PFwise.com
Search
  • Home
  • Blog
  • Tools
  • Know-how
    • Insurance 101
    • Annuity 101
    • College Planning
    • Real Estate
    • Retirement Planning
    • Smart Investment
    • Stock Ideas
    • Tax Planning
  • About Us
  • 中文
  • Resources
    • Personal Finance Reading List
    • Financial Aid Resources
    • Personal Finance Calendar
    • Retirement Planning Calendar
    • ETF list
    • Financial Glossary
  • Newsletters Archive

Which High Dividend ETF to Invest

1/31/2015

0 Comments

 
Q. I want to invest in an ETF that consists of high dividend paying stocks.  Which one should I choose?

A. In the low interest environment, investors are chasing high dividend paying stocks.  

The S&P 500 Dividend Aristocrats Index selects companies in the S&P 500 that have increased their dividends every year for at least 25 consecutive years. It currently contains 53 companies diversified across the consumer staples, industrials, materials, health care, financials and consumer discretionary sectors. The companies in the index are equal-weighted, rather than weighted by market capitalization. It is reconstituted annually in January and rebalanced in April, July and October.

NOBL is the ticker of the ETF that tracks the S&P 500 Dividend Aristocrats Index.  It was named ETF product of the year in 2014.  Its 2014 return is 16%, better than S&P 500 index's 12%.
0 Comments

IUL 101 - Part G - IUL As a Portfolio Stabilizer

1/30/2015

0 Comments

 
In our previous blog post, we looked at IUL's costs and showed that it's actually less than 401(k) or other regular investments, over lifetime of the investment.  Now we will look at another key assumption - annual return.

Most IUL's crediting features are similar - 0% floor and 11%-14% cap, the specific return will be based on the underlying index's performance.

For example, if the crediting is tied to S&P 500 index's annual performance, if S&P 500's actual return is -10%, IUL's return will be 0%, if S&P's actual return is 10%, IUL's actual return will be 10%, if S&P's actual return is 20%, IUL's actual return will be the cap level.

We have created an online tool so you can use it to back date test the IUL's average historical annual return.  As the actual historical return chart below shows, IUL actually is a portfolio stabilizer - its average annual return is typically between bonds and stocks.
Picture
In our next blog post, we will compare IUL with 401k and see if IUL could actually be a good retirement saving tool.
0 Comments

IUL 101 - Part F - Does IUL Have High Costs?

1/29/2015

0 Comments

 
In our last blog post, we discussed two major advantages of IUL - tax advantage and collateral feature, now we will look at IUL's costs.

In order to show a product has high cost or not, we need to use a benchmark.  We will use the typical 401(k) account's expense as a benchmark because both IUL and 401(k) serve the same purpose - to create supplement retirement income.

401(k) Costs
Many people think their 401(k) has low or even no cost.  Wrong!  


We have discussed 401(k) account's costs previously here, there are several books with extensive discussion of the 401(k) industry and the hidden expenses - see Andy Tanner's 401(k)aos (5 stars at Amazon) and David Loeper's Stop the 401k Rip Off. 

Typical annual fund expense could run from 0.25% to 1.5%.  People tend to forget about 401k costs because its cost pattern is starting small and growing big later on.  For example, at 0.5% expense ratio, an account with $100,000 value has annual expense only $500.  However, when the account value grows to $1,000,000, the annual expense would be $5,000!

IUL Costs
IUL has 3 major cost components:
  1. Premium cost: each year, when you pay your premium, you will incur, typically 6%, premium costs.  If you don't pay premium, there will be no premium cost.
  2. Cost of insurance: surprisingly, the Cost of Insurance is not as high as people normally expect.  For instance, in the same example, the person's cost of insurance at age 65 is $2,070.  
  3. Insurance overhead costs:  this component has high initial costs, especially during the first 10 years, then will drop significantly over time.  For example, for the same person we discussed, at age 35, the annual overhead cost is $1,265, and at age 65, the cost will be only $113.

In Summary
  • 401K (or any other regular investment accounts)'s costs start small, but grow over time to very high levels.  
  • IUL's costs start high during initial years, but decreases over time.  

If we add up the total costs, 401(k), or other regular investment account's total expenses are almost always much higher than IUL's total lifetime expenses.

In our next blog post, we will run back date testing to compare IUL's historical performances against index performances.

