The Grand (Money) Illusion

OK, admit it. You've done it too. With the recent rise in the stock market, you've seen your 401(k) balance rise also. You've started to think "Its going up, so everything is fine. It was down for a while, but now its coming back."

Does that sound like you? When you open your 401(k) or IRA statement, do you just look at the total balance and try to figure out if it's up or down? 

Money Magazine has their 2011 Retirement Guide out now. Senior Editor, and Retirement Expert Penelope Wang urges you to think of your retirement differently. Don't just look at the total lump sum. Look at what the future income will be, which the lump sum will generate. This is the Grand Illusion (not the Styx song) when it comes to your 401(k), she says. Remember that your future purchasing power also will be eroded by inflation.

Recently, I had a client ask me if $1,000,000 was enough to retire on. My answer was that we don't know until we look at your income needs, and cash flow. What are your monthly and yearly expenses? 

Let's assume that you have $1,000,000 (I know, I know.....just play along, OK). Let's assume also that you will be drawing 4% per year from the $1,000,000 nest egg. In order to do that, your money needs to be invested so that you are getting at least a 4% real return (after taxes and inflation). That way you can take money out without shrinking your nest egg.

So, using the $1,000,000 figure we can multiply that by .04 and get $40,000. We will take $40,000 per year for income. Will $40,000 meet your expenses? Do you have other debt? How about other sources of income?  

You MUST look at your 401(k) or IRA this way! It is a source of future income for you. The bigger the nest egg, the more income it will generate. But now you know WHY you need a bigger nest egg! "People understand how much money they need each month, so it makes the saving process more relevant," says UCLA behaviorial finance professor Shlomo Benartzi.

By the way, Ms. Wang also shows an illustration in her article on how long we think our money will last. Although most experts asvise retirees to limit their withdrawals to a maximum of 4%/year, there is a myth that you can take out more. According to the Met Life Retirement Income IQ Test (2008), about 26% of those surveyed thought that withdrawing 7%/year from a nest egg was safe. A whopping 43% (nearly HALF) of the respondants believed that it would be OK to withdraw 10% or more per year!!

Picture a small boat with a leak.

At first, you may not notice the leak. As water rushes into the boat, you start to panic. The water pours in

faster and faster, until the boat begins to sink. That's what happens to IRAs when you take out too much money. Eventually you reach a point where you can't keep up.

Let's keep your boat floating!

Help! My 401(k) Has Fallen – And Must Get Up! is my new book. It has several ideas and strategies which will help you in your retirement savings journey. Get your ‘Fallen’ 401(k) back on its feet. Contact me to reserve your copy today. You can also get a FREE report at my website –

The 5 Biggest Problems With 401(k) Plans & How To Fix Them.

You may also listen to my weekly radio program – Improving Your Financial Health on WHME-FM in South Bend. Archives can be heard on my website as well. If you live in the South Bend, IN area, I specialize in 401(k) rollovers or IRA reviews. You can also follow me on Twitter, Linked In, or Facebook .

Seven Things You Should Knew About SIMPLE IRAs

Most people have never heard of a SIMPLE IRA before, and are curious to know how it differs from a 401(k). A SIMPLE IRA stands for Savings Investment Match PLan for Employees.


One of the key differences of why your employer may have a SIMPLE IRA versus a 401(k), is that SIMPLE IRAs are geared for employers with less than a 100 employees. In addition to that, the administrative cost of a SIMPLE IRA for your employer is considerably much less than what a 401(k) would be. (It’s shortened to SIMPLE because it’s…..SIMPLE for small businesses.)

1. Your Employer’s Contributions Are 100% Vested

With some 401(k)s you need to have worked for the employer for a certain number of years to be vested. That means that if you were to leave that employer you could take that employer’s matching contribution. With 401(k)s, you have anywhere from three to five years to where you’re 100% vested. Anything you put in is yours, but anything which they put in may be subject to a vesting schedule. With a SIMPLE IRA, you are 100% vested whenever the employer deposits that into your account. There is no vesting schedule at all.

2. Employers Have To Match In A SIMPLE IRA

Each year, the employer is required to make a contribution to your SIMPLE IRA account whether it be in the form of a match or what’s called a non-elected contribution. Matching contribution states that the employer has to match at least what you match. So, if you’re matching 3%, the employer has to match 3% as well. Note that 3% is the most that the employer has to match, which could be considerably different than compared to a 401(k).

If the employer chooses to not do a match, then they may do what is called a non-elect contribution and what that means is that they will contribute 2% of your salary no matter what. Even if you are contributing 3% of your salary, they will only contribute the 2%.

To sum this up, the employer can choose:

* Match contributions up to 3% of salaries for any employees who choose to participate in the
   SIMPLE IRA.


* Contribute 2% of salaries for ALL employees, whether or not they participate.

