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To Roth or Not to Roth
Tweet Share on Facebook February 24, 2009 Comment (3)When it comes to retirement investing, you have a lot more options than your parents did. Of course, you probably don't have a pension, but you do have plenty of choices: the 401(k), the IRA, its cousin, the Roth IRA, and even the Roth 401(k) in some cases. But how to decide which one? Let's start with the basics (assuming you already know how a 401(k) works):
Traditional IRA: When you put money into a plain-vanilla IRA (that stands for Individual Retirement Account) your contributions are not taxed. They grow tax-free until retirement, when they're taxed as income at the time of withdrawal.
Roth IRA: You pay income tax on the amount you contribute now, then take tax-free withdrawals in retirement. Think of yourself as a farmer, says Christian Cordoba, wealth advisor and principal at California Retirement Advisers in El Segundo, Calif.: "It's like paying tax on a seed and getting the harvest for free."
Roth 401(k): This is a hybrid between a Roth IRA and a traditional 401(k). One difference is that the contribution limit to a Roth 401(k) is higher than a Roth IRA. Another is that you can receive matching contributions from your company in a Roth 401(k). And in a Roth 401(k), you only get to choose from among your employer's menu of investment choices.
Whether you go with team 401(k) and traditional IRA or team Roth IRA and Roth 401(k) is a big decision. Some might call it a gamble: You need to weigh your current tax rate against what you think your tax rate will be in the future. So if you expect that you'll be in a higher tax bracket when you reach retirement, Roth is a good bet. But if you are making a ton of money now--and think your salary will likely be lower in retirement--you might want to delay taxes and stick with a traditional 401(k) or IRA.
It's not an either-or decision, though. Consider hedging your bets by contributing to both, says Cordoba. "Say you're putting $5,000 a year into a 401(k)--be sure to get the employer match--then it might be prudent to put another $5,000 into a Roth IRA so you have half of your money tax-free, and on the second half, you pay tax."
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Mardi Gras Parties On Despite Recession
Tweet Share on Facebook February 23, 2009 Comment (1)Sinking investments got you down? New Orleans has a solution: Mardi Gras!
"It's the perfect place to forget your problems and have fun!" (Those words are straight from the Big Easy.)
The price of beads has increased, krewe membership fees are up and corporate sponsorships are down, but Mardi Gras is still marching on, reports USA Today: This year, only three of the 49 parades in the area have been canceled (interestingly, the story says, Mardi Gras has only been canceled 13 times. Those included the Civil War and a yellow fever epidemic.) Bead store sales are picking up, and costume stores say it's business as usual.
If you do plan to go, the official site offers some helpful tips for party animals:
- Don't be sassy or contrary
- Don't get overly drunk, be obnoxious, or behave irrationally in public (ha)
- No risqué behavior elsewhere. In other words, keep it in the French Quarter--don't go crazy at the Popeye's drive-thru.
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The Oscars, Recession-Style
Tweet Share on Facebook February 23, 2009 Comment (2)On today's Good Morning America, anchor Robin Roberts described this year's Oscar glitz as "toned down." Apparently, stars and designers had to make some tough decisions. Notes the Los Angeles Times, "It's a delicate balance to strike in a town not known for its restraint."
And let's not forget the viewers. InStyle magazine's fashion director told the LA Times (pre-Oscars), "Would you really want to tune in and see a bunch of women walking down the red carpet in black pantsuits?" he said. "It's a recession, not an apocalypse." The horror! The stars didn't disappoint last night, but they did acknowledge the recession in their own little ways:
-Accessories designer Stuart Weitzman, who usually adorns a lucky actress with $1 million shoes, decided it wasn't appropriate.
-Stars opted for "statement" pieces over going the head-to-toe diamond route.
-Vanity Fair went for a more "intimate" location for its annual party, and used decorations from past years' events.
But apparently Wolfgang Puck didn't get the memo. His menu for the Governor's Ball included 3,000 Oscars statues made out of smoked salmon and 6,000 made of chocolate. He told reporters it was essential to do it up and support Obama's stimulus plan.
One of the night's great lines came from host Hugh Jackman, who's also the star of the "Australia." He quipped: "“Because of the recession, everything is being downsized. Next year I’ll be starring in a movie called ‘New Zealand."
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Dow Below 7500...Oh, My!
Tweet Share on Facebook February 19, 2009 Comment (5)The Dow has officially tripped another "psychological barrier," writes the AP. Today, the index busted through its November low, which many analysts hoped was the bottom of the bear market. In fact, today's close left the index languishing at its lowest since October 9, 2002, the bottom of the last bear market.
It seems like just yesterday that we were talking about how the Dow below 10,000 was a psychological downer.
What Real Time Economics is reporting is also a downer for those who were expecting a quick market turnaround: a survey of top executive don't think the economy will even start recovering before 2010.
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Despite the Economic Slump, Birthright Israel Trips Continue
Tweet Share on Facebook February 19, 2009 Comment (1)Although the global economy is currently a mess, young Jewish adults can still look forward to their likely once-in-lifetime free trips to Israel. Registration opened today at 9 a.m. Eastern time for Birthright Israel, an organization that sponsors 10-day trips to the country each summer and winter for those in the 18-to-26 age group.