If you are interested in a comparison that is tailored to your situation, please contact us, we can run any scenario based on your specified assumptions, and you will be surprised by the results!


0 Comments

4 Investment Strategies to Grow Wealth

1/28/2015

0 Comments

 

investing tips to grow wealth

4 Investment Strategies to Grow Wealth – An infographic by the team at Motif Investing.

0 Comments

IUL 101 - Part E - 2 Key Flaws in the Previous Analysis

1/28/2015

0 Comments

 
In our last blog post, we did a comparison between Buy Term and Invest the Difference and IUL.  The results showed us that IUL tends to yield less cash value at the end of the comparison period.

However, that analysis has two major flaws, if we correct them, the results could point to the other direction.

Flaw 1. Age 65 is NOT the end 
In fact, for most people, age 65 (or whatever your retirement age) is just the beginning of another life stage - the retirement stage - and it could last another 20-30 years!


Implications:
Buy Term and Invest the Difference
If you are like most people, in your retirement stage, the biggest risk is the market crash (remember 2008?)!  How to prevent it?  By allocating money into more conservative assets such as bonds, which means your portfolio will have lower average return in this life stage than in your assets accumulation stage.

IUL
Because of the downside protection, the IUL portfolio could afford to remain fully tied to equity indexes, therefore keeping the 6% (or even higher) annual return assumption (see our online tool that compares IUL's back date testing against equity index results)


Conclusion
Given that people typically have at least twenty or more years of retirement life, the above rate change means IUL would catch up in cash value in the retirement stage.

Flaw 2. Ignored IUL's Tax Free Advantage
The cash value comparison focuses on the assets accumulation phase, however, IUL shines in the assets distribution phase, due to its tax-free advantage.  
There are two factors in play here:

Factor a. Tax-free Loan
Buy Term and Invest the Rest
When you invest on your own (or even in a 401k account), at retirement time, if you need to take money out to support retirement life, you need to pay tax.  For example, assume you need $100,000 each year to support your life expenses, and the tax rate is 20%, the actual amount taken out of the account will be $125,000.

IUL
For IUL owners, the smart way to use IUL's cash value is to borrow from it, which means you are taking a loan, of course you don't pay tax on a loan!  This means $100,000 taken out of the cash value is $100,000 arriving at your hand to use.


Factor b. Collateral Loan
The "collateral" feature is special to only some of the cash value life insurance policies - it means any amount you are borrowing against your cash value will remain fully invested in the equity index account and enjoy any return the market delivers.  For example, your cash value is $500,000 and you are borrowing $100,000 out of it, you will pay interest on the $100,000 loan, but your cash value amount remains to be $500,000 (the $100,000 is treated as a collateral) and grows with whatever the market rate.

Buy Term and Invest the Difference
No collateral feature, any amount (for example, $125,000) taken out means your account value drops by that same amount and a lower base to grow in the future.

IUL
With the collateral feature, plus the fact that over long term, the average loan rate (typically less than 6%) is less than the average market growth rate (assumed to be 6% but could be better), your cash value will increase, instead of decreasing, over time.  Over a twenty or thirty years time frame, that could be a substantial amount.


Conclusion
At the distribution phase, the IUL cash value could keep growing, while the other investment accounts will inevitably see account values decline because more money taken out each year, many 401k account even faces the risk of depletion by the age 70's or 80's (you can run our free 401K Evaluation Tool by yourself and see how long your 401k money will last - many people are surprised by the results!). 

In Summary
After correcting the above two mistakes in our earlier analysis, our early conclusion will be reversed!

In our next blog post, we will discuss one of the major complains towards IUL - its costs are too high, again, the results could be very surprising!

0 Comments

IUL 101 - Part D - IUL vs. Buy Term and Invest the Difference

1/27/2015

0 Comments

 
We have showed the pros and cons of IUL so far, now we will take a look at the common argument against IUL: Buy Term and Invest the Difference.

The best way to compare two options is to use the numbers to illustrate.  