The decision should be based on which option provides the most benefits and tax savings to the employer.

3. Employees Control The Investments

With most 401(k)s, you are limited to the investment options that you have. This is considerably different when compared to the SIMPLE IRA. Being a self-directed retirement plan, the SIMPLE IRA gives you the discretion of what exactly you want your money invested into. That means that if you want to buy individual stocks, mutual funds, ETFs, or CDs, you are allowed.

To keep things “simple”, it is most common to work with an established family of mutual funds which offers a wide variety of investments.

4. Employees Can Contribute 100% Of Income Into A
    SIMPLE IRA

As of 2010, you are allowed to contribute up to $11,500 per year in a SIMPLE IRA. For those who are age 50 and older, you are allowed a catch-up contribution, which is currently $2,500, for a maximum total of $14,000 in 2010. To do this, you must have at least $14,000 in earned income. Currently, the maximum contribution for a 401(k) is $16,500 with a catch-up of $5,500 for ages 50 and up. The SIMPLE IRA is tax-deferred similar to a 401(k).

5. SIMPLE IRAs Do Not Allow Loans

A lot of 401(k)s have loan provisions that allow the employee to borrow against their money if need be. With SIMPLE IRAs, this is not the case. For employers who are weighing their options on retirement savings plans, that may be a consideration. No matter which type of plan you have - Loans are NOT advised. Money which is contributed to retirement savings is to be used for exactly that - retirement! The drawback to using a loan in a 401(k) is that when you leave the company, the loan is immediately due, and then treated as a withdrawal. The withdrawal is then counted as income, and taxed and penalized accordingly.

6. The SIMPLE IRA Two-Year Rule

This is something that should be definitely different from a traditional IRA within the SIMPLE IRA. Most retirement plans — 401(k)s, IRAs, or Roth IRAs — have the 10% early withdrawal penalty if you take money out and you are under the age of 59.5. The SIMPLE IRA goes one step further. If the SIMPLE IRA that you’ve started is less than two years old, and you cash that out, you will be subject to a 25% penalty in addition to ordinary income tax. That is a huge item to not be overlooked. Again, we do not recommend withdrawing money from a retirement savings account before retirement.

If you were attempting to roll over your SIMPLE IRA into a rollover IRA, the 25% penalty would apply as well if the SIMPLE is less than two years old. Once the two year period has passed, a SIMPLE IRA can be easily rolled over into a traditional IRA with no tax consequence. Cashing it out would then incur the same 10 % penalty and taxation as any other account.

7. Which Businesses Use SIMPLE IRAs

Any business which has less than 100 employees may consider using a SIMPLE IRA. The main benefits are:

* SIMPLE to set up and maintain.

* Variety of investment choices available.

* Employer contributions are tax-deductible.

A SIMPLE IRA may be established prior to October 1 to be recognized for that year.

My book, Help! My 401(k) Has Fallen - And Must Get Up! has several ideas and strategies which will help you in your retirement savings journey. Get your 'Fallen' 401(k) back on its feet. Contact me to reserve your copy today. You can also get a FREE report at my website. The 5 Biggest Problems With 401(k) Plans - And How To Fix Them. If you live in the South Bend, IN area, I am also happy to help with
401(k) rollovers or IRA reviews. You can follow me on Twitter, Linked In, or Facebook.

My weekly radio show is Improving Your Financial Health on WHME-FM in South Bend, and archives are available for listening on my website.

Match Game

Employers want you in the 401(k) plan at work. The more money which is in their plan, the lower the fees should be. Also, because they most likely do not offer a pension, they want to be sure they are doing their part in helping you to save for retirement.

Many 401(k) plan sponsors are focusing on two features: automatic enrollment and automatic increases in savings as an employee's pay goes up. However, one of the biggest factors which drives plan participation is the matching contribution. Money Magazine writer Penelope Wang wrote in her March 2010 article Make the Best of a Bad 401(k) that in 2009, matches had dropped off due to the sluggish economy.

Matching contributions are great for employers though. They provide a tax deduction and studies have shown that it is a great way to get employees involved with the plan. 401(k) Plans with a match have higher particpation rates than those with no match.  

Matching formulas vary widely. According to Schwab, one of the most common formulas for matching is for the employer to offer a 50% match of an employees deferred salary up to a 6% contribution. In English, that means that the most they put in for you is 3% of your pay - and you have to put in 6% to get that.

Here is an example. Let's say that Bob earns $60,000/year at ABC Company. He puts 6% of his pay into
his 401(k) - $3,600.

                    Bob's Salary (before taxes)                        $60,000
                    Bob's 401(k)                                               $3,600
                    Bob's Taxable Pay                                     $56,400
                    ABC Match                                                 $1,800
                    Total contribution into Bob's 401(k)              $5,400

Now if Bob bumped up his contribution to 10%, he would still only get $1800 from ABC. Many advisors (myself included) believe that we should be saving 10% or more into a 401(k) plan. Over a long period of time, this should allow someone to replace approximately 75% of their income at retirement.

