What’s Your Retirement Number? 2 InvestmentMistakes, 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. email@example.com Concierge services. Some cards help you get tickets to sold-out events, book travel, make dinner reservations, and find unusual gifts.
Employees are losing Please know that this isdisability coverage as not rocket science, especiallyemployers cut back on high- in an age when there are socost benefits. Companies that many retirement calculatorsare not dropping the coverage available. The tricky partoften are raising employees’ about using these calcula-cost of obtaining it while tors is that they ask you toreducing the benefits paid by estimate factors that eventhe 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 sensibleyour employer at your own estimates that should help:expense…or buy an individual Inflation assump-policy. Buying through your tion: 4.5 percent (higheremployer costs less but may than where we are today, butprovide narrower coverage— most economists believe thatanalyze the options carefully. inflation is headed up in the coming years).How to negotiate Rate of investmentsalary in today’s tough return both before and afterjob market: Job candidates retirement: Consider youroften are so happy to be of- risk tolerance and err onfered a job that they accept a the side of being conserva-lower salary than they should. tive. If you’re stuck, use 4-5Self-defense: When askedfor your salary requirement percent. Obviously, if youon applications, leave it blank use a higher rate of return, the calculator will ultimately determine that you haveor write “Open.” Duringinterviews, 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 youabout your previous salary, askabout the range for the job you Retirement that higher return assumptions may not always work out as planned.are discussing. Don’t negotiatesalary in the interview. Say Number? Life Expectancy — if you are younger thanthat 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 Aseriously consider any offerthat 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 ofclear 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 investmentment potential you’ll be better could retire. “That amount just seems like way more accounts, any future pension amounts, and a Socialprepared to discuss salary. money than is necessary!” But after walking through Security benefit. While Social Security might changeWhen you receive an offer, ask the variables and calculations, he finally said, “Geez, a in the future, most of the revisions being contemplatedif there is any flexibility. You million bucks — I guess that’s my number.” would not affect people who are currently over 50. Formay 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, yousigning 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 thebeing poor is that only 42 percent of American workers have taken the necessary information can you alter your course toit 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
stock funds, and 5 percent in commodity funds. At theInvestment 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 percentMistakes, 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 registerBy Elliott Raphaelson, Tribune Media Services retirement and nonretirement accounts, consider taking or tap a retailer’s reader toA 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 youbased on reasonable investment objectives. It is easy relate to your portfolio. It is important to understand the want to but does offer a wideto imagine that there would be years when you would basics of the federal tax law, whether you prepare your range of plans at differenthave done much better to have 100 percent of your in- taxes or hire someone. There are situations in which costs—and compares themvestments 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 thosepercentage 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 byin only a few common stock funds. Any decision with a visiting multiple sites even if ithigh risk relative to your financial situation may be seems easier to go to a singlea mistake. site and use its comparison A common mistake is not rebalancing your tool.portfolio often enough. Portfolio balance refers to yourallocation of assets among different asset classes. Afterdeciding on your most effective portfolio mix, it makessense to rebalance your portfolio periodically. I like todo it annually. For example, assume you decided at the begin- “Hard work never “The seller will accept your downpayment of 5,000ning of 2011 that 30 percent of the dollar value of your returnable beer and soda bottles, providing one of those killed anybody, butportfolio 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
CHAD HORSHAM’SFINANCIAL 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 68154This publication is provided to our readers as an informational source only. The ideas, opinions and concepts expressed here should not be construed as specifictax, legal, financial or investment advice. You should consult your professional advisers regarding your particular situation. SMRU 472701 trouble to parcel outMoney-Smart Kids: your kids’ allowance, a simple alternative is toTeaching Kids To Save require them to save, say, a flat 10 percent.MBy 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 yourhere’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 andshould 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 Schooland 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 financialexample, kids could save money for a trip to the dollar store, or tape a responsibilities to include gifts, clothing, concerts, cellphones and carpicture 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 oring, saving, giving and even investing. If you don’t want to take the $5,000, whichever is less.