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Kiplinger's Personal Finance Kiplinger's Personal Finance Document Transcript

  • personal finance money BESt VAluES How Much in PuBlic to Save at cOllEgES p 64 25, 35, 45, 55 your $1 Million formula p 57 FREE One-on-One Financial Advice p 56 RETIRE investing Profiting From Sin Stocks p 27 living RICH Boost We Make It easier Your Home’s Than ever p 54 Value p 85 LISA and SEAN KENNEDY add to the amount they stash in their 401(k) plan each year. february 2008 www.kiplinger.com
  • KIPLINGER’S PERSONAL FINANCE // FOUNDED 1947 CONTENTS VOL. 62 NO.2 64 34 TARGET FUNDS UNDER FIRE (41) 13 AHEAD (44) (48) PLUS: (48) 51 37 5 WAYS TO BET ON A SINKING DOLLAR 53 MONEY 20 PORTFOLIO DOCTOR 54 RETIRE RICH 42 GOING LONG PLUS: 22 OPENING SHOT 46 MUTUAL FUNDS 64 BEST VALUES IN PUBLIC COLLEGES 27 INVESTING 27 THE VIRTUES OF VICE STOCKS 40 MORE ABOUT INVESTING PLUS: JIM BASTARDO (40) PLUS: (41) 70 THE ’08 RACE TO FIX HEALTH CARE 3 02/2008 KIPLINGER’S PERSONAL FINANCE
  • KIPLINGER.COM CONTENTS Log On Go online to get more from our experts and enjoy expanded articles that include slide shows, tools and videos. Find out what we’re talking about this month at Kiplinger.com: 74 A HEAD START ON THE ROAD TO RICHES 81 ASK KIM 77 MORE ABOUT YOUR MONEY (77) (78) (78) (79) (83) (83) 85 LIVING 85 REMODELING THAT PAYS BACK WHAT YOU’LL FIND ONLY ONLINE FIND MORE TAX DEDUCTIONS Consult our updated Taxopedia for clear, concise explanations. kiplinger.com/links/taxopedia 90 HIGH DEF FOR LESS THAN WHICH CANDIDATE’S HEALTH-INSURANCE PROPOSAL IS BEST? $1,000 Read our analysis, then go online and vote. Plus, see our Web recap and share your views. kiplinger.com/links/healthcare08 92 DRIVE TIME HOME MAKEOVERS Our before-and-after photos of kitchen and bath redos provide remodeling inspiration. kiplinger.com/links/makeovers 95 THE LOWDOWN WHO BENEFITS FROM A REVERSE MORTGAGE? Seniors can tap home equity to remain in their home—or even modify the house for wheelchair use. Watch our video at kiplinger.com/video/retirement. HASSLE-FREE GIFT RETURNS Retailers are using more restocking 96 MY STORY fees and other deterrents. Learn how to avoid the headaches—or just share your cautionary tale—at kiplinger.com/links/holiday-returns. REAL ESTATE VALUES Track prices in your area from 2006 to 2007. IN EVERY ISSUE Find out which homes appreciated in a declining market, or compare the 6 FROM THE EDITOR numbers with last year’s predictions. kiplinger.com/tools/houseprices ALLOY PHOTOGRAPHY/VEER HOW TO REACH US: Subscriptions. For inquiries about ordering, billing or renewing a subscription, or to report address changes, call 800-544-0155, Monday through Friday between 7 A.M. and 11 P.M. and Saturday and Sunday between 8 A.M. and 6 P.M. central time. Please have your mailing label handy when speaking with our customer-service representatives. You can also write to 8 LETTERS Kiplinger’s Personal Finance, P.O. Box 3292, Harlan, IA 51593-0472, or e-mail us (sub.services@kiplinger.com). On the Internet, go to kiplinger.com/magazine. Reprints. PARS International Corp. (212-221-9595, ext. 322; e-mail, linda@parsintl.com). Content ON THE COVER: Photograph by Mark Tucker. licensing. Call 202-887-6558 or e-mail licensing@kiplinger.com. mailing lists. From time to time we make our subscriber list Stylist: Shannan Shepard. Hair and makeup: available to carefully screened companies whose products may be of interest to you. If you would rather not receive such solici- Bridget Henry. tations, send your mailing label to P.O. Box 3292, Harlan, IA 51593-0472 and instruct us to exclude your name. 4 KIPLINGER’S PERSONAL FINANCE 02/2008
  • AHEAD » TOPIC A A CUSHION FOR UNCERTAIN TIMES AS THE OUTLOOK CLOUDS, INVESTORS CAN PROTECT THEMSELVES FROM MARKET SHOCK. BY ANNE KATES SMITH SCARCELY A DAY GOES BY Colgate-Palmolive Abbott Laboratories Nicor ALISON SEIFFER Vanguard Consumer Staples iShares Dow Jones US Healthcare 13 02/2008 KIPLINGER’S PERSONAL FINANCE
  • AHEAD Select Sector SPDR- INTERVIEW Utilities A WILD RIDE WILL GET EVEN WILDER WHAT’S THE VIX TELLING US NOW? INCREASING MARKET VOLATILITY ISN’T NECESSARILY A BAD THING. JUST BE PREPARED FOR IT. Kraft Foods SPDR Dividend Alpine Dynamic Dividend STOCK-MARKET VOLATILITY SEEMS OUT OF CONTROL. WHAT IS THE VOLATILITY INDEX, ALSO KNOWN AS THE FEAR INDEX, AND WHAT CAN IT TELL US ABOUT OUR INVESTMENTS? HOW CAN YOU PROTECT YOUR- SELF? W WILL THE MARKET BECOME EVEN MORE JUMPY? E JOHN JOHNSTON ■ GEOFF CONSIDINE SAYS PRE-RETIREES SHOULD KEEP A KEEN EYE ON VOLATILITY, WHICH CAN AFFECT 14 PORTFOLIO WITHDRAWAL RATES FOR YEARS. KIPLINGER’S PERSONAL FINANCE
  • AHEAD MARKETS MONEY & ETHICS KNIGHT KIPLINGER POP GOES A BUBBLE DON’T GET LEFT HOLDING THE (HAND)BAG. 3 OFFERS FOR AND WATCH YOUR STOCKS, TOO. A BUSINESS— WHICH TO ACCEPT? SOME INVESTORS MAY BE Q: My siblings and I own a business that was founded by our late father. It’s been struggling, and we’ve decided to sell it. The highest offer, by far, is from a private- equity investor. The middle offer is from a direct (and tough) competitor, who would probably fold our company into his. The lowest offer is from a respected firm in a related field that says it will retain our prod- uct line, brands and employees. It won’t pay us as much because it plans to invest heavily to revive our franchise. What are the ethical considerations here? The top two bidders are most likely to slash costs to recover their high purchase price as quickly as possible. If you care most about protecting your company’s culture and brand, your loyal employees, and your father’s legacy, you’ll take the lowest offer—and cross your fingers. There’s no guarantee that the low bidder, honorable though its intentions might be, will stick to them if conditions worsen in your field. If you take the low offer, consider keeping a stake in the firm or getting a performance-based price escalator so that you may share in the upside if the turnaround works. ●● From The Kiplinger Letter Q: A colleague at my office takes his wife on a lot of his business trips. Is this ethical? CLARITY, BREVITY AT LAST Put off by tomelike mutual fund prospectuses? You’re in luck. Easy-to-read summaries are on tap for 2008. The plain-English Yes, as long as he gets his work done and pays the added FROM TOP: PETER ROSS; ALISON SEIFFER; COURTESY SEC booklets will boil down fund objectives, costs, strategy, risks, costs of her accompanying him—her airfare, meals, side trips returns and taxes. They’ll provide more clarity on fees, includ- for pleasure and so on. If traveling alone, he would still need ing line-by-line explanations of what funds charge for manage- a hotel room and rental car, so he doesn’t have to reimburse ment, marketing and other expenses. (www.kiplingerbiz.com/ the company for her sharing in their use. If the business travel ahead/fundsummaries) entails entertaining clients—including their spouses—it is sometimes appropriate for the spouse’s expenses to be cov- ered, too. It’s always best to check with one’s supervisor first. HAVE A MONEY-AND-ETHICS QUESTION YOU’D LIKE ANSWERED IN THIS COLUMN? WRITE EDITOR IN CHIEF KNIGHT KIPLINGER AT ETHICS@KIPLINGER.COM. 16 KIPLINGER’S PERSONAL FINANCE 02/2008