Here is a typical case:
  • Male age 35, best health class
  • Every month after paying all the expenses and savings, has $1,000 money left to invest
  • Needs $1,000,000 life insurance coverage
  • Plans to retire at age 65

Option 1. Buy Term and Invest the Difference
  • 30-year $1,000,000 Term life annual premium: $815
  • Annual investment amount: $1000*12-$815=$11,185
  • Average fund expense ratio: 0.5%
  • Average annual fund’s before expense return: 8%
  • Investment horizon: 30 years
  • Total principal contribution: $346,735
  • Balance at age 65: $1,348,530 (pre-tax)
  • Capital tax rate (Federal plus state): 20%
  • After-tax balance: $1,148,171

Option 2. Buy IUL
  • Annual premium contribution: $12,000
  • Insurance face amount: $1,000,000
  • Average annual return: 6%
  • Cash value at age 65: $799,901

Conclusion

Buy Term and Invest the Difference is better because it yields higher after-tax balance at the retirement age 65.

For a long time, I belong to the Buy Term and Invest the Difference camp too, driven by the above analysis.  However, I didn't realize two major flaws associated with the above comparisons, I will discuss the in the next blog post.

0 Comments

IUL 101 - Part C - 3 Downsides of IUL

1/26/2015

0 Comments

 
We discussed 3 major advantages of IUL, now we will discuss the major downsides of IUL.

Caps on Upside
All insurance companies impose a cap on IUL's equity index returns, these caps typically range from 11% to 14%.  However, I found one company offers a 2-year point-to-point cap of 50% which literally means not much cap on the market performance's upside.

Risk of Policy Lapse

If the underlying equity index has a negative year, IUL will have 0% return.  Granted, this is better than a negative return, but it hurts because the IUL policy still incurs costs such as cost of insurance, insurance company administrative costs, etc.  A few stock market negative years in a row, if you don't add cash to IUL, the policy face the risk of lapse.

IUL's Costs
The biggest complaint about IUL (or any permanent life insurance products) is its costs.  However, you really need to see the numbers to judge if the costs are high or not.  Generally, there are three major cost components of an IUL product:
  • Premium cost: it's typically a percentage of your premium payment. This is an one-time expense
  • Cost of insurance: in the end, IUL is an insurance product, so it has insurance cost.  But surprisingly, its cost of insurance is really not very high at all.
  • Insurance company overhead: such cost is usually the deal breaker - because it usually starts with very high number, but if you keep the policy for more than 10 years, this cost will go down quickly and significantly.


In summary
There are several dozens of insurance companies offer IUL products, some are good, but some are bad (for example, higher costs, lower caps).  The best way to find the right IUL product is to work with an independent agent who can cross compare different IUL products and find the best one for you.  Please contact us if you are interested in seeing how the numbers look like for your situation.

In our next blog post, we will take a look at the common comparison between Buy Term and Invest the Difference and IUL.
0 Comments

Index vs. IUL Historical Annual Change Comparison Tool

1/25/2015

0 Comments

 
How does IUL's performance compare with the actual underlying equity index's performance?  This is a key question every IUL purchaser has in mind.  

In the following tool, you can select the underlying index, the specific time period, and the floor and cap of your IUL's annual return, it will show you how much the average annual IUL performance will be over the historical time period.  

The conclusion is, if the investment time frame is long, IUL tends to outperform the underlying index, mainly due to its no-downside protective feature.

0 Comments

IUL 101 - Part B - 3 Advantages of IUL

1/25/2015

0 Comments

 
In our last blog post, we introduced the IUL concept.  Now we will discuss some of the major advantages of IUL over other insurance products.

Lower Premiums
Unlike Whole Life insurance which offers stable return (for example, 6% return with verifiable historic data), IUL's return is tied to equity index performance, which is not guaranteed (even though IUL does offer 0% floor protection), in other words, IUL policy owners bear the risks, therefore they are rewarded with lower premiums.

Tax Benefits
Like any life insurance products that offers cash accumulation, IUL's cash accumulation is tax-deferred (and could be tax-free in distribution phase as well if structured properly).

Of course, like any permanent life product, IUL's death benefit is tax free for the beneficiaries.

Flexibility
The policy owner controls the risks level, for example, if one does not want to take higher risks, he or she can allocate the entire cash value to fixed account and earn a fixed return (for example, 3%).  But most IUL owners allocate money fully into the equity index account with the downside protection (typically 0% guaranteed) while enjoy upside of the equity market because over a long period of time, the equity market always goes up.

In our next blog post, we will discuss the downsides of IUL.

To truly understand the benefits of the IUL product, it's best to run it against an investment alternative and see which one generates higher cash value, after all the expenses. 

0 Comments

IUL 101 - Part A - What is IUL?

