No. of Recommendations: 13
Here's Scott Adams' (Dilbert creator) one-page personal finance guide.

http://www.marketwatch.com/story/dilberts-9-point-financial-...



1. Make a will

2. Pay off your credit cards

3. Get term life insurance if you have a family to support

4. Fund your 401k to the maximum

5. Fund your IRA to the maximum

6. Buy a house if you want to live in a house and can afford it

7. Put six months worth of expenses in a money-market account

8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement.

9. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio.

<snip>


I'd add a 10th item.

10. The cheapest annuity you can "buy" is delaying Social Security to age 70.

intercst
Print the post Back To Top
No. of Recommendations: 1
4. Fund your 401k to the maximum
5. Fund your IRA to the maximum


If you trust the government, this is fine. I don't. I predict the Federal government is going to go the way of Detroit--maybe not in my lifetime, but surely racking up TRILLIONS in debt, year after year, will have consequences. Big consequences.
Print the post Back To Top
No. of Recommendations: 1
How the National Debt affects you (and your retirement plans)
http://money.usnews.com/money/personal-finance/articles/2011...

At more than $14 trillion (March 2011), America's debt might seem abstract, a number so large it's difficult to conceptualize. But if left unchecked, that swiftly swelling figure has the potential to affect our daily lives in a big way, primarily in the forms of higher interest rates and ultimately, a slower economy.

And the numbers are only getting scarier. That $14 trillion tab is growing at a staggering pace of more than $58,000 per second. "It's truly huge—we're talking 9, 10 percent of GDP," says Richard DeKaser, deputy chief economist at The Parthenon Group, a Boston, Mass.-based financial services firm. "We haven't seen anything like that in most people's lifetime. For most people, this is unprecedented." [...]

"What's sort of baked into the cake right now is the presumption that there's some sort of bipartisan action to rein in the deficit, which is by no means assured," says DeKaser.

Keep the Big Spenders (Democrats) in office and this country is doomed and so is your retirement.
Print the post Back To Top
No. of Recommendations: 2
primarily in the forms of higher interest rates

Really? I hadn't noticed.
Print the post Back To Top
No. of Recommendations: 8
4. Fund your 401k to the maximum
5. Fund your IRA to the maximum

If you trust the government, this is fine. I don't. I predict the Federal government is going to go the way of Detroit--maybe not in my lifetime, but surely racking up TRILLIONS in debt, year after year, will have consequences. Big consequences.


Budget projections were released earlier this week by the CBO:

The economy’s gradual recovery from the 2007–2009 recession, the waning budgetary effects of policies enacted in response to the weak economy, and other changes to tax and spending policies have caused the deficit to shrink this year to its smallest size since 2008: roughly 4 percent of GDP, compared with a peak of almost 10 percent in 2009. If current laws governing taxes and spending were generally unchanged—an assumption that underlies CBO’s 10-year baseline budget projections—the deficit would continue to drop over the next few years, falling to 2 percent of GDP by 2015. As a result, by 2018, federal debt held by the public would decline to 68 percent of GDP.

http://www.cbo.gov/publication/44521

The projected deficit of two percent of GDP would be lower than any year under Reagan and the lowest since 2002. If we returned to Clinton-era levels of taxation, the budget would be balanced or close to balanced next year.

I agree, deficits are a problem that need to be dealt with, but they shouldn't be a panic inducing problem.
Print the post Back To Top
No. of Recommendations: 1
Budget projections were released earlier this week by the CBO:

The budget deficit and the national debt are two entirely different things.
Print the post Back To Top
No. of Recommendations: 95
The budget deficit and the national debt are two entirely different things.

The latter is the summation of the former. So they are hardly "entirely different things."

Also, I'm guessing from your remarks and cutesy name-calling that you are unaware of why the annual deficits (and, hence, the national debt) have grown so much during the Obama administration. If you think it is because of massive spending increases under Obama, you are mistaken. The stimulus package was a one-off thing, about one-third of it was tax cuts, and it is done.

