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Wednesday Welcome: Can being weird make you rich and happy?

iStock_flexibilityToday we have a special Wednesday Welcome from Daniel Crosby, who consults for companies looking to improve their financial-services products and advisory services. He also writes a stellar blog (one of my top picks for personal finance) that gets to the heart of why we do things with our money that even we know aren’t in our best interests. Crosby gave a TEDx talk that’s worth the watch. Can being weird make you rich and happy? Crosby breaks it down for us below…


Money Sense on Fortune

business teamShould you pay for financial advice? Research from TIAA-CREF shows that although the number of Americans who are interested in financial advice jumped from 24% last year to 35% this year; for 65%, the topic is a non-starter. Yet paying for financial advice has been shown to pay off. Think about it this way: Why do you go to the dentist? Or the car mechanic? In this week’s Fortune column, I make a case for financial advisors.

See the full article here.


Wednesday Welcome: Key things to know before buying an annuity

stanToday we’re welcoming Stan Haithcock, aka Stan The Annuity Man, to the blog. Stan The Annuity Man is a nationally recognized independent annuity expert (and critic) known for his crusade against improperly sold annuity products. He has made it his mission to educate Americans about the good, the bad, and the truth behind annuity products. 

Annuities are the most misunderstood and improperly sold product in the financial world, with the frequently overhyped “too good to be true” sales message going largely unregulated. There are at least 15 different types of annuities available, and they have been around since the Roman times and sold in the U.S. for well over 200 years.  In 2013, there were over $200 billion of annuities sold in America, so it’s important to know how to evaluate if an annuity is right for you, the key questions to ask, and how to structure these strategies in a low interest rate environment.

Annuities are, in essence, transfer or risk products that contractually solve for a specific goal.  An easy to remember acronym to find out if you even need to consider an annuity for your situation is the word P.I.L.L.


Mailbag Monday: Prioritizing your Principal

suburbOn 4/15, you made a comment about using tax refund toward principle on mortgage. I have to assume you are suggesting pay off your house, save the interest and not be having to make the monthly payments. That sounds like a good plan. I had the idea to get rid of my second mortgage, a very long life second.  I’ll never see the end of it, if I make payments.  But I could pay it off.  I had 3 financial advisers say that was a bad idea because even in retirement, I will need write-offs, and current interest rates are cheaper than what they will be. Why the disconnect here? Also, I heard on the radio that mortgage interest deduction will go away as part of Obama care. What do you know of this?



Wednesday Welcome: Three Steps to Maximize Your 401(k)

This week we welcome Roger Wohlner, an Illinois fee-only financial advisor and blogger at The Chicago Financial Planner. Since I met Roger at the FINCON blogging conference last year, he’s become a frequent source of mine when I’m reporting a column or television segment. I asked him to bring his wisdom to you today. Below, he offers some tips for making the most of your 401(k) plan.

indexThe financial press carried numerous stories during the financial crisis about the evils of 401(k) plans — in several cases it was referred to as a “201(k).”  There are many lousy 401(k) plans out there, but there are also many excellent ones as well.  Here are a few tips to help you maximize the benefit of your workplace retirement plan.

Get started.  This might seem intuitive, but you can’t benefit from your employer’s 401(k) plan unless you are participating.  If you haven’t started deferring a portion of your salary into the plan, this is great time to start.  Look at your budget, determine how much you can afford to defer each pay period and as the Nike folks say “…just do it…”  Many plans allow you to do everything online. Otherwise, contact the plan administrator at your company. (more…)

New SEC Guidance for Financial Advisors

handshakeJust recently the Securities and Exchange Commission (SEC) granted money managers and advisors the right to feature third-party reviews on their marketing materials. Meaning: Your advisor can now use your dazzling Facebook review (of him) to boost his business. I asked WalletHub CEO Odysseas Papadimitriou for the run down – why you should care and what this means for the advisory industry? Here’s what he had to say:

JC: What finally sparked the SEC to allow this?