1/24/2015

0 Comments

 
Q. What is IUL?  Why should I consider it?

A.
IUL stands for Indexed Universal Life, it is a type of universal life products that allows the owner to allocate cash value of the policy to either a fixed account (with fixed interest rate) or an equity index account (tied to some well known indexes such as S&P 500, Nasdaq 100, etc.) to accumulate tax-deferred returns.  

An IUL policy is more volatile than fixed UL or Whole Life, but less risky than Variable Universal Life (VUL) because no money is actually invested in equity positions.

Who Should Consider IUL?
For investors, today's low interest rate environment challenges return on cash accumulation options, many people want higher returns associated with equity markets, but are not comfortable with the higher risks associated with the higher returns.


In addition, for people with age 30-55+ and household income $50,000 - $250,000, they may have competing financial priorities, such as:
  • Need more life insurance
  • Need more supplemental retirement income
  • Need a solution for potential long term care expenses

IUL was designed for such people to address the above concerns.

What are the major advantages of IUL compared with other insurance products?  Please see our next blog post.

0 Comments

20 Reasons Why You Still Need Life Insurance At Age 60

1/23/2015

0 Comments

 
Q. Do I still need life insurance at age 60 or older?

A. Most people think of life insurance only when they want to protect their family and provide a source of replacement income in the event of their deaths.  At age 60 or older, your children are grown and gone, the mortgage is paid off, you have minimum debts, so do you still need life insurance?

Well, the answer is yes, because you need to realize that life insurance could be a buffer to lost assets due to market volatility at your retirement time, for example, when the market crashes and you die before you have the time to rebuild or replace the lost assets.

Here are 20 reasons for life insurance after age 60:
  1. Offset loss of retirement income to spouse at death.(Pension max)
  2. Pay costs associated with death
  3. Pay final expenses
  4. Pay estate and inheritance taxes
  5. Pay off debts
  6. Pay income in respect of a decedent taxes on IRAs, 401(k)s etc
  7. Provide for the care of a disabled child, spouse, etc.
  8. Offset loss of key person in a small business
  9. Provide funds to buy out interests of a deceased business partner or co-shareholder
  10. Dividends can be a tax-free source of supplemental retirement income.
  11. Cash surrender values are a source of emergency funds during life.
  12. Cash surrender values can be wholly or partially annuitized to provide additional guaranteed lifetime income.
  13. Any unused funds can be used to provide a gift to grandchildren.
  14. Provide a gift to charity at death or prior if desired.
  15. It adds flexibility to the estate plan.
  16. It allows parents to balance uneven distributions of property or business interests to children.
  17. It allows parents to spend all their money and still leave a legacy to their children or grandchildren.
  18. It is creditor proof in most states.
  19. It can be designed to provide an “inevitable gain,” no matter when one dies.
  20. It can collateralize loans. As people live longer, they tend to take on more debt or debt that has a longer amortization (just look at all the big houses being built by people who consist of a family of two post-65 adults!)

Review your personal situation. You may find there are more reasons to own life insurance after age 60 than you think.
0 Comments

Seven Out of Ten 401(k) Participants Do Not Know 401(k) Fees

1/22/2015

0 Comments

 
Do you know you are paying fees and expenses for your 401(k) plans?  

Based on an AARP survey, 70% people don't know they are paying fees in their 401(k) investment, despite NerdWallet.com finds that there are at least 28 types of fees related 401(k) accounts, such as management and administration fees, trading costs, record keeping fees, etc.

How do you get smart on 401(k) fees?  Before you investing in a fund, go to Morningstar.com and check the fund's expense ratios and compare the expense ratios to the average figures for that asset class.
0 Comments

When Is the Best Month to Buy Something

1/21/2015

0 Comments

 
January
  • Bedding
  • Carpeting
  • Cds and Dvds
  • Cookware
  • Houses and condos *
  • Furniture *
  • Linens
  • Swimwear
  • Toys
  • Exercise equipment like treadmills
  • Tax filing software
  • Winter clothes*

February

  • Electronics
  • TVs *
  • Home theaters

March

  • Digital cameras
  • Small electronics
  • Smart phones

April

  • Computers *
  • Lawn mowers
  • Spring clothing
  • Jewelry
  • Vacuum cleaners *

May

  • Athletic apparel and shoes
  • Camping and outdoor gear
  • Carpeting*
  • Cordless phones
  • Mattresses
  • Small consumer electronics *
  • Refrigerators