  • AHEAD FAQ THE PITFALLS OF THE MORTGAGE BAILOUT THE PLAN TO HELP OUT STRUGGLING BORROWERS WON’T DO MUCH TO STEM THE TIDE OF FORECLOSURES. ■ HARRIET THE PLAN AIMS TO PREVENT WIGGIN HOPES TO HOP TO MANUFACTURING FROM TECH. WORKPLACE CAREER CROSSOVERS EXPERTS EXPECT MORE WORKERS TO SWITCH INDUSTRIES, EVEN CAREERS, AS THEY CHANGE JOBS IN 2008. AS JOB SEEKERS, WE’VE BEEN REMARKABLY LOYAL TO OUR industries. About 60% of professionals with new jobs stayed within their industry during the third quarter of 2007, according to a recent MATTHEW MOGUL survey. That put the year on track for a record-low level of industry- switching—until trouble broke out in the housing and finance sectors. s ●● Stock Watch Now, outplacement firm Challenger, Gray & Christmas expects a spike N in industry crossovers early in 2008, similar to the one that occurred BIG ENOUGH BLUE in late 2001 as the dot-com bubble collapsed. Starting anew can be invigorating, but it’s risky to your earning Investors worry that finan- power. “The secret is to be conversant in the language of the industry p cial firms, representing one- you’re moving to,” says Jan Cannon, of Cannon Career Development y fourth of sales for Interna- in Boston. For instance, networking skills means something very dif- tional Business Machines, will trim orders. But resil- ferent in the tech field than it does in public relations, says Cannon. f ient, recurring revenue from “You don’t want the person reading your résumé to do any of the “ services and software is 73% work—you have to do all the translating.” People who’ve hop- w of sales. A global presence scotched before have an advantage. Twenty-year veterans of a single s mitigates U.S. struggles. industry may have to draw on outside volunteer work or other inter- in ests to highlight their adaptability. If you have to take a pay cut to get e FROM LEFT: COURTESY IBM; REENA BAMMI in the door, try to negotiate an early performance and salary review. It helps to target thriving industries open to newcomers. Harriet Wiggin, 59, was downsized out of her marketing post at a technology W research firm in Boston. She hopes to land a similar position in manu- re facturing—among the few bright spots in a struggling economy this f SYMBOL: IBM year. “I think there’s more opportunity,” says Wiggin, acknowledging y PRICE: $109 that challenges await as well. “There’s always a learning curve.” t EARNINGS PER SHARE: 2007: $6.97* 2008: $7.98* 18 To Dec. 10. *Estimate. KIPLINGER’S PERSONAL FINANCE SOURCES: Morningstar Inc., Thomson Financial.
  • » AHEAD PORTFOLIO DOCTOR DESIGNING YOUR FIRST 401(k) PLAN WHEN YOU’RE YOUNG, YOU CAN TAKE MORE CHANCES. THINK STOCKS. BY JEFFREY R. KOSNETT STEVEN LEIBENSPERGER AND Rare win for bonds. Stocks’ long-term edge. CHRIS MUELLER/REDUX STUMPED BY YOUR INVESTMENTS? WRITE TO US AT PORTFOLIODOC@ KIPLINGER.COM. DESIGNER STEVEN LEIBENSPERGER 20 SHOULDN’T LET HIS FEAR OF RISK COLOR THE WAY HE INVESTS HIS 401(K) MONEY. KIPLINGER’S PERSONAL FINANCE
  • INVESTING » IN THIS SECTION Target-date retirement funds 34 Bet on a sinking dollar 37 Buy shares in BlackBerry? 40 Insured munis take a hit 41 Jeremy Siegel’s ’08 forecast 42 A new breed of mutual funds 44 PLUS Update on the Kiplinger 25 48 GUINNESS, MADE BY LONDON-BASED DIAGEO, IS THE WORLD’S MOST POPULAR STOUT. THE VIRTUES OF VICE STOCKS THE IRISH IMAGE COLLECTION/CORBIS BY THOMAS M. ANDERSON 27 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » INVESTING // STOCKS HARD TIMES WON’T STOP GAMBLERS FROM BETTING, PARTYGOERS FROM DRINKING AND AmBev LUCRATIVE LIQUIDS Diageo Anheuser-Busch STEWART GREGORY/GETTY IMAGES 28 KIPLINGER’S PERSONAL FINANCE 02/2008
  • NEW YORK, NEW YORK AND THE BELLAGIO, BOTH OWNED BY MGM MIRAGE, ARE AMONG THE NEWEST HOTELS ON THE STRIP. 29 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » INVESTING // STOCKS HIGH-STAKES STOCKS MGM Mirage Sin Stocks EIGHT THAT PROMISE BIG PROFITS In addition to being attractive in their own right, these companies have strong market forces behind them. All of them are large, consistent growers (an area of the market currently in favor), and four are based overseas. Price- Recent Mkt. cap. Revenues Earnings earnings Company Symbol price (in billions) (in billions)* per share* ratio† Altria MO $78 $164 $39 $4.69 17 AmBev ABV 76 47 12 3.40 22 Anheuser-Busch BUD 53 39 17 3.09 17 British American Tobacco BTI 78 80 21 4.82 16 Diageo DEO 87 58 19 4.92 18 Imperial Tobacco Group ITY 105 36 11 6.47 16 International Game Technology IGT 44 14 3 1.66 27 MGM Mirage MGM 93 28 8 2.79 33 Data to December 10. *Based on 2008 fiscal-year estimates. †Based on estimated earnings. SOURCES: Thomson Financial, Yahoo. 30 KIPLINGER’S PERSONAL FINANCE 02/2008
  • The Fund Route to Sin Stocks IF YOU DON’T WANT TO MUCK AROUND IN SIN STOCKS, HIRE A MUTUAL FUND MANAGER TO DO International the dirty work for you. Game Technology Only one fund specializes in the entire range of sin stocks. Vice fund, run by Charles Norton since September 2005, invests in alcohol, gaming, tobacco and defense. We hardly consider military-related companies to be sinful, but Norton includes them because they tend to run counter to general economic trends and because most socially screened funds—polar opposites of his fund—shun them. Top holdings include Altria, Diageo and British American Tobacco. Vice gained 21% in 2007 to December 10, compared “Leisure funds and other with the S&P 500’s 8% return. The $177-million fund (symbol VICEX) specialized doesn’t levy sales fees, but it charges a hefty annual fee of 1.75%. funds may hold Dan Ahrens, former manager of Vice fund, now runs the tiny (assets healthy doses of $3 million) Ladenburg Thalmann Gaming and Casino fund. The of sin stocks.” fund holds just 35 