The big (but declining) deficits are primarily because of massive declines in revenues as a result of (1) the financial crash and (2) Bush tax cuts, along with (3) two unfunded wars, a major unfunded Medicare program (Part D), and TARP -- all of which he inherited from, yes, Bush.

This is not my opinion. These are facts. If you read the CBO reports, you can verify this all for yourself. Or not.

Now can we get back to retirement investing?
Print the post Back To Top
No. of Recommendations: 0
The projected deficit of two percent of GDP would be lower than any year under Reagan and the lowest since 2002. If we returned to Clinton-era levels of taxation, the budget would be balanced or close to balanced next year.

The reduction to this year's projected deficit spending is due primarily to the sequester. Cutting spending does work, however sloppy it might be.

Clinton loves to take credit for the balanced budget in the mid 90s, but it really had little to do with him....it had much to do with peace dividends from the collapse of the Soviet Union. Thank Reagan.

As to the OP's top-10 suggestions from Dilbert....not a bad list. But a couple of tweeks...

1. A will is good for assigning guardianship for minor dependents and for easy distribution of fee-simple personal property....and this is fine. But for most, it is designating a beneficiary of one's retirement plan, IRA, 529 plan, life insurance and jointly titled property that is the most important.

4. Funding one's 401(k) past the match can get expensive.

9. Hiring a 'fee-based' adviser will get you a stock broker or some other commissioned salesman. Mr. Adams should learn the difference between 'Fee-Based' and 'Fee-Only'.

Otherwise, a great list!

BruceM
Print the post Back To Top
No. of Recommendations: 2
The budget deficit and the national debt are two entirely different things.

If you look at the graph, the debt (the debt, not the deficit) relative to the size of the economy will start dropping next year and continue to do so for the next several years. That same trend is what lead to balanced budgets in the late 1990s.

I don't put much stock in economic forecasts, and none in long range forecasts, but the trend is clearly in the right direction.

Like I said, this is something to keep an eye on, not something to panic over.
Print the post Back To Top
No. of Recommendations: 1
Now can we get back to retirement investing?

I don't know, can we? I don't see how the country's finances are divorced from those of its individual citizens. See the Great Depression.

http://en.wikipedia.org/wiki/Great_Depression
Print the post Back To Top
No. of Recommendations: 1
If you look at the graph, the debt (the debt, not the deficit) relative to the size of the economy will start dropping next year and continue to do so for the next several years.

Riiiight.
Print the post Back To Top
No. of Recommendations: 1
...primarily in the forms of higher interest rates

Really? I hadn't noticed.

From the link:

Consumers will also be affected. Interest rates on U.S. Treasury bonds serve as the benchmark for many consumer loan products, including mortgages, car loans, credit cards, and student loans. As interest rates inch up to attract treasury bond investors, so will rates for consumers.

And just in case you're thinking the Fed can step in and hold rates down indefinitely, Georgetown finance professor Reena Aggarwal says that's not the case. "At some point, the Fed can't really control interest rates," she says. "The market is not stupid. The market sees [that] eventually interest rates have to go up."
Print the post Back To Top
No. of Recommendations: 1
The primary balance of government spending is related to the structural and cyclical deficits. The primary balance is when total government expenditures, except for interest payments on the debt, equal total government revenues. The crucial wrinkle here is interest payments. If your interest rate is going up faster than the economy is growing, your total debt level will increase.

The best way to think about governments is to compare them to a household with a mortgage. A big mortgage is easier to pay down with lower monthly mortgage payments. If your mortgage payments are going up faster than your income, your debt level will only grow. For countries, it is the same. The point of no return for countries is when interest rates are rising faster than their growth rates. At that stage, there is no hope of stabilizing the deficit. This is the situation many countries in the developed world now find themselves in.

“Our projections of public debt ratios lead us to conclude that the path pursued by fiscal authorities in a number of industrial countries is unsustainable. Drastic measures are necessary to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability.”