June
  • Camcorders*
  • Gym memberships
  • Indoor furniture
  • Pots, pans, and dishware
  • Summer sports gear

July

  • Furniture
  • Swimwear
  • Suits
  • Tools

August

  • Air conditioners
  • School supplies*
  • Dehumidifiers
  • Lawnmowers*
  • Outdoor furniture
  • Snow blowers*
  • Swimwear

September

  • Big appliances (except for refrigerators) *
  • Bikes*
  • Cars*
  • Gas grills *
  • Outdoor perennial plants*
  • Thanksgiving travel tickets
  • Wine*

October

  • Air conditioners
  • Cameracorders*
  • Christmas travel tickets
  • Digital cameras*
  • Toys*
  • Wedding supplies and services requiring vendors*

November
  • Baby goods
  • Fresh Christmas trees
  • Recreational vehicles
  • GPS navigators
  • TVs*

December

  • Home appliances
  • iTunes gift cards
  • Tools
  • Holiday decorations (after Christmas)
0 Comments

U.S. Boomers Not Ready For Retirement

1/21/2015

0 Comments

 
Bankers Life Center for a Secure Retirement (CSR) recently revealed some findings from its recently conducted survey of 1,000 Americans between ages 50 and 68 with annual household incomes ranging from $25,000 to $100,000, see details below:

Attitude Towards Retirement Saving
  • 38% feel very or extremely confident about their retirement savings
  • 62% express doubt

Threshold of Retirement Security
  • Middle income boomers view a half million dollars in investable assets as the financial threshold for retirement security
  • 66% who have investable assets between $500,000 and $1 million, and 90% with investable assets greater than $1 million, are very confident their money will last throughout their retirement

Investable Assets
  • Only 13% boomers have investable assets of $500,000 or more
  • 54% have less than $100,000 (34% have less than $25,000)

One possible explanation to the small investable assets amount is maybe the boomers are heavily invested in their homes - medial home equity value was $100,000 to $250,000.
0 Comments

3 Major Advantages of ETFs over Mutual Funds

1/20/2015

0 Comments

 
Q. Why ETF's are better than mutual funds?

A.
Here are 3 major advantages of ETFs over mutual funds:


1. Trading Flexibility
You can buy and sell ETFs just like stocks, you specify the price, you can trade any number of times a day.  However, for mutual funds, you can only buy and sell once a day, and you don't even know what will be your buying or selling price until the market closes.

2. Lower Costs
Because ETF's structure is different from mutual funds, for example, there is no customer service, no requirement to send out statements to holders on a regular basis, etc.  ETFs enjoy lower costs.

3. Tax Advantages
If you are a mutual fund holder, even you didn't do any selling last year, you can still receive tax form from the mutual fund at the tax season that shows capital gains, that's because mutual funds pass through capital gains to all fund holders.  As a contrast, if you hold an ETF and didn't sell it, you will not incur capital gain (note: there could still be dividend related taxes).


0 Comments

The HSA Guidebook

1/19/2015

0 Comments

 
HealthEquity has a pretty comprehensive HSA Guidebook, it's over 200 pages, you are likely to find answers to any question you have from the book.
hsa_guidebook.pdf
File Size: 1318 kb
File Type: pdf
Download File

0 Comments

The Pros and Cons of Investing in Commercial Real Estate

1/19/2015

0 Comments

 
Q. I had some successes in real estate investment, now I want to invest in a commercial building, what are the major pros and cons investing in commercial real estate?


A. While most people can quite easily get into residential real estate investment filed, commercial real estate investment is a lot more complicated, its major pros and cons are summarized below:


Pros of Commercial real estate investment
  • Higher rent (if you can find a tenant)
  • Lease is more favorable to the landlord
  • Easier to manage
  • Longer lease term
  • Commercial loan has no impact on the landlord's credit



Cons of Commercial real estate investment
  • It might take longer time to find a tenant, especially if the local economy is in the downturn.
  • More complicated lease (gross lease, triple net, double net, modified gross, etc.)
  • Commercial financing is hard to obtain.  Commercial loans typically are 5-year fixed with balloon payment, so you have to refinance every 5 years.
0 Comments

24 Failures

1/19/2015

0 Comments

 
Cancelled

Fired

Called out

Humiliated

Embarrassed

Crashed

Unfunded

Indicted though innocent

Typos found

Unappreciated

Late

Underbid

Found out

Outclassed

Defeated

Satired

Criticized

Out of cash

In debt

Underdressed

Out of tune

Underwhelmed

Out of your league

Unprepared

You can avoid all of these failures by doing nothing.