stocks, including Penn National Gaming, Las Vegas Sands and MGM Mirage. Since its March 2006 debut, performance has been as erratic as a float- n ing craps game. In 2007 to December 10, the fund (GACFX) gained 3%. Annual fees are 1.70%. So-called leisure funds and other specialized funds may also hold healthy doses of sin stocks. Geoff Kuli, manager of Fidelity Select Leisure since October 2006, hunts for reasonably priced, growing companies in the media, entertainment, cable, food and beverage industries. At last report, the fund (FDLSX) had about 15% of its $263 million of assets in gaming stocks. Select Leisure gained 9% in 2007 to December 10. About one-fourth of Rydex Leisure’s $9 million in assets are in casino stocks. The fund (RYLIX) uses a formula to buy equal portions of stocks in the leisure sector. Over the past five years, it returned 14% annualized, beating the S&P 500 by an average of one percentage point per year. UNSEEMLY PRODUCT, Fidelity Select Consumer Staples recently kept 20% of its portfolio in alcohol and tobacco GREAT STOCKS stocks. The fund (FDFAX), managed by Robert Lee since June 2004, has a three-year annualized return of 18%, which beat the S&P 500 by an average of seven percentage points per year. British American Tobacco Imperial Tobacco Group 31 02/2008 KIPLINGER’S PERSONAL FINANCE
  • Foreign INTERNATIONAL LARGE-COMPANY VALUE FUNDS Ranked by one-year returns Total return to Dec. 10 Max. Markets sales Expense Toll-free Rank/Name Symbol 1 yr. 3 yrs. 5 yrs. charge ratio number 1. Allianz NFJ Intl Value A@ AFJAX 34.1% — — 5.50% s 1.46% 800-498-5413 2. Cullen Intl High Dividend Ret@ CIHDX 30.6 — — 2.00 r 1.25 877-485-8586 Roar On 3. Harbor Intl Instl@ 4. Thomas White Intl 5. American Century Intl Value A@ HAINX TWWDX MEQAX 30.5 24.6 22.9 27.8% 27.7 20.9 27.5% 26.7 21.8 2.00 r 2.00 r 5.75 0.85 1.44 1.40 800-422-1050 800-811-0535 800-345-2021 6. Dryden Intl Value A@ PISAX 22.0 22.2 20.7 5.50 1.65 800-225-1852 7. Cambiar Intl Equity Inv CAMIX 21.5 19.0 21.2 2.00 r 1.50 866-777-8227 8. Templeton Foreign A@ TEMFX 20.9 17.4 18.9 5.75s 1.16 800-632-2301 9. Longleaf Partners Intl LLINX 19.7 18.2 18.4 none 1.61 800-445-9469 10. DWS Intl Value Opps A@ DNVAX 19.7 — — 5.75s 2.05 800-621-1048 CATEGORY AVERAGE 14.6% 18.0% 22.0% 20 LARGEST STOCK MUTUAL FUNDS Ranked by size Max. INTERNATIONAL STOCKS COASTED Assets† Total return to Dec. 10 sales Toll-free Rank/Name Symbol (in billions) 1 yr. 3 yrs. 5 yrs. charge number 1. American Gro Fund of America A@ AGTHX $193.9 12.5% 13.9% 15.3% 5.75% 800-421-0180 2. American EuroPacific Gro A@ AEPGX 125.4 24.3 23.2 23.2 5.75 800-421-0180 3. Vanguard 500 Index Inv@ VFINX 123.3 8.8 10.5 12.4 none 800-635-1511 4. American Cptl Wrld Gro & Inc A@ CWGIX 113.3 22.1 20.3 22.8 5.75 800-421-0180 5. American Cptl Inc Builder A@ CAIBX 110.8 13.8 14.0 15.8 5.75 800-421-0180 6. Vanguard Total Stck Mkt Idx Inv@ VTSMX 105.3 8.6 11.0 13.6 none 800-635-1511 7. American Invstmt Co of America A@ AIVSX 90.7 8.9 11.1 12.8 5.75 800-421-0180 8. American Inc Fund of America A@ AMECX 88.5 6.6 10.5 13.1 5.75 800-421-0180 9. American Washington Mtl Inv A@ AWSHX 84.3 7.8 10.3 12.2 5.75 800-421-0180 10. Fidelity Contrafund** FCNTX 80.3 20.7 17.6 18.2 none 877-208-0098 11. Dodge & Cox Stock** DODGX 65.7 5.4 11.9 15.9 none 800-621-3979 12. American New Perspective A@ ANWPX 61.8 20.1 17.6 19.3 5.75 800-421-0180 13. Franklin Income A@ FKINX 61.6 6.9 9.8 13.9 4.25s 800-632-2301 14. American Balanced A@ ABALX 61.0 8.6 8.3 10.5 5.75 800-421-0180 15. Fidelity Diversified Intl** FDIVX 57.5 20.3 20.8 23.8 1.00 r 877-208-0098 16. Dodge & Cox Intl Stock DODFX 53.5 17.7 21.4 27.6 none 800-621-3979 17. Vanguard Windsor II Inv@ VWNFX 51.6 8.4 11.7 15.2 none 800-635-1511 18. Vanguard Wellington Inv@ VWELX 50.8 10.0 11.3 12.4 none 800-635-1511 19. American Fundamental Inv A@ ANCFX 49.8 15.7 16.5 17.9 5.75 800-421-0180 20. Davis New York Venture A@ NYVTX 49.8 8.7 12.1 14.9 4.75 800-279-0279 S&P 500 WITH DIVIDENDS 9.0% 10.6% 12.6% MSCI EAFE 16.5% 19.1% 22.3% @Rankings exclude share classes of this fund with different fee structures or higher minimum initial investments. sFront-end load; redemption fee may apply. rMaximum redemption fee. †For all share classes combined. **Closed to new investors. MSCI EAFE is Morgan Stanley’s Europe, Australasia, Far East index. SOURCE: © 2007 Morningstar Inc. EXPLANATION OF TERMS Kiplinger.com Total return assumes reinvestment of all dividends and capital gains; three- and five-year returns are RETURNS FOR annualized. Returns reflect ongoing expenses but not sales charges. 3,OOO+ FUNDS ONLINE Maximum sales charge A figure without a footnote Get the latest data and see the means the commission is deducted from the money top 25 performers over one-, you send to the fund. A figure with an r is the maxi- three- and five-year periods. We mum redemption fee charged when you sell shares. group our rankings into eight bond- Funds that charge both sales and redemption fees are fund and almost two dozen stock- footnoted with an s next to the front-end load. fund categories and update them monthly. To see the rankings and Expense ratio is the percentage of assets claimed ELIZABETH ODY look up fund information, go to annually for operating a fund. kiplinger.com/links/mutualfunds. 51 02/2008 KIPLINGER’S PERSONAL FINANCE
  • MONEY » IN THIS SECTION Best values in public colleges 64 The race for health-care reform 70 Make your child a millionaire 74 After the California wildfires 78 Telecom-bundle deals 83 ROB FALCONE CONSIDERED SEVERAL ROLLOVER OPTIONS TO KEEP HIS 401(K) SAVINGS GROWING AFTER HE SWITCHED JOBS. A REAL-WORLD RETIREMENT PLAN PHOTOGRAPH BY PETER ROSS 53 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » MONEY // COVER 6 Simple Ways to Retire Rich BY MARY BETH FRANKLIN RETIREMENT SAVINGS PLANS ARE UNDERGOING AN EXTREME MAKEOVER. AFTER 54 KIPLINGER’S PERSONAL FINANCE 02/2008
  • LISA AND SEAN KENNEDY WILL AUTOMATICALLY INCREASE THE AMOUNT THEY CONTRIBUTE TO THEIR RETIREMENT ACCOUNTS EACH YEAR. PHOTOGRAPH BY MARK TUCKER
  • » MONEY // COVER SIMPLE WAY #1: SIGN UP SIMPLE WAY #2: GET HELP FROM THE PROS * KipTip Ki Ti * KipTip NUMBERS FAST RETIREMENT TO KNOWFACTS FOR ’08 SAVINGS IN 2008 IRA AND ROTH IRA CONTRIBUTION LIMITS: $5,000, plus $1,000 if you’re 50 or older 401(K) CONTRIBUTION LIMITS: $15,500, plus $5,000 if you’re 50 or older INCOME CEILINGS FOR ROTH IRA: $169,000 if you’re married and filing jointly $116,000 if you’re single 56 INCOME CEILING TO CONVERT AN IRA TO A ROTH IRA: $100,000 KIPLINGER’S PERSONAL FINANCE 02/2008