The largest donors of the program are a group of philanthropists, followed by the Israeli government, according to the Institute for Global Jewish Affairs. The rest of the funding comes from various Jewish community organizations. Despite this hefty backing, Birthright Israel has run into a few "fundraising conundrums" and may not be financially indestructible, according to the Wisconsin Jewish Chronicle. In late December, Forward, a U.S.-based Jewish weekly magazine, reported that Birthright Israel might be unable to pay for thousands of summer 2009 trips due to the financial problems of its largest donor.
The average cost of the trip is about $2,300 per participant. In the institute's post about the program, Leonard Saxe, a professor of Jewish community research at Brandeis University and coauthor of Ten Days of Birthright Israel: A Journey in Young Adult Identity, said that it's remarkable that relative stability in costs has been maintained over the years.
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Stanford Financial Blow-Up: What Will Happen to Investors' Money?
Tweet Share on Facebook February 18, 2009 Comment (5)Across the country--and even throughout other countries--investors of Stanford Financial Group are pounding on doors, demanding their money back.
According to this report, a SEC spokeswoman said it's too soon to tell if the CD investors will lose their funds--it may be a "somewhat timely" process--and that the commission has concerns that money may be lost. The story also says the SEC will have a web site up and running Wednesday to answer Stanford investors' questions.
Investors shouldn't get their hopes up just yet, though, according to one expert. The reason: Houston-based Stanford issued certificates of deposit through Stanford International Bank, which is based in Antigua.
Michael Gurland, co-chair of Neal Gerber Eisenberg’s White Collar Criminal, Regulatory & Internal Investigative Services Practice Group, says the fact that the bank is based outside of the U.S. complicates matters because offshore accounts make it more difficult for the SEC to enforce their regulations, according to Gurland.
Reuters is reporting that lawyers have not yet received documents determining whether investors are insured, and Stanford representatives are directing questions to the SEC. A class-action lawsuit has already been filed by a group of investors.
Updates to come.
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The Consumerist Gives the Scoop on Facebook Privacy Snafu
Tweet Share on Facebook February 18, 2009 Comment (2)If you've logged into Facebook recently, you may have noticed a peculiar "Terms of Use" update at the top of your home page. It essentially says that due to user feedback over the past couple of weeks, the social networking site will return to its previous terms of use.
Like me, you may wonder what the previous terms of use contained.
Here's the scoop, courtesy of the Consumerist blog, which initially broke the story thanks to a reader tip:
"Facebook's terms of service (TOS) used to say that when you closed an account on their network, any rights they claimed to the original content you uploaded would expire. Not anymore."
How so?
"Now, anything you upload to Facebook can be used by Facebook in any way they deem fit, forever, no matter what you do later.* Want to close your account? Good for you, but Facebook still has the right to do whatever it wants with your old content. They can even sublicense it if they want."
So essentially, Facebook said, it could retain archived copies of your user content. Reportedly, the site updated the term of use on Feb. 4. -
How Long it Could Take to Get Your Portfolio Out of the Red
Tweet Share on Facebook February 17, 2009 CommentNeed a little good news? Check out this nifty tool from the NYT, which calculates how long it may take for your investments to return to their peak levels.
What does the calculator tell me? I really need to keep contributing to my portfolio in order for it to move anywhere in the next 30 years (read more about my investments here and here.)
For anyone who enjoys financial calculators (maybe enjoy isn't the right word), check out this one on U.S. News: "What Will It Take to Reach Your Investment Goal?" It allows you to enter your primary investments, such as large companies, small companies, etc. And here's how to calculate how long it may take you to reach the millionaire mark.
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Stanford Financial: SEC Accuses Texas Firm of CD Fraud
Tweet Share on Facebook February 17, 2009 Comment (4)As Warren Buffett once said, "It's only when the tide goes out that you learn who's been swimming naked."
Just two months after Bernie Madoff was arrested for allegedly running a $50 billion Ponzi scam, the SEC today charged Robert Stanford and three of his companies for defrauding investors through a CD program. The SEC says Stanford International Bank sold roughly $8 billion of "so-called 'certificates of deposit' to investors by promising improbable and unsubstantiated high interest rates."
Interestingly, Stanford suffered $400,000 in losses related to the alleged Madoff scheme, according to the NYT.
The commission said the CD rates were "supposedly earned through SIB's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years."
Reports say about 15 agents raided Stanford's Houston and Memphis offices today.
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2 Sectors to Keep an Eye On
Tweet Share on Facebook February 17, 2009 CommentAccording to Citi's February 2009 "Small Cap Sector Snapshots," analyst Lori Calvasina thinks two sectors look compelling right now: technology and consumer discretionary (that last category includes things consumers spend on non-necessities, such as restaurants. Apparently companies like Chipotle and Buffalo Wild Wings have been somewhat successful in weathering this recession.)
Writes Calvasina in a note to clients:
Still Intrigued With Consumer Discretionary and Technology - We remain overweight these two sectors, where valuations look compelling and our economic models are continuing to climb higher. These two sectors also tend to outperform late in recessions, after broader markets have bottomed. Both have been outperforming YTD and since the November 20th, 2008 lows in equity markets.