Or you can risk these failures and start making a difference. 


Which will you choose?

0 Comments

IRA Contribution Rules For 2015 - Part C

1/18/2015

0 Comments

 
In our last two blog posts, we compared Traditional IRA and Roth IRA contribution limitations.  Now we will discuss conversion from Traditional IRA to Roth IRA.

First, the good news - there is NO income limitation on conversion from traditional IRA to Roth IRA!

Now, the bad news - starting this year, the IRS has adopted a stricter limitation on how many tax-free IRA rollovers can be done in any one-year (365-day) period.  However, if you do a direct trustee-to-trustee transfers (meaning the money won't pass through your hands) between IRAs or rollovers from qualified retirement plans (such as 401(k) plans) into IRAs, such limitation does not apply, and of course such transactions will be tax-free to you.

0 Comments

IRA Contribution Rules For 2015 - Part B

1/17/2015

0 Comments

 
In our last blog post, we discussed the various regulations about Traditional IRA contributions.  Now we will turn our attention to Roth IRA contribution rules.

The annual contribution limits and the contribution deadline for Roth IRAs are the same as for traditional IRAs. The rest of the rules are different.

Contribution age limit: After age 70½, you can still make Roth IRA contributions — as long as you (and/or your spouse if you’re married) have earned income at least equal to what you contribute.

If you are unmarried: eligibility to make Roth contributions for the 2014 tax year is phased out between AGI of $114,000 and $129,000. For 2015, the phase-out range is $116,000-$131,000.

If you are married filing jointly, the phase-out range for the 2014 tax year is between joint AGI of $181,000 and $191,000. For 2015, the phase-out range is $183,000-$193,000.

Eligibility to make Roth contributions is unaffected by whether you (or, if you are married, your spouse) are covered by a retirement plan.

You can also consider the idea of converting a traditional IRA into a Roth IRA.  We will discuss it in our next blog post. 

0 Comments

IRA Contribution Rules For 2015 - Part A

1/16/2015

0 Comments

 
Q. What are the rules for traditional IRA and Roth IRA contribution rules?

A.
We will share the traditional IRA contribution rules and limitations in this blog post, and share the Roth IRA contribution rules in our next blog post.

Individual contribution amount limit: $5,500 per year in 2014 and 2015.  If you were age 50 or older as of Dec. 31, 2014, you can contribute up to $6,500 for the 2014 tax year. If you will be age 50 or older as of Dec. 31, 2015, you can contribute up to $6,500 for the 2015 tax year. 

If you’re married, the same limits apply to your spouse if he or she wants to fund a separate IRA. As a result, the two of you can contribute up to $11,000 (2 x $5,500) and maybe even up to $13,000 (2 x $6,500).

Must have earned income: you, and/or your spouse if you are married, must have earned income at least equal to what you contribute.

If you are unmarried and single and were covered by a retirement plan in 2014, your eligibility to make a deductible traditional IRA contribution for the 2014 tax year is phased out between adjusted gross income (AGI) of $60,000 and $70,000. For 2015, the phase-out range is $61,000-$71,000.  (You can contribute to a traditional nondeductible IRA regardless of how high your AGI might be.)

If you are married and both you and your spouse were covered by retirement plans in 2014, your eligibility to make a deductible traditional IRA contribution for the 2014 tax year is phased out between joint AGI of $96,000 and $116,000. Ditto for your spouse. For 2015, the phase-out range is $98,000-$118,000. You can both contribute to traditional nondeductible IRAs regardless of how high your AGI might be.


If you are married and only one spouse was covered by a retirement plan in 2014, the covered spouse’s eligibility to make a deductible traditional IRA contribution for the 2014 tax year is phased out between joint AGI of $96,000 and $116,000. The non-covered spouse’s eligibility is phased out between joint AGI of $181,000 and $191,000. For 2015, the phase-out ranges are $98,000-$118,000 and $183,000-$193,000, respectively. You can both contribute to traditional nondeductible IRAs regardless of how high your AGI might be.

Contribution deadline: you have until April 15 of the following year to make an IRA contribution for the current tax year.  Of course, the sooner you contribute, the earlier you can get tax saving benefits.






0 Comments

What Are the Actively Managed Mutual Funds Costs?