  • How to Make a Million STRATEGIES FOR SAVING AT EVERY AGE The road to $1 million starts early, but there’s hope, and help, for late bloomers. The table below shows how much you need to save each month to accumulate $1 million by age 65, along with strategies to fit retirement saving into the rest of your life. At age 25, you’re starting from scratch. At ages 35, 45 and 55, we assume you already have money in savings on which you’re earning 8% annually. Even if you can’t save quite this much now, our step-by-step guide will help you set priorities for every stage of life. 25 35 45 55 YOUR AGE YOU’VE SAVED $0 YOU’VE SAVED $0 YOU’VE SAVED $0 YOU’VE SAVED $0 WHAT YOU NEED TO SAVE WHAT YOU NEED TO SAVE WHAT YOU NEED TO SAVE WHAT YOU NEED TO SAVE PER MONTH $286 PER MONTH $671 PER MONTH $1,698 PER MONTH $5,466 FROM LEFT: SHUJI KOBAYASHI/GETTY IMAGES, DAVID SACKS/GETTY IMAGES, RYAN MCVAY/GETTY IMAGES, ARIEL SKELLEY/JUPITER IMAGES YOU’RE JUST STARTING YOU’VE SAVED $50,000 YOU’VE SAVED $50,000 YOU’VE SAVED $50,000 YOUR CAREER, SO THIS IS YOUR WHAT YOU NEED TO SAVE WHAT YOU NEED TO SAVE WHAT YOU NEED TO SAVE CHANCE TO BUILD A SOLID PER MONTH $304 PER MONTH $1,298 PER MONTH $4,859 FINANCIAL FOUNDATION. TIME IS ON YOUR SIDE. YOU MAY BE STARTING A YOU’VE SAVED $100,000 YOU’VE SAVED $100,000 FAMILY OR PREPARING TO BUY WHAT YOU NEED TO SAVE WHAT YOU NEED TO SAVE Contribute enough to your PER MONTH $861 PER MONTH $4,253 A HOME. BALANCE YOUR company 401(k) plan to SHORT-TERM NEEDS WITH CAPTURE YOUR EMPLOYER YOU’VE SAVED $200,000 YOUR LONG-TERM SAVINGS YOU MAY BE JUGGLING MATCH . If you don’t have WHAT YOU NEED TO SAVE GOALS. THE NEEDS OF A GROWING a retirement plan at work, PER MONTH $3,040 FAMILY AND AGING PARENTS, fund an IRA. Although you have added BUT DON’T TAKE A BREAK responsibilities, don’t You’ll be investing FROM RETIREMENT SAVINGS. TAKE ADVANTAGE OF YOUR neglect retirement. for 30 years or more, PEAK EARNING YEARS AIM TO SAVE 15% OF YOUR You can CONTRIBUTE UP TO so you can afford to TO TOP OFF YOUR SAVINGS. GROSS INCOME (including $15,500 TO A 401(K) or similar KEEP 100% OF YOUR an employer match) in workplace-based retire- ADD AN EXTRA $5,000 IN ACCOUNT IN STOCKS. your 401(k). If one parent ment plan this year or CATCH-UP CONTRIBUTIONS PAY DOWN CREDIT CARDS AND leaves work to care for $5,000 to an IRA. Roll over to your 401(k) savings and OTHER HIGH-INTEREST DEBT. the kids, consider opening retirement savings from an extra $1,000 to your IRA. That will free up money to a spousal IRA. previous jobs into an IRA. As you near retirement, save for a house. Shift your assets to 90% Adjust your asset allocation reallocate your portfolio SET UP AN EMERGENCY FUND STOCKS AND 10% BONDS . to 80% STOCKS AND to 70% STOCKS AND equal to three to six months 20% BONDS. 30% BONDS. INVEST IN A 529 COLLEGE- of take-home pay. Stash it in SAVINGS PLAN. Many states Your kids can get grants Estimate your retirement a readily accessible account offer a tax deduction for or loans for college, but expenses and your in an online bank that pays your contribution, and there’s no financial aid for projected income. If you’re interest of 4% or more. qualified distributions are retirement. DON’T PUT YOUR coming up short, CONSIDER exempt from federal taxes. KIDS’ COLLEGE COSTS WORKING A FEW MORE YEARS . AHEAD OF RETIREMENT. 57 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » MONEY // COVER * KipTip THE MAGIC OF COMPOUNDING IF YOU START AT AGE 22, SAVE $100 A MONTH AND EARN AN 8% RETURN UNTIL YOU’RE 65, YOU’LL HAVE $450,478 IF YOU START AT AGE 32, SAVE $100 A MONTH AND EARN AN 8% RETURN UNTIL YOU’RE 65, YOU’LL HAVE $194,654 SIMPLE WAY #3: CHECK YOUR PROGRESS SIMPLE WAY #4: CONSIDER A ROTH 60 KIPLINGER’S PERSONAL FINANCE 02/2008
  • Turn Savings Into Retirement Income RETIREES HAVE MANY CHOICES, BUT NOT ONE OF THEM OFFERS THE PERFECT SOLUTION BABY-BOOMERS ARE ABOUT TO START That rate would gradually increase to index funds, as well as inflation-protected tapping a lifetime of retirement savings. 100% of the fund’s balance in the final securities and money-market funds. The $16-trillion question is how to turn year. But the actual dollar amount could that pile of cash into an income stream fluctuate from year to year depending on INCOME FOR LIFE. Both companies ad- you can’t outlive. market performance. (The longer your dress retirees’ concerns about generating The quick answer: There’s no quick time horizon, the smaller your initial steady income while protecting against answer. “Any retirement solution will be payout rate. The 2028 fund with a 20-year future inflation. But neither tackles the only a piece of the puzzle,” says Jonathan timeline, for example, pays out 6.10% the biggest financial risk of the 21st century: Shelon, co-manager of the new Fidelity first year.) You can cash out your funds or living longer. Aside from a traditional Income Replacement funds. Heavy hitters switch among them at any time. pension or Social Security benefits, only Fidelity and Vanguard have recently come an insurance product, such as an immedi- up with solutions that will appeal to VANGUARD’S STRATEGY. Vanguard’s ate annuity, can guarantee income for life. different groups of retirees. soon-to-be-available managed-payout But the trade-offs are giving up control funds take a different tack. They are of your assets and leaving nothing for your FIDELITY’S APPROACH. Fidelity’s new designed to provide retirees with current heirs—neither of which is popular with funds offer a unique approach that com- income without consuming capital so their retirees. In 2006, immediate annuities bines asset allocation with withdrawals. portfolios can continue to grow. “Our accounted for less than 1% of sales of all Essentially, they are mutual funds with an shareholders are interested in having the insurance investment products. expiration date. You select a target date, flexibility in their later years to meet The newest generation of annuities currently from eight to 28 years, and unexpected expenses or to leave money to is more attractive. You can change your receive monthly payments until the fund family members,” says Ellen Rinaldi, head payout amount, withdraw funds for an is exhausted. Payments are set for a year of Vanguard’s retirement services. emergency or guarantee payments to at a time, and may rise (or fall) in subse- Investors may choose from among three your beneficiaries