June 2012 Financial News Digest

1. What’s Your
Retirement
Number?
2
Investment
Mistakes, Common
and Uncommon CHAD HORSHAM’S
3 FINANCIAL NEWS
Money-Smart
Kids: Teaching
Kids to Save
4 DIGEST MONEYLINE
Pick
Your
Plastic
A
Courtesy of Chad A. Horsham, LUTCF
cash-back card or a travel rewards card?
Hmmm. Here are some lesser-known consid-
erations when deciding on what kind of plastic
you want to be packin’:
Warranties. Some of the upscale versions offered
by issuers extend the manufacturer’s warranty by up to
one year when you purchase an item with your card.
Purchase protection. If, for example, your iPad
is stolen from your hotel room, some issuers will
reimburse you if you paid for the room with the right
card. Drop that new iPad and some cards will have it
repaired or replaced within 90 days from the date of
purchase.
Luggage protection. Was your luggage lost or
Chad A. Horsham, LUTCF damaged by the airline on your last flight? If you paid for your ticket with
Financial Services Professional the right card, you could be reimbursed for up to $3,000.
One Valmont Plaza Rental-car coverage. Many cards cover damage to a rental car (if you
Suite 100 use the card to reserve and pay for the vehicle) that your primary auto insur-
Omaha, NE 68154 ance doesn’t. That means you may not need the rental company’s collision
(402) 496-6413 damage waiver (CDW) insurance.
cahorsham@ft.newyorklife.com Concierge services. Some cards help you get tickets to sold-out events,
book travel, make dinner reservations, and find unusual gifts.

2. Employees are losing Please know that this is
disability coverage as not rocket science, especially
employers cut back on high- in an age when there are so
cost benefits. Companies that many retirement calculators
are not dropping the coverage available. The tricky part
often are raising employees’ about using these calcula-
cost of obtaining it while tors is that they ask you to
reducing the benefits paid by estimate factors that even
the disability policies. What economists can’t agree upon.
to do: Find out if you can buy My crystal ball isn’t perfect,
additional coverage through but here are some sensible
your employer at your own
estimates that should help:
expense…or buy an individual
Inflation assump-
policy. Buying through your
tion: 4.5 percent (higher
employer costs less but may
than where we are today, but
provide narrower coverage—
most economists believe that
analyze the options carefully.
inflation is headed up in the
coming years).
How to negotiate Rate of investment
salary in today’s tough return both before and after
job market: Job candidates
retirement: Consider your
often are so happy to be of-
risk tolerance and err on
fered a job that they accept a
the side of being conserva-
lower salary than they should.
tive. If you’re stuck, use 4-5
Self-defense: When asked
for your salary requirement
percent. Obviously, if you
on applications, leave it blank use a higher rate of return,
the calculator will ultimately determine that you have
or write “Open.” During
interviews, if you are asked What’s Your to save a smaller amount. After our Great Recession
and financial crash, I probably don’t have to tell you
about your previous salary, ask
about the range for the job you Retirement that higher return assumptions may not always work
out as planned.
are discussing. Don’t negotiate
salary in the interview. Say Number? Life Expectancy — if you are younger than
that you are interested and will 50, use 95; if you’re older than 50, use 90. If you want
By Jill Schlesinger, Tribune Media Services
a closer estimate, go to www.livingto100.com and use
A
seriously consider any offer
that the company makes… their Life Expectancy Calculator.
or say that once you get a former client once argued with me about his Then you will be asked to plug in the amount of
clear understanding of the job ‘“retirement number”.’ He couldn’t believe money you have already saved, your annual contribu-
requirements and advance- that he needed $1 million in savings before he tions to your retirement plans and other investment
ment potential you’ll be better could retire. “That amount just seems like way more accounts, any future pension amounts, and a Social
prepared to discuss salary. money than is necessary!” But after walking through Security benefit. While Social Security might change
When you receive an offer, ask the variables and calculations, he finally said, “Geez, a in the future, most of the revisions being contemplated
if there is any flexibility. You million bucks — I guess that’s my number.” would not affect people who are currently over 50. For
may not be offered a higher those under 50, you might have to wait longer to col-
Determining your retirement number is like get-
salary, but you might get an
ting on the bathroom scale: Sometimes it’s a pleasant lect benefits or the benefit amount could be reduced.
extra week of vacation or a
surprise; however, more often than not it forces you to To adjust for an altered Social Security landscape, you
signing bonus.
face an ugly truth. Just as taking the dreaded step onto could simply raise your replacement rate by 5 percent.
the scale is a necessary part of the weight-loss process, Once you have entered in all of the information,
so too is crunching the numbers for retirement plan- the calculator is going to spit out your results. For
ning. According to the Employee Benefit Research many, this moment could be as stressful as stepping
“The trouble with Institute (EBRI) 2011 Retirement Confidence Survey, on the scale. But only when you are armed with the
being poor is that only 42 percent of American workers have taken the necessary information can you alter your course to
it takes up all your time and effort to complete a retirement needs calcula- a smooth retirement. So don’t be afraid to take the
tion. Without going through that process, you’re flying plunge and discover your retirement number.
time.” blind into your retirement.
— William de Kooning