1/15/2015

0 Comments

 
Q. What are the actively managed mutual funds fees?

A.
The recent study by NextShares, a division by Eaton Vance, a mutual fund company reveals the following data:


12b-1 Fees
These are the marketing fees that you pay to Mutual funds so they can sell to other investors, it just doesn't create any value to you.  The study found average expense ratio is 0.4% annually on an equally weighted basis, or 0.15% asset-weighted.

Transfer Agent Fees
This is another layer middle man fee.  Annual TA fees, flow related trading costs, and cash drag combined cost average 0.65% per for equal-weighted funds investors.

These fees, while are small percentages figures, when added up could lead to huge numbers, especially as your invested assets grow over time.
0 Comments

The Best Way to Sell Used Car - Part B

1/14/2015

0 Comments

 
In our last blog post, we showed the research you need to do before selling your car to a dealer.  If you want to get more money, by putting some more work, you can sell your used car to a private person.

Get the Documents ready
Put together your service and emission inspection records, the title, and the paperwork required to transfer ownership (you can download from your state's DMV site).

Run a Vehicle Report
Run a vehicle history report on AutoCheck.com or Carfax.com ($30-40), and post it with your ad (see below) will nail you higher prices.

Do Some Light Fix Ups
Maybe it's worth to do a window wash and interior cleaning, but don't bother with a car detailing that costs $100.  For any major repairs needed, factor that in your price.  You can offer to take the car to a mechanic for a check if the buyer asks and pays for it.  Or you can make the used car available for a 3-rd party inspection, such as AiM Mobile Inspection.

Put up for Sale at Multiple Sites
You can post free ads on Craigslist and Cars.com, but to pay $25 - $125, you can put up for sale at Cars.com, AutoTrader.com, eBay Motors with more photos and longer ad running time.  Like selling anything else, if you can create a story and explain well why you are selling the car, you can get higher price for your item.


Get Cash or Money Order
Never meet with the buyer at your home, meet at a public place.  Never let the car out of your sight, unless you get the money - cash or money order!
0 Comments

One Stone Kills Two Birds - An Insurance Case Design Part B

1/13/2015

0 Comments

 
In our last blog post, we discussed the situation Sally faces and the problems she wants to solve.  Now, here is the solution that solves all her problems at the same time!

Step 1.
Use her IRA money to purchase a Fixed Income Annuity with Guaranteed Benefits Rider that pays her 5% lifetime - it will be $12,500 per year. Assume her income tax rate at 20%, that will be $10,000 after tax.

The Benefits: 
No money needs to come out from her pension and social security income to support this mission, she can keep living her planned life style.

Step 2.
Use the $10,000 per year to purchase a permanent life insurance with a 2% monthly long term care benefits rider.  Given her health situation, the $10,000 annual premium can get her $400,000 death benefit, the 2% LTC benefit (if she ever needs it) will be $8,000 per month.

The Benefits
1. Sally's $250,000 IRA is guaranteed to generate $400,000 benefits, no more worry about losing money if the stock market crashes!
2. If she ever needs nursing care, there is $96,000 a year benefit waiting for her!


Caution
Different people's situations are different, your age, health situation, etc. may lead to different coverage amount.  Also, the product market is very competitive and always evolves.  Please contact us to design a case that makes sense for you.
0 Comments

An Empirical Study - Active vs Passive: Who Wins

1/13/2015

0 Comments

 
One of the most popular investment research article is attached below - it reviews active vs. passive investment and uses empirical data to prove what we have known - passive investment wins, and tax matters.

Take a look at it by yourself, it is not very hard to read.
imca_top_3_articles_of_2014.pdf
File Size: 1650 kb
File Type: pdf
Download File

0 Comments
<<Previous

    Author

    PFwise's goal is to help ordinary people make wise personal finance decisions.

    Archives

    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013

    Categories

    All
    Annuity
    Book Reviews
    College Finance
    Finance In Formula
    Financial Scams
    For Entrepreneurs
    Healthcare
    Insurance
    Investment
    Miscellaneous
    Real Estate
    Retirement
    Savings
    Savings Ideas
    Stock-ideas
    Tax
    Tax-related

    RSS Feed

Copyright © 2013 - 2022 PFWise.com, All Rights Reserved. 
IMPORTANT DISCLOSURES
PFwise.com does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.

To the extent that any material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
About Us | Contact Us 
中文