if you die prematurely. quent years depending on market perfor- managed-payout portfolios with distribu- But each of those features reduces the mance and payout rates. tion targets ranging from 3% per year, amount of your monthly check. Because of the set time frame, payouts for those primarily interested in growth, It’s up to you to create your own plan are larger than the typical 4% initial annual to 7%, for retirees who need more income. for retirement income. You have a growing withdrawal rate recommended for retir- The low-cost funds, with estimated an- number of choices, and there are a lot of ees, who must take a cautious approach to nual expenses of 0.34%, will invest mainly right answers (for an overview, see the try to make their money last a lifetime. in Vanguard domestic and international box below). MARY BETH FRANKLIN But the limited time frame also means the funds are depleted by a preset date, so Retirement Income this option is not appropriate for all your savings. CREATE YOUR OWN PENSION How much annual income can a 65-year-old man who invests $100,000 expect? Instead, you could use them as an Here are the first-year figures from a variety of retirement-income sources, as well income bridge or for specific spending as the trade-offs between income and flexibility. The annuity payments listed here needs, such as a travel budget. For exam- are fixed for life. Investment payouts could rise or fall with market performance. ple, say you’re 55, work part-time and plan to collect Social Security at 65. You could Amount Guaranteed Control Legacy for Income source per year income for life? of assets? heirs? use Fidelity’s 2018 Income Replacement 4% initial withdrawal from portfolio $4,000 No Yes Maybe fund to supplement your income for the next ten years. If you invested $200,000, Fidelity Income Replacement 2036 5,090 No Yes Maybe you would receive $19,160 the first year, Annuity with 20-year guaranteed payout* 7,020 Yes No Maybe spread out over 12 equal monthly pay- Life-only annuity 8,062 Yes No No ments, based on the fund’s initial payout *Guarantees payments for life and pays death benefits to heirs if you die within 20 years. SOURCES: Fidelity Investments, New York Life. rate of 9.58%. 61 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » MONEY // COVER SIMPLE WAY #6: * On the Web SELL COMPANY STOCK EASY TOOLS TO SEE HOW YOU’RE DOING For more tips on saving for retirement and figuring out how much you can spend once you quit, visit kiplinger.com/ yourretirement. To see if your savings are on track, check out the interactive tools at fidelity .com/myplan and nationwide.com/ retirability. SIMPLE WAY #5: ROLL IT OVER 62 KIPLINGER’S PERSONAL FINANCE 02/2008
  • » MONEY // COLLEGE BEST VALUES IN PUBLIC COLLEGES BY JANE BENNETT CLARK IT COULD JUST BE THE BEST PUBLIC COLLEGE YOU’VE NEVER HEARD OF, WITH PRICES SO PRICES HEAD NORTH 64 KIPLINGER’S PERSONAL FINANCE 02/2008
  • AT SUNY GENESEO, THE MIX OF OLD IVY AND A NEW SCIENCE CENTER ATTRACTED STUDENTS MAUREEN GILLARD AND ROB BROOKS. 65 02/2008 KIPLINGER’S PERSONAL FINANCE PHOTOGRAPHS BY JIM BASTARDO
  • » MONEY // COLLEGE THE BEST VALUES IN PUBLIC COLLEGES KIPLINGER’S BASES ITS COLLEGE rankings on a combination of outstand- ing academic quality plus an affordable price tag. We start with nationwide data from more than 500 public four-year colleges and universities, which are provided to Peterson’s/Nelnet. We supplement DIVERGING TRENDS Peterson’s data with our own reporting. We narrow the list to about 120 schools based on several measures of academic quality—including the per- centage of the 2006–2007 freshman class scoring 600 or higher on the verbal and math components of the SAT (or scoring 24 or higher on the ACT), admis- sion and retention rates, student-faculty ratios, and four- and six-year graduation rates, which most schools reported for the student cohort entering in 2000. We then rank each school based on cost and financial aid. We look at total cost for in-state students (tuition, man- datory fees, room and board, and esti- mated expenses for books); the average cost for a student with need after sub- tracting grants (but not loans); the aver- age cost for a student without need af- ter subtracting non-need-based grants; the average percentage of need met by aid; and the average debt a student ac- cumulates before graduation. In the ta- ble, aid refers to need-based assistance. To determine out-of-state rankings, we run the academic-quality and cost numbers again, this time using total costs for out-of-state residents and average costs after aid. In our scoring system, academic qual- ity carries more weight than costs (al- most two-thirds of the total). To break ties, we use academic-quality scores and average debt at graduation. 66 KIPLINGER’S PERSONAL FINANCE 02/2008
  • Quality In-state Out-of-state SAT Student/ 4-yr. 6-yr. Average Undergrad. (V/M)* faculty grad. grad. Costs Costs debt at In-state rank/Name enroll. or ACT ratio rate rate Total After aid Rank Total After aid graduation 1. University of North Carolina at Chapel Hill 17,124 72%/81% 14 71% 84% $13,430 $5,902 4 $29,078 $21,550 $14,487 2. University of Florida 35,110 60/69 21 51 78 11,216 6,520 3 25,801 21,105 15,045 3. University of Virginia 14,676 79/85 15 84 93 17,225 4,702 7 36,475 23,952 12,726 4. College of William and Mary (Va.) 5,734 84/83 11 81 91 17,449 5,992 6 35,010 23,553 14,524 5. New College of Florida 746 96/76 11 53 63 11,605 3,985 31 29,458 21,838 15,334 6. SUNY Geneseo 5,358 79/87 19 64 79 14,966 12,320 1 21,226 18,580 17,000 7. University of Georgia 25,437 59/62 18 41 75 13,754 7,732 18 28,858 22,836 13,478 8. SUNY Binghamton 11,523 59/80 20 67 79 16,000 10,973 2 22,260 17,233 15,167 9. University of Washington 27,836 45/59 11 46 74 15,730 7,230 21 31,476 22,976 15,900 10. University of California, Los Angeles 25,432 69/80 17 57 87 20,969 10,025 13 40,037 29,093 15,996 11. University of California, San Diego 21,369 55/76 19 50 78 19,180 9,146 17 38,248 28,214 15,170 12. Georgia Institute of Technology 12,361 71/92 14 29 76 13,936 9,076 58 31,660 26,800 14,895 13. North Carolina State University 23,730 35/57 16 36 71 13,417 6,509 16 25,615 18,707 14,719 14. University of Mary Washington (Va.) 4,183 62/49 16 70 76 13,226 10,026 12 23,106 19,906 12,800 15. Florida State University 31,347 39/44 22 42 66 12,355 8,911 32 25,486 22,042 13,290 16. University of Michigan 25,555 94 15 67 87 19,657 11,711 14 40,511 32,565 23,533 