“Drastic measures” is not language you typically see in an economic paper from the Bank for International Settlements. But the picture painted in a very concise and well-written report by the BIS for 12 countries they cover is one for which the words drastic measures are well warranted.

Details and graphs at http://www.financialsense.com/contributors/john-mauldin/the-...
Print the post Back To Top
No. of Recommendations: 1
The latter is the summation of the former. So they are hardly "entirely different things."

The national debt is increasing because both parties continue to run the nation's business at a deficit--the Democrats more than the Republicans. Republicans are the only ones (finally) sounding the alarm.

There's absolutely no hope of making progress to resolve the national debt when the government runs its business at a deficit. No matter how much the deficit declines, it's still a deficit that adds more to the national debt with (literally) each passing day.

The Complete Stupidity of the United States Government
http://www.youtube.com/watch?v=d3wa0-NZmxA

50 Examples of U.S. Government Waste
http://www.heritage.org/research/reports/2009/10/50-examples...

Desperado politicians are eyeing your retirement accounts.
http://nypost.com/2012/04/22/feds-eye-retirement-fund-tax-to...

The Post article's author--using "deficit" when he means "debt"--is referring to links accessible here.
http://www.zerohedge.com/news/2013-02-02/government-generous...

The possible diversion of private resources is partly why Dave recommends IULs.
Print the post Back To Top
No. of Recommendations: 27
CCinOC analyzes,

There's absolutely no hope of making progress to resolve the national debt when the government runs its business at a deficit. No matter how much the deficit declines, it's still a deficit that adds more to the national debt with (literally) each passing day.

The possible diversion of private resources is partly why Dave recommends IULs.

</snip>


What about all the "private resources" that are being diverted to the insurance company in an IUL?

The Federal Gov't taxes the dividends on an S&P500 index fund at a fairly low rate (i.e., 10% for couples with incomes below $72,500), while the S&P500 dividend in an IUL is completely confiscated by the insurance company. (They only credit you with the change in the S&P500 index and not the dividends.) That's a 100% tax rate!

intercst
Print the post Back To Top
No. of Recommendations: 4
The big (but declining) deficits are primarily because of massive declines in revenues as a result of (1) the financial crash and (2) Bush tax cuts, along with (3) two unfunded wars, a major unfunded Medicare program (Part D), and TARP -- all of which he inherited from, yes, Bush.

Just because you keep repeating lies doesn't make them true.
Print the post Back To Top
No. of Recommendations: 18
Just because you keep repeating lies doesn't make them true.

Just because you keep saying that doesn't make it true.

If you cannot provide accurate data to contradict me (and you cannot, because it doesn't exist), you are wasting our time.
Print the post Back To Top
No. of Recommendations: 7
I'm still trying to figure out why anyone would buy into any kind of investment from an insurance company.

AM
Print the post Back To Top
No. of Recommendations: 0
I'm still trying to figure out why anyone would buy into any kind of investment from an insurance company.

There are reasons, but if you don't want to worry yourself about them, then don't bother.

-synchronicity
Print the post Back To Top
No. of Recommendations: 0
10. The cheapest annuity you can "buy" is delaying Social Security to age 70.

Yeah, but there is no flexibility. The SSA tells you the size of the annuity and that's it. Take it or leave it. You want a bigger or smaller annuity? Too bad.
Print the post Back To Top
No. of Recommendations: 0
I'd add a 10th item.

10. The cheapest annuity you can "buy" is delaying Social Security to age 70.


Unless you have been widowed and are collecting on a spouse's record in which case there is no reason to delay past full retirement age.
Print the post Back To Top
No. of Recommendations: 1
I'd add a 10th item. 10. The cheapest annuity you can "buy" is delaying Social Security to age 70.

Unless you have been widowed and are collecting on a spouse's record in which case there is no reason to delay past full retirement age.

