Sound Advice

Investing in Education? Here’s How Although it’s tempting to think the purchase of a home for your family is the biggest investment you’ll ever make.  In most cases, it’s not.    The Number One investment will be your children’s education.  For a baby born today, four-year tuition at a private college will be more than $500,000.  Multiply that by the number of kids in your family and it will dwarf whatever most homes cost.   The good news is that in many cases financial assistance will be available, especially if the students have good academic records.  In addition, student loans can help fill in the shortfalls. Even so, the parents or grandparents will still have to bear a substantial part of the cost.  That’s where 529 plans come in. A 529 plan is a tax-advantaged plan to encourage savings for future education costs.  There are two types: prepaid tuition plans and education savings plans.  Every state has at least one type of 529. Education savings plans are the most commo

Three Ideas for a More Assured Retirement   Retire Later Although you may be one of the fortunate few who have amassed sufficient assets to easily cover ongoing expenses in your later years, most people won’t have that luxury.  Indeed, folks often pay little attention to what lies ahead financially until they are in their 50s or 60s, which may be too late to make key adjustments for a continuation of comfortable living. Even so, there are options.  One of the most obvious is the opportunity to keep working as you get older.  This path may not be open for some people, but more likely than not it will be.  Continuing to work may mean an extension of an existing routine or perhaps tapering off over a period of a few years.  Either way, the positive impact on future financial health can be substantial. Spend Less In retirement, some expenses may continue, some may increase, and some may be reduced.  Those that may continue include mortgage or rental payments, utilities, cleaning,

Four Things You Need To Know About Social Security   When to Start? One of the most common questions about Social Security is when to start receiving benefits.   The earliest age to begin is 62, although there are significant trade-offs when doing so.   First, your benefits will be permanently reduced by 25.8% from those payable at Full Retirement Age (FRA) over the course of your lifetime.   Second, your benefits will be reduced if you earn more than $18,960 a year.   The reduction will be $1 for every $2 you earn over that limit.   The limit rises every year, but by a modest amount.   For those considering part-time work during retirement, this may not be a problem, but for folks planning to continue full-time employment, this reduction could wipe out the benefits they would receive. For those who wait until FRA, there is no limit on earned income and no penalty.   Full retirement age is now 66 years and two months.   It increases by two months every year. To get the highes

What’s a Safe Withdrawal Rate in Retirement? If you are already retired or planning to retire soon, one of your biggest concerns will be having sufficient income from your investments (and Social Security) to cover your ongoing expenses without running out of money.   Another concern will be how you will spend your time, preferably in a satisfying manner.   The financial part of the equation can be tricky since there are several variables that can change the outcome dramatically.  Those with children often are concerned about leaving a substantial inheritance.  Those without heirs can draw down the earnings on their assets and take distributions from the principal amount. The former situation has a heightened emphasis on the prospective returns on assets invested and the ongoing flow of expenses.  The usually suggested withdrawal rate is 4% of assets in Year One, adjusted each year thereafter for inflation.  When inflation rises, the withdrawal increases . . . and vice-versa. V

Wall Street Lingo Translated – Part II Beta The beta is a measure of market sensitivity (volatility) relative to the Standard & Poor’s 500 Index, which has a beta of 1.00.  A stock that moves 20% more than the S&P in either direction would have a beta of 1.20.  A well-constructed portfolio aimed at delivering worthwhile returns while managing sensitivity (a.k.a., risk) would have an average beta below 1.00 Bid and Asked Prices There are actually two prices for each stock.  One is the bid price, which is the price a trader (usually an exchange specialist who handles huge quantities of shares) will pay to buy a stock from an investor. The other is the asked price, which is the price a trader will sell a stock for.  The difference between the bid and asked prices is known as the spread, which tends to be quite narrow in the case of actively traded stocks. The situation with bonds is similar, though spreads tend to broaden when the trade involves a relatively small number o

It’s All About The Earnings   For stocks, the key driving force is EPS, earnings per share. EPS is the same thing as profit or net income per share.  Over time, when a company’s earnings are rising, its stock will follow.  The two are not always in lockstep, but most assuredly they will move in the same direction. There are nuances that impact current stock movements and probable price action ahead.  Among the most important is the price-earnings ratio.  It’s also known on Wall Street as the P/E, the price-earnings multiple, the multiple, the valuation rate, and the capitalization rate. The P/E is derived from a simple calculation.  The P stands for the price of one share of stock.  The E stands for earnings per share, which is the company’s net income divided by the number of shares outstanding.  EPS and P/E information is available on many financial websites including Yahoo! Finance and MarketWatch. By itself, the P/E is not helpful.  What’s missing is the historical range of