17. Virginia Polytechnic Institute and State Univ. 21,997 43/62 16 47 76 13,527 9,307 26 25,905 21,685 19,807 18. University of California, Berkeley 23,863 72/81 15 58 87 23,466 11,925 11 43,086 31,545 14,751 19. University of Wisconsin–Madison 30,055 91 13 43 78 15,510 11,681 23 29,760 25,931 20,282 20. University of Delaware 16,296 44/58 12 62 76 16,898 11,662 8 28,148 22,912 17,200 21. University of California, Irvine 20,719 38/61 19 42 80 19,667 9,328 41 39,287 28,948 13,587 22. James Madison University (Va.) 16,013 28/33 16 62 80 14,340 8,601 19 25,060 19,321 11,932 23. College of New Jersey 6,094 62/75 13 61 81 21,549 12,063 5 28,772 19,286 19,459 24. University of Texas at Austin 37,037 54/68 18 42 75 17,046 10,746 35 33,920 27,620 16,800 25. Texas A&M University 36,580 42/57 20 35 77 14,971 8,176 9 23,311 16,516 16,027 26. Truman State University 5,524 86 16 41 66 13,477 10,517 10 18,087 15,127 16,656 27. Appalachian State University (N.C.) 13,447 30/36 17 35 64 10,897 6,186 20 20,639 15,928 14,838 28. University of Maryland, College Park 25,373 68/78 19 50 76 17,848 12,405 24 32,087 26,644 17,731 29. University of California, Santa Barbara 18,212 49/55 17 58 78 21,013 10,793 30 40,633 30,413 15,808 30. University of Connecticut 16,347 45/58 17 50 72 18,236 11,793 43 32,180 25,737 20,030 31. Miami University (Ohio) 14,551 81 16 66 80 20,294 15,609 33 34,121 29,436 22,255 32. University of Illinois at Urbana–Champaign 31,472 87 17 59 81 20,526 13,995 25 34,612 28,081 15,413 33. Clemson University (S.C.) 14,096 54/69 15 44 75 17,031 13,531 34 28,961 25,461 17,556 34. Indiana University, Bloomington 29,828 30/38 18 48 71 15,271 8,443 66 29,750 22,922 19,756 35. University of South Carolina 18,648 39/50 17 41 65 15,166 11,721 59 27,594 24,149 19,360 36. University of North Carolina at Wilmington 10,759 26/37 18 37 57 12,330 8,667 51 22,293 18,630 15,620 37. Ohio State University 38,479 82 13 35 68 17,358 10,833 45 29,967 23,442 18,130 38. Western Washington University 12,838 33/32 19 30 65 13,344 7,172 55 24,418 18,246 14,887 39. University of Wisconsin–La Crosse 8,306 64 24 21 64 11,320 7,144 38 18,894 14,718 16,793 40. University of North Carolina at Asheville 3,609 47/41 13 28 54 11,244 7,138 53 22,234 18,128 14,211 41. Cal. Polytechnic State Univ., San Luis Obispo 17,777 38/62 20 21 69 14,868 13,074 15 23,004 21,210 14,032 42. St. Mary’s College of Maryland 1,948 64/57 12 63 72 21,844 17,844 40 31,178 27,178 17,125 43. University of Pittsburgh 17,246 57/64 16 44 67 22,176 14,903 44 31,686 24,413 N/A 44. University of Nebraska–Lincoln 17,371 59 19 22 63 13,688 8,821 61 23,708 18,841 16,909 45. Pennsylvania State Univ. at University Park 36,613 37/58 17 48 84 21,384 16,689 46 32,252 27,557 23,500 46. Rutgers, State Univ. of N.J., New Brunswick 26,691 41/60 16 46 71 21,373 12,483 36 30,541 21,651 16,283 47. Purdue University (Ind.) 31,290 30/45 14 31 64 15,996 7,103 75 30,804 21,911 20,102 48. University of California, Davis 23,458 35/54 19 42 80 21,150 12,078 57 40,218 31,146 12,701 49. University of Minnesota, Twin Cities 32,113 69 15 32 61 18,122 10,526 63 29,752 22,156 24,995 50. University of Texas at Dallas 9,375 58/73 19 30 56 16,425 12,027 37 25,725 21,327 16,895 N/A information not available. *Verbal/Math. SOURCE: Peterson’s Undergraduate Database. Copyright © 2007 Peterson’s/Nelnet LLC. All rights reserved. COLLEGE RANKINGS CONTINUED ON NEXT PAGE >> For more on affordable education, check out our Best Values in Colleges and Universities Center. Go to kiplinger.com/links/college08. 67 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » MONEY // COLLEGE Quality In-state Out-of-state SAT Student/ 4-yr. 6-yr. Average Undergrad. (V/M)* faculty grad. grad. Costs Costs debt at In-state rank/Name enroll. or ACT ratio rate rate Total After aid Rank Total After aid graduation 51. University of Central Florida 39,545 34%/44% 28 31% 57% $12,650 $9,225 85 $26,851 $23,426 $12,876 52. Louisiana State University 24,583 65 21 27 59 12,895 7,665 56 21,195 15,965 16,354 53. University of Missouri–Columbia 21,551 66 18 38 68 16,572 10,418 54 27,228 21,074 18,983 54. University of Iowa 20,738 64 15 38 66 14,503 10,031 74 27,675 23,203 20,234 55. SUNY Purchase 3,754 37/23 15 32 47 13,383 8,638 52 19,643 14,898 16,058 56. SUNY Fredonia 5,046 23/31 16 49 63 14,922 11,772 27 21,182 18,032 22,303 57. University of Colorado at Boulder 26,163 68 16 38 66 17,421 10,244 91 35,583 28,406 17,141 58. Iowa State Univ. of Science and Technology 20,440 59 15 32 68 13,854 10,706 68 24,612 21,464 27,324 59. University of Arkansas 14,350 64 17 30 56 14,021 10,068 50 22,475 18,522 18,170 60. University of Alabama 19,471 46 19 35 63 12,518 9,038 77 23,336 19,856 18,653 61. Michigan State University 35,821 62 17 36 71 17,222 11,733 81 31,082 25,593 22,147 62. Salisbury University (Md.) 6,791 21/27 16 47 67 15,216 10,534 49 23,304 18,622 18,330 63. Northern Arizona University 14,526 22/24 16 26 48 11,634 7,524 71 20,619 16,509 17,563 64. University of Wisconsin–Eau Claire 10,031 57 19 19 59 11,455 7,287 62 19,028 14,860 16,953 65. University of Massachusetts, Amherst 19,823 34/43 17 46 66 18,759 11,595 60 29,337 22,173 14,094 66. University at Albany (SUNY) 12,457 26/42 20 50 62 16,050 11,283 28 22,310 17,543 11,856 67. Missouri University of Science and Technology 4,515 83 14 15 60 15,732 9,972 70 26,388 20,628 17,820 68. University of North Carolina at Greensboro 12,921 16/18 17 38 51 11,891 7,492 89 23,159 18,760 19,146 69. University of Vermont 10,082 44/46 15 49 65 21,014 10,244 83 36,898 26,128 23,328 70. College of Charleston (S.C.) 9,820 57/59 13 41 58 17,272 14,406 67 28,226 25,360 16,761 71. Murray State University (Ky.) 8,601 45 16 36 57 11,780 9,597 65 13,858 11,675 15,010 72. Ramapo College of New Jersey 5,188 36/46 17 39 59 21,475 14,126 22 27,046 19,697 15,937 73. University of Tennessee 20,619 74 15 29 57 13,578 10,781 82 25,820 23,023 18,254 74. SUNY New Paltz 6,263 30/31 13 28 54 14,220 11,791 39 20,480 18,051 1,900 75. SUNY Oneonta 5,596 16/28 17 37 53 14,756 10,965 48 21,016 17,225 12,100 76. University at Buffalo (SUNY) 18,165 30/47 15 33 58 16,285 13,974 42 22,545 20,234 19,062 77. George Mason University (Va.) 18,221 25/31 15 33 52 15,958 10,880 86 28,150 23,072 15,791 78. SUNY Brockport 6,916 26/16 18 29 56 14,596 10,938 47 20,856 17,198 19,082 79. University of South Florida 34,438 26/32 19 21 47 12,347 8,000 94 25,045 20,698 17,995 80. University of New Hampshire 11,971 24/33 17 53 73 20,036 