Funny...I just this minute received an email titled "Should you Buy an Annuity from Social Security?" Here are videos on the topic:

http://youtu.be/mj6ztYg05LY
http://youtu.be/qne4VQDaBYU
http://youtu.be/YrZ6oAWyOro
http://youtu.be/y7GeQbKrwh4
http://youtu.be/VNWxl4t5j5s
http://youtu.be/bH2zMQbTKhQ

Here's a brief on the topic from Center for Retirement Research at Boston College.

http://www.producersweb.com/files/b/e6/e6ff98c2088587e69f4ee...
Print the post Back To Top
No. of Recommendations: 1
I'm still trying to figure out why anyone would buy into any kind of investment from an insurance company.

The graph that's part of the spreadsheet I posted in this thread tells the tale. Some people simply cannot stand the thought of their principal eroding--especially since it appears America is going to fall consistently to the libruls (can't win against Santa Claus) in the foreseeable future.
Print the post Back To Top
No. of Recommendations: 0
The Federal Gov't taxes the dividends on an S&P500 index fund at a fairly low rate (i.e., 10% for couples ...

Not me! Not me! Not me! Our dividends get taxed a 0%. Zero.

It's almost a game lots of people play -- more so for folks on Early Retirement & Financial Independence that here at TMF I think --
see how close you can get your taxable income to the top of the 15% bracket without going over.
Print the post Back To Top
No. of Recommendations: 2
"all of which he inherited from, yes, Bush."

All of which he said he was going to fix.
Print the post Back To Top
No. of Recommendations: 1
I guess there weren't as many shovel ready jobs as he thought.
Print the post Back To Top
No. of Recommendations: 4
I'm still trying to figure out why anyone would buy into any kind of investment from an insurance company.

Path dependence.

I assume that this was an honest question and not rhetorical?

Norman Dacey lifted the rock in 1965 when he wrote "How to avoid probate" and then "What's Wrong With Your Life Insurance" (1989)

The True Fact is that the cost of life insurance (note: cost, not price) goes up as you age. Life insurance doesn't insure your life, it insures against dying early, sooner than the mortality table shows your life expectancy is.

The unit of insurance is "dollars of premium per $1000 of insurance".
U = P/V
U is one specific number for the age of the insured, because it is defined by the mortality table. U goes up each year, because the chance of dying goes up each year.
You can keep P the same -- by reducing V
Or you can keep V the same -- by increasing P
What you cannot do is keep both P and V constant. Reality doesn't allow that.

People didn't like this for many reasons. One reason was that people just don't like to believe an uncomfortable truth and will deny that truth. Another reason is that people don't like to have a bill that increases every year. Which the insurance premium must, in order to keep the same insurance amount.
Either the price has to increase or the coverage has to decrease.

But people do not like this tradeoff, they want a stable premium AND a constant coverage amount. So insurance companies -- who know everything there is to know about time-value-of-money -- figured that they could give customers what they wanted.
They computed the average premium (very low at first and very high at the end) for the entire term and charged that.

In essence the company overcharges in the early years and uses that to offset the undercharge in the later years. Works great until until a customer decides to terminate the policy before the later, undercharged, premiums come into play. They overpaid for years but never got the benefit that didn't kick in until much later. Regulators noticed the unfairness.

The outcome was Whole Life Insurance, that builds cash value. Level premium (albeit higher than term insurance) and level death benefit. Many customers don't realize or don't care that the amount of INSURANCE is the difference between the cash value and the death benefit.

Now it's back to level premium and a decreasing amount of insurance -- exactly the thing that customers hated in the first place.
Except that *now* customers have in their minds the idea that you should be getting money back from the company, that is it's an investment.
Print the post Back To Top
No. of Recommendations: 2
Except that *now* customers have in their minds the idea that you should be getting money back from the company, that is it's an investment.


Having something in their minds still doesn't make it an investment.
If I needed it, I would buy insurance from an insurance company - but I make it a rule to NEVER NEVER EVER buy ANY kind of investment instrument from an insurance company. EVER. :)

If I want to guarantee my principle will not go down, I could buy a bond and hold it to maturity or until it's called - whichever comes first, naturally. This, of course, doesn't protect the principle from loss due to inflation.