3. stock funds, and 5 percent in commodity funds. At the
Investment end of 2011, your portfolio might have been around 35
Downside of a digital
wallet. If you use your
percent bonds, 55 percent stock funds and 10 percent
Mistakes, Common commodity funds. If your financial situation has not
smartphone to make purchas-
es, your protection against
changed, and you are comfortable with your original al-
and Uncommon
fraud may be limited. Digital-
location, you should consider rebalancing back to your wallet programs let you wave
optimum allocation. If you have a portfolio of both your phone at a cash register
By Elliott Raphaelson, Tribune Media Services
retirement and nonretirement accounts, consider taking or tap a retailer’s reader to
A
any losses — if you have a choice — in your nonretire- make a payment with a credit
ll of us make investment decisions that are not or debit card, gift card or bank
ment accounts in order to minimize your taxes.
account…or charge what
perfect. However, that doesn’t mean we have It is not uncommon for a sector of the market that
you buy to your mobile-phone
made a mistake. does very well one year to do poorly the next year. If
account. If you use it to pay
For example, let’s say you have chosen an al- you rebalance annually, you will be protecting some of
by credit or debit card, you
your gains. Nor is it
get the protection offered
uncommon for sec- by those cards—usually a
tors that have had a maximum liability of $50. But
poor year to rebound if you use the phone to buy
the next year. By something with a prepaid
rebalancing, you will card or gift card or on your
be taking advantage mobile-phone bill, you will be
of such situations. liable for all purchases until
No one can predict you report a problem, such as
short-term move- a lost or stolen phone.
ments in the market
with certainty, but Don’t trust car insur-
rebalancing is a con- ers’ price comparisons.
servative approach Visit competitors’ Web sites
that does allow you directly to get quotes from
to take advantage of them. Example: Progressive
frequent reverses in offers a name-your-own-price
the markets. option for auto insurance at
Another error is its Web site. It does not actu-
location of the stock and bond funds in your portfolio not taking advantage of the existing tax laws as they ally let you go as low as you
based on reasonable investment objectives. It is easy relate to your portfolio. It is important to understand the want to but does offer a wide
to imagine that there would be years when you would basics of the federal tax law, whether you prepare your range of plans at different
have done much better to have 100 percent of your in- taxes or hire someone. There are situations in which costs—and compares them
vestments in the stock funds. But it is hardly a mistake an understanding of the tax law will help you improve to other companies’ plans.
not to have done so. But Progressive’s quotes for
your financial situation.
other firms’ insurance are not
However, it may be a mistake to have too high a
necessarily the same as those
percentage of your assets in one sector of the market
companies’ own quotes.
inconsistent with your long-term objectives, or to invest
What to do: Shop around by
in only a few common stock funds. Any decision with a
visiting multiple sites even if it
high risk relative to your financial situation may be
seems easier to go to a single
a mistake. site and use its comparison
A common mistake is not rebalancing your tool.
portfolio often enough. Portfolio balance refers to your
allocation of assets among different asset classes. After
deciding on your most effective portfolio mix, it makes
sense to rebalance your portfolio periodically. I like to
do it annually.
For example, assume you decided at the begin- “Hard work never
“The seller will accept your downpayment of 5,000
ning of 2011 that 30 percent of the dollar value of your returnable beer and soda bottles, providing one of those killed anybody, but
portfolio should be in the bond funds, 65 percent in the bottles contains a check for thirty-five thousand dollars.” why take a chance?”
— Edgar Bergen

4. CHAD HORSHAM’S
FINANCIAL NEWS
DIGEST
One Valmont Plaza, Suite 100
Omaha, NE 68154
Chad Horsham is a Registered Representative offering services through NYLIFE Securities LLC., Member FINRA/SPIC. A Licensed Insurance Agency. One Valmont Plaza, Suite 100; Omaha, NE 68154
This publication is provided to our readers as an informational source only. The ideas, opinions and concepts expressed here should not be construed as specific
tax, legal, financial or investment advice. You should consult your professional advisers regarding your particular situation. SMRU 472701
trouble to parcel out
Money-Smart Kids: your kids’ allowance, a
simple alternative is to
Teaching Kids To Save require them to save,
say, a flat 10 percent.
M
By Janet Bodnar, Kiplinger’s
n Match what your
any parents acknowledge that it’s their responsibility to children put aside.
teach kids about money and savings but that they don’t n Give them a
always follow through. For such time-strapped parents, reward. Once your
here’s my easy-to-follow guide to teaching kids to save: children have achieved
Preschool their goal, let them
Young children think about money in concrete terms, so saving spend the money and
should be as hands-on as possible. enjoy the payoff for
n Start with a piggy bank. Banks come in all forms, from tradi- their efforts.
tional pigs to talking ATMs, and they’re great as both teaching tools High School
and toys. Whether your teens
n Set simple goals. Keep them short-term and easy to achieve. For get an allowance or earn money of their own, expand their financial
example, kids could save money for a trip to the dollar store, or tape a responsibilities to include gifts, clothing, concerts, cellphones and car
picture of a coveted toy to their piggy bank so they don’t lose sight of expenses.
their goal. n Clue them in to college. If they have a job, it’s not unreasonable
Elementary Through Middle School to expect them to save a chunk of their income for college expenses.
Tweens are prime candidates for getting an allowance that’s tied to n Encourage them to have their paychecks deposited directly.
specific responsibilities. n Start an IRA. If your children have earned income from a job, in
n Divvy up their allowance into pockets of money for spend- 2012 they can contribute an amount equal to their annual earnings or
ing, saving, giving and even investing. If you don’t want to take the $5,000, whichever is less.