17,588 84 32,996 30,548 23,928 81. Florida International University 31,712 28/28 17 19 47 14,922 9,855 93 27,320 22,253 4,489 82. University of Minnesota, Morris 1,740 56 12 40 59 16,602 10,717 29 16,602 10,717 15,490 83. Georgia College & State University 5,141 24/25 16 22 45 13,346 10,487 97 25,968 23,109 15,128 84. Colorado State University 21,283 51 18 34 63 13,791 8,326 100 27,231 21,766 16,887 85. University of Arizona 28,442 28/36 19 32 58 13,418 7,387 95 24,652 18,621 17,392 86. University of Oregon 16,529 30/32 18 39 65 14,935 10,704 92 27,691 23,460 18,813 87. University of Oklahoma 19,600 72 20 19 56 14,675 10,845 76 23,789 19,959 19,206 88. Auburn University (Ala.) 19,367 54 18 32 62 14,400 9,887 87 24,900 20,387 21,256 89. SUNY Cortland 5,960 18/11 17 37 57 14,989 11,439 64 21,249 17,699 N/A 90. Washington State University 19,554 25/32 14 32 63 15,094 9,228 88 25,408 19,542 18,754 91. Longwood University (Va.) 3,787 19/14 20 41 61 15,134 10,199 78 23,454 18,519 17,781 92. Arizona State University 41,815 26/34 23 27 55 13,241 7,589 98 25,273 19,621 15,894 93. West Chester Univ. of Pennsylvania 10,821 14/18 13 26 59 14,466 14,466 69 22,322 22,322 17,500 94. Oklahoma State University 18,737 60 19 26 59 13,821 9,704 90 23,246 19,129 19,180 95. Mississippi State University 12,630 47 14 25 56 12,929 8,634 80 19,420 15,125 19,780 96. Rowan University (N.J.) 8,430 22/35 12 39 63 20,160 14,350 72 27,468 21,658 16,253 97. SUNY Plattsburgh 5,567 16/17 17 31 54 14,461 10,235 79 20,721 16,495 17,596 98. University of Idaho 9,127 43 20 20 54 12,264 9,119 96 22,344 19,199 20,002 99. University of California, Riverside 14,792 15/29 18 38 65 20,555 9,877 99 40,175 29,497 14,965 100. Illinois State University 17,885 53 19 33 62 16,755 9,321 73 24,075 16,641 17,015 N/A information not available. *Verbal/Math. SOURCE: Peterson’s Undergraduate Database. Copyright © 2007 Peterson’s/Nelnet LLC. All rights reserved. 68 KIPLINGER’S PERSONAL FINANCE 02/2008
  • * KipTip MORE GREAT COLLEGE VALUES OUR RANKINGS FOCUS ON TRADITIONAL FOUR-YEAR SCHOOLS WITH BROAD-BASED curricula. As a result, schools that offer great value but focus on special or narrow academic programs are excluded. For example, the academies for the Air Force, Army, Coast Guard, Merchant Marine and Navy offer top academic quality; they charge no tuition and pay students to attend. But appli- cants to the federal academies must generally obtain congressional or military nominations and serve in the armed forces after graduation. Cornell University, best known as a member of the Ivy League, is another exception. Four of Cornell’s colleges—Architecture, Art and Planning; Arts and Sciences; Engineering; and Hotel IVY-LEAGUE ALTERNATIVE Administration—are part of the privately endowed university, which we consider a private in- stitution. But three of Cornell’s undergraduate colleges are land-grant state schools that charge much lower tuition. New York State residents who attend the colleges of Agriculture and Life Sciences, Human Ecology, and Industrial and Labor Relations pay about $19,000 a year for tuition and fees. COLETTA HAGAN, ELIZABETH ODY AND STACY RAPACON HELPED COMPILE THE DATA FOR THIS SPECIAL REPORT. 69 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » MONEY ASK KIM KIMBERLY LANKFORD Mistaken Identity Insurance when you’re sick. “Check your statements to see whether the card issuer is using a different version of your name.” Is my broker safe? PETER ROSS 81 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » MONEY // ASK KIM / YIELDS / TELECOM / CREDIT TOP-YIELDING MONEY-MARKET ACCOUNTS 30-day yield Minimum Web Toll-free TAXABLE MUTUAL FUNDS to Dec. 5 investment address number 1. TIAA-CREF Instl. Money Market/Retail 4.83% $2,500 tiaa-cref.org 800-223-1200 2. Fidelity Money Market 4.78 25,000 fidelity.com 800-544-6666 3. Vanguard Prime Money Fund/Investor 4.76 3,000 vanguard.com 800-635-1511 4. Fidelity Cash Reserves 4.74 2,500 fidelity.com 800-544-6666 NATIONAL AVERAGE 4.19% 30-day yield Tax. eq. yield Minimum Web Toll-free TAX-FREE MUTUAL FUNDS to Dec. 4 25%/35% bracket investment address number 1. Alpine Municipal* 3.50% 4.7%/5.4% $2,500 alpinefunds.com 888-785-5578 2. Vanguard Tax-Exempt 3.46 4.6/5.3 3,000 vanguard.com 800-635-1511 3. DWS Tax Exempt Money Fund 3.34 4.5/5.1 1,000 dws-scudder.com 800-621-1048 4. American Century Tax Free 3.25 4.3/5.0 5,000 americancentury.com 800-345-2021 NATIONAL AVERAGE 2.99% 4.0%/4.6% Annual yield Minimum Web Toll-free DEPOSIT ACCOUNTS to Dec. 10 amount address number 1. OneUnited Bank (Cal.)† 5.30% $1,000 oneunited.com 877-663-8648 2. UFBDirect.com (Cal.)† 5.22 none ufbdirect.com 888-580-0049 3. Corus Bank (Ill.) 5.12 100 corusbank.com 800-989-5101 4. Flagstar Bank (Mich.) 5.10 none flagstar.com 800-642-0039 NATIONAL AVERAGE 0.90% *Fund is waiving all or a portion of its expenses. †Internet only. SOURCES: Money Fund Report, iMoneyNet Inc., One Research Dr., Westborough, MA 01581 (508-616-6600; www.imoneynet.com); Bankrate.com. TOP-YIELDING CERTIFICATES OF DEPOSIT Recent Minimum Web Toll-free 6-MONTH annual yield amount address number 1. Countrywide Bank (Cal.) 5.35% $10,000 countrywide.com 866-846-4480 2. E*Trade Bank (Va.)† 5.25 1,000 etrade.com 800-387-2331 3. UmbrellaBank.com (Ala.)† 5.17 1,000 umbrellabank.com 866-242-0065 4. Corus Bank (Ill.) 5.16 10,000 corusbank.com 800-989-5101 NATIONAL AVERAGE 3.30% Recent Minimum Web Toll-free 1-YEAR annual yield amount address number 1. Apple Bank for Savings (N.Y.) 5.21% $500 theapplebank.com 800-722-6888 2. Corus Bank (Ill.) 5.16 10,000 corusbank.com 800-989-5101 3. E*Trade Bank (Va.)† 5.15 1,000 etrade.com 800-387-2331 4. Countrywide Bank (Cal.) 5.10 10,000 countrywide.com 866-846-4480 NATIONAL AVERAGE 3.49% Recent Minimum Web Toll-free 5-YEAR annual yield amount address number 1. Apple Bank for Savings (N.Y.) 5.26% $500 theapplebank.com 800-722-6888 2. ThirdFederal Savings & Loan (Ohio) 5.10 500 thirdfederal.com 888-844-7333 3. Capital One (Va.) 5.10 5,000 capitalone.com 866-369-2737 4. Intervest National Bank (N.Y.) 5.03 2,500 intervestnatbank.com 212-218-8383 # NATIONAL AVERAGE 3.78% To December 10. †Internet only. # Not a toll-free number. SOURCE: © 2007 Bankrate.com, a publication of Bankrate Inc., 11760 US Highway 1, N. Palm Beach, FL 33408; 800-327-7717, ext. 11410; www.bankrate.com. To December 12. ‡EE savings Month- Year- bonds purchased after May 1, 2005, YIELD BENCHMARKS Yield ago ago have a fixed rate of interest. Kiplinger.com U.S. series EE savings bonds‡ 3.00% 3.00% 3.60% Bonds purchased before May 1, U.S. series I savings bonds 4.28 4.28 4.52 1995, earn a minimum of 4% or a market-based rate. UPDATES G GOT A QUESTION? ASK KIM AT KIPLINGER Six-month Treasury bills 3.24 3.70 5.07 Bonds bought between May 1, 1995, and May 1, 2005, earn a market-based ONLINE . .COM/ASKKIM, OR WRITE ASK KIM, 1729 H STREET, N.W., WASHINGTON, DC 20006. Five-year Treasury notes 3.49 3.80 4.55 rate from date of purchase. K KIMBERLY LANKFORD IS THE AUTHOR OF Ten-year Treasury notes 4.10 4.25 4.50 SOURCE FOR TREASURIES: For the latest savings yields A ASK KIM FOR MONEY SMART SOLUTIONS ( (KAPLAN, $18.95). Bloomberg.com, U.S. Treasury. and loan rates, visit kiplinger .com/finances/yields. 82 KIPLINGER’S PERSONAL FINANCE 02/2008