OP: Not sure, but we hope that sites like Yelp & WalletHub that have allowed reviews on financial advisors irrespective of financial gain had something to do with this. 

JC: What does this mean for consumers/investors?

OP: This represents a major breakthrough for consumers and investors. In a world where everyone relies heavily on the internet for fast-paced information, this will allow investors to react faster. Additionally, consumers/investors are now free to compare the professionals who manage our money with the same level of discernment and transparency that has long been available in other segments of the market – from hotels to restaurants and consumer electronics. In other words, the SEC is making ground breaking strides to level the playing field.


Mailbag Monday: Finding an Independent Financial Advisor

investingI recently came out from under the mess of the recession but I still have minimal yet manageable credit card debt. I want to start rebuilding my savings and retirement plans so I took your advice and looked up certified financial planners in my area.  Unfortunately, a couple of them never got back to me and the one who did said he deals with wealth management and since I have no wealth, I’m not a candidate for his services.  He recommended that I seek help from companies like Fidelity Investments and TD Ameritrade but aren’t they biased to their own products?  If so, how will I know my money is being invested in the right place?  What should I do?

— Kelly

Hi Kelly.  It sounds as if you’d prefer an advisor not affiliated with a particular firm.  Take a look at the Garrett Planning Network.  Sheryl Garrett, a fine planner in her own right, has built a network of planners willing to work with customers by the hour.  So you can spend just the time you need to get the plan or information you need, then execute the recommendations yourself.  This will save you a considerable amount of money.  Then, once a year, I’d go back to the planner for a check-up to make sure you’re moving in the right direction.

Money Sense on Fortune

jobreportIf you’ve been following me for a while now, then you might already know my take on target-date funds (TDFs). I’m a proponent — especially if you’re aiming to rebalance your portfolio — and need some help along the way. In this week’s column, I take you through what you need to know about TDFs when it comes to retirement.

FORTUNE – More than 51 million Americans have an active 401(k) retirement account, according to the Investment Company Institute.  And if recent statistics from Vanguard hold across the category – more than half have at least some of their money in a target-date fund. That’s a lot of dough and it’s growing fast.  According to BrightScope, target-date fund balances overall hit $500 billion in assets in 2012.  The company is estimating them to reach $2 trillion by 2020.

In many ways, that’s a good thing.  That shift has tempered the bi-polar tendencies of many 401(k) investors.   According to Vanguard, 10 years ago, 13% of their self-directed 401(k) investors held no stocks and 22% held only stocks.   No matter how you slice it, those investors were taking too little or too much risk.  Last year those numbers dropped to 10% and 13%, respectively – a result, at least in part, of making TDFs the default option on many retirement plans.

I’ve been a proponent of TDFs over the years.  I like the way they help humans who say they are going to rebalance their portfolios but never seem to get around to it stay at least in the vicinity of the track. Which is not to say I think they’re perfect.

For the full column, head over to

Mailbag Monday: IRA Income Requirements

retirementI want to open up an IRA, however I do not have any earned income from employment.  I am on disability. Could I qualify for an IRA?

— Dave

Hi Dave.  Generally, no.  There are a few exceptions — alimony and scholarships, for example.  But perhaps the biggest is spousal income.  If you have a spouse who works, you (and your spouse) can both make contributions based on that income.

Not being able to qualify for an IRA, however, doesn’t mean you shouldn’t save.  Invest your money in a discretionary account just as you would an IRA, based on your age and your risk tolerance – and let the time value of money work on your behalf.

You can open a discretionary account at any major brokerage.

Saving for the Future You

Merrill Edge has a new mobile app, Merrill Edge’s Face Retirement. In response to research from Stanford University that found that being able to see yourself older may encourage you to save more and focus on your retirement planning, the app (and coordinating web version) encourages you to “meet the future you” by aging a picture of yourself. See my aged photo below — while I can’t say the results made me want to save more, they did make me want to buy anti-aging cream.


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