Went in to buy auto insurance right after we moved to a new state and the guy wasn't content with selling us auto insurance - he desperately wanted to sell us investments.

My first reaction (well, ok... second reaction after my brain shouted NO!) was to ask what the management fees were, what the sales fees were, what the load, if any, was - and I wanted actual percentages.. no hemming and hawing around as though I was an idiot.

Turns out the charges are enormous. And for the life of me I can't figure why anyone would buy such instruments. For the tiniest of management fees I can get excellent performing funds from Vanguard. Why go anywhere else?

If others want to throw their money away, fine.
But I refuse. And I've done quite well over the years for myself by keeping as much of my money as I possibly can. Well... ok... I have to fess up and admit that I do have a couple of funds with Vanguard that are not index funds and the fees are approaching .50% - but are not there yet. Fortunately, these funds are fantastic performers. If they ever go over that 1/2 of 1 percent, I will seriously take another look to decide if they are worth keeping or if I should dump them.

AM
Print the post Back To Top
No. of Recommendations: 0
Rayvt writes,

The Federal Gov't taxes the dividends on an S&P500 index fund at a fairly low rate (i.e., 10% for couples ...

Not me! Not me! Not me! Our dividends get taxed a 0%. Zero.

It's almost a game lots of people play -- more so for folks on Early Retirement & Financial Independence that here at TMF I think --
see how close you can get your taxable income to the top of the 15% bracket without going over.

</snip>


Aren't you talking about capital gains? Dividends in the 15% bracket are taxed at 10%, capital gains, 0%.

https://www.fidelity.com/viewpoints/personal-finance/taxpaye...

intercst
Print the post Back To Top
No. of Recommendations: 0
Aren't you talking about capital gains? Dividends in the 15% bracket are taxed at 10%, capital gains, 0%.

https://www.fidelity.com/viewpoints/personal-finance/taxpaye...


Reread the chart you linked to. Qualified dividends (what Ray is talking about, and generally will be what we think of as 'dividends' from publicly traded companies) are taxed in the same manner as long term capital gains, which is at 0% if one is in the 15% (or lower) bracket.

In addition to the chart you linked to which spells that out, here's a guide from UBS which discusses that at the very beginning.

http://www.ubs.com/us/en/wealth/_jcr_content/par/columncontr...

-synchronicity

Circular 230 Disclaimer - I don't claim to know nuttin' about taxes and am not offering an opinion or advice, talk to a real tax attorney or advisor, the IRS won't care what I typed if you screw up your taxes.
Print the post Back To Top
No. of Recommendations: 0
synchronicityII writes,

Reread the chart you linked to. Qualified dividends (what Ray is talking about, and generally will be what we think of as 'dividends' from publicly traded companies) are taxed in the same manner as long term capital gains,

Thanks. I see it.

intercst
Print the post Back To Top
No. of Recommendations: 4
"Just because you keep repeating lies doesn't make them true."

Just because you keep asserting something is a lie does not make it one. Everything he said was accurate and credible. Just because it does not fit your preconceived narrative does not make it a lie, it just means your narrative is wrong and needs to be rethought.

It would be the credible thing to do.
Print the post Back To Top
No. of Recommendations: 0
I'd add a 10th item.

10. The cheapest annuity you can "buy" is delaying Social Security to age 70.

intercst

-----------------------------------------------------------------------

Sorry for the late post.

One of the big mistakes people can make is taking SS benefits early.

With some married couples it can makes sense but I digress.

Longevity is tied to income. Men who are poor, working poor, and lower middle class simply don't live as long in America.

http://www.ncpa.org/pub/st342

. "Consistent with other studies based on individual level data, we saw that longevity gains for men in counties with higher Social Security benefits among the retired outpace the gains in counties with lower Social Security benefits."

It's a bit misleading to make broad stoke recommendations when each individual's situation differs.
Print the post Back To Top