  • CREDIT CARD Q&A HOW DO I CANCEL MY ●● TELECOM UPDATE PARENTS’ CARDS? Save Q: Both of my parents have passed away. I ran a credit report on them and several credit cards came up. I haven’t found the actual With a cards, and I don’t know the account numbers. How can I cancel these cards? Triple Your parents’ credit report should provide a phone number for each credit card listed. Call the number and explain your problem. The issuer should be able to locate and close the account if you Play supply some basic information, including the name, Social Secu- rity number and address of the cardholder. You may be asked whether the estate is in probate, and the issuer may request a certified copy of the death certificate. If the credit card has a balance, you will likely be asked to pay it from the estate. “The general rule,” explains Martin Shenkman, WHEN IT COMES TO BUYING an estate-planning attorney in Teaneck, N.J., “is that the debt is of the estate and the estate must pay.” If the estate does not have adequate cash to clear the outstanding balance, you may have to sell some assets. If that is still insufficient to cover the amount owed, you and any other heirs are not liable. Your parents’ debt is not passed on to you, and the credit-card issuer will write off the amount as uncollectible. However, paying off credit-card debt does take precedence over distributing bequests that are specified in a will. “If the bequests are made first and the debt cannot be paid, the executor of the estate is personally liable,” says Shenkman. JOAN GOLDWASSER LOW-RATE PREMIUM CARDS Late/ Recent Annual Over Toll-free Issuer rate* fee limit number Wells Fargo Bank (P) 7.50% $19 $39 †/$35 800-932-6736 Capital One Platinum Prestige (P) 7.90 none 39 †/39 800-548-4593 Pulaski Bank & Trust (G) 7.99 50 35†/35 800-980-2265 CASH REBATE CARDS Recent Annual Rebate Toll-free Issuer rate* fee terms number LLOYD MILLER; BIG STOCK PHOTO American Express Blue Cash 12.49% none up to 5% 800-223-2670 National City Everyday Rewards Visa 14.24 none up to 4% ‡ 888-622-4932 Chase Freedom Visa Signature 17.49 none up to 3% 888-215-3049 As of December 10; rates are adjustable. (P) Platinum card. (G) Gold card. *If you do not qualify for this interest rate, the issuer will offer a higher-rate card. †Depending on balance. ‡Rewards may expire after two years. SOURCE: Bankrate.com, N. Palm Beach, Fla. Banks may offer lower introductory rates. JEFF BERTOLUCCI 83 02/2008 KIPLINGER’S PERSONAL FINANCE
  • LIVING » IN THIS SECTION HDTVs for less than $1,000 90 Car-leasing myths debunked 92 The lowdown on do-not-call lists 95 REMODELING THAT PAYS BACK BY JESSICA L. ANDERSON 85 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » LIVING // HOME AS THE HOUSING MARKET HAS VEERED OFF COURSE, SO HAVE MANY HOMEOWNERS’ // UPDATE YOUR KITCHEN A COMPETITIVE EDGE * KipTip HIRING HELP Get at least three bids on any project you’re considering. The middle bid is probably your best bet—the low one may not include all the costs, and a high bid often means the contractor doesn’t have time to take on your job. Contrac- tors won’t give you the names of clients who hated their work, so in addition to their references, check the Better Business Bureau’s complaint records 86 (www.bbb.org). KIPLINGER’S PERSONAL FINANCE 02/2008
  • DREW AND JULIENNE STATHIS SPENT $37,500 ON AN UPSCALE BATHROOM REMODEL THAT INCLUDES A JACUZZI, NEW SHOWER AND TOP-OF-THE-LINE FIXTURES. THEY HOPE IT WILL MAKE THEIR HOME EASIER TO SELL. PHOTOGRAPHS BY LISE METZGER 87 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » LIVING // HOME Cabinets. Cabinets and sinks. A BETTER BATH Countertops. Toilet and tub. Sinks. 88 KIPLINGER’S PERSONAL FINANCE 02/2008
  • ● ● REMODELING AND RESALE HOW MUCH WILL YOU GET BACK? The table shows the national average price tag, and the percent- Information Systems, which develops software for estimating re- age recouped at sale, for 17 popular projects. If your area has a lot modeling costs. The percentage of cost recouped at resale is based of new homes on the market, your return will be less because buy- on estimates by members of the National Association of Realtors. ers would rather purchase a new house with builder incentives than The payback varies by region. Single-city reports for 60 cities are a remodeled home. Costs are based on figures from HomeTech available free at http://costvalue.remodelingmagazine.com. REMODEL REPLACEMENT % recouped % recouped Project Price at sale Project Price at sale Minor kitchen, midrange $21,185 83% Fiber-cement siding, upscale $13,212 88% Bathroom, midrange 15,789 78 Vinyl siding, midrange 9,910 83 Major kitchen, midrange 55,503 78 Wood windows, midrange 11,384 81 Attic bedroom, midrange 46,691 77 Vinyl windows, upscale 13,479 81 Basement, midrange 59,435 75 Foam-backed vinyl siding, upscale 12,132 80 Major kitchen, upscale 109,394 74 Vinyl windows, midrange 10,448 79 Bathroom, upscale 50,590 68 Wood windows, upscale 17,383 79 Home office, midrange 27,193 57 Fiberglass asphalt roofing, midrange 18,042 67 SOURCE: Remodeling magazine’s “2007 Cost vs. Value Report” Steel roofing, upscale 33,151 66 REPLACEMENTS Roofing. Windows. Siding. 89 02/2008 KIPLINGER’S PERSONAL FINANCE
  • » LIVING // TECH High Def for Less 37-INCH VIEWING ON A BUDGET Than $1,000 VIZIO VX37L RETAIL PRICE: $800 BY JEFF BERTOLUCCI THE BIGGER CHOICE TOSHIBA REGZA 37HL67 RETAIL PRICE: $1,200 MAYBE YOUR DEN IS ALREADY SCREEN, STYLE AND EXTRAS SAMSUNG LN-T3253H RETAIL PRICE: $1,300 COURTESY SAMSUNG WALT DISNEY WORLDWIDE HOME ENTERTAINMENT BRILLIANCE FOR LESS SHARP AQUOS LC-32D43U3U RETAIL PRICE: $1,100 SAMSUNG, SAMSUNG LN-T3253H $1,300 90 KIPLINGER’S PERSONAL FINANCE 02/2008