Let's see what happens if Bob decides to put in 10%.

                    Bob's Salary                                               $60,000
                    Bob's 401(k)                                                $6,000
                    Bob's Taxable Pay                                      $54,000
                    ABC Match                                                  $1,800
                    Total contribution into Bob's 401(k)              $7,800 

Changing his contribtuion from 6% to 10% gives him an extra $2,400/year into the plan. My book, Help! My 401(k) Has Fallen - And Must Get Up! shows that this could be huge over time. The other plus is that even though Bob raises his contribution by $2,400/year, his take home pay after taxes should only be about $1,800 less because the taxes are deferred on this. $1,800/year works out to less than $35/week.

$35/week - that's all!!

Over a 25 year period, if Bob was able to get a 7% average return on his 401(k) plan, here is the difference between 6% and 10% This also includes the employer match of 3% (50 cents per dollar, up to 6%).
The difference after 25 years is $157,493!! 

6%   ($3,600) = $359,789
10% ($6,000) = $517,282
Difference      = $157,493

You can contact me in the South Bend, IN area for 401(k) rollovers. My website is http://www.helpmy401k.us/
Get a FREE REPORT titled "The 5 Biggest Problems With 401(k) Plans - And How To Fix Them!"

My book, Help! My 401(k) Has Fallen - And Must Get Up! is written to help everyday people to get more from their retirement savings. My radio program, Improving Your Financial Health is also heard weekly on WHME-FM in South Bend, IN and archives are available on my website.

Ageism

Ever heard of ageism? Ageism is a term coined by Dr. Robert Butler which refers to discrimination against the elderly. How does this affect you?

As a nation, we are getting older. People are living longer than they did in previous generations. According to http://www.socialsecurity.gov/ a male who lives to age 65 can reasonably expect to live until age 82. A female at age 65 can reasonably expect to live until age 85. Earlier this year, Federal Reserve Chairman Ben Bernanke discussed the effects of aging on the U.S. economy. Mr. Bernanke stated that "the U.S. must begin now to prepare for this coming demographic transition."  
Dr. Robert Butler, 83 is in charge of the National Institute on Aging. Dr. Butler, a Pulitzer Prize winner, has also written six books about aging issues and is the the founder of the International Longevity Center. In a recent article in Investment Advisor magazine, Dr. Butler discusses his thoughts on aging. Did you know that in 2025, only 15 years from now, more than 1 in 5 persons will be 65 or older?

Dr. Butler says that older people "should probably plan to work longer than they envisioned." He adds that regarding Social Security and our workforce, "It's very obvious and striking that if people stay in the workforce longer, they put more money into the system and take less money out."

What does this mean for you?

For those in my generation (I am 46 at this time.) we need to think seriously about working longer. Also, we need to prepare for changer in Social Security. We must do a better job of saving and investing in our 401(k) or 403(b) plans. Since we don't have pensions and can't count on Social Security for our future income, the 401(k) has to be our main method for retirement savings.

Saving in a 401(k) means you have to do the work. No one else will care about your future the way you do. My book, Help! My 401(k) Has Fallen - And Must Get Up! has several ideas and strategies which will help you in your journey. Get your 'Fallen' 401(k) back on its feet. Contact me to reserve your copy today, or visit http://www.my401khasfallen.com/.

You can also get a FREE report at my website, http://www.helpmy401k.us/ The 5 Biggest Problems With 401(k) Plans - And How To Fix Them. If you live in the South Bend, IN area, I am also happy to help with 401(k) rollovers or IRA reviews. You can follow me on Twitter, Linked In, or Facebook.

My weekly radio show is Improving Your Financial Health on WHME-FM in South Bend, and archives are available for listening on my website.   

3 Big 401(k) Mistakes

I had a chance to read a great article this week by Joe Mont. Big 401(k) Mistakes That Hurt Savings - June 1, 2010. This article was interesting to me for a few reasons. The facts he outlines tell me that there is definitely a need for my book,
Help! My 401(k) Has Fallen - And Must Get Up!

Mr. Mont agrees with me that "neither the market losses of 2008 nor the robust rally of 2009 have motivated workers to make their 401(k) plans their top priority." This is based on Hewitt Associates annual retirement study.

"While it's encouraging that most workers stayed the course, most did so simply because they were disengaged with the retirement saving process or too paralyzed with fear and confusion to touch their 401(k) plans", says Pamela Hess, Hewitt's director of retirement research. "If employees continue to ignore their 401(k) plans, they're hurting themselves by letting the market dictate their retirement strategy."

Mistake #1 - We Don't Save Enough

We don't save enough in these plans! There STILL needs to be a sense of urgency. Your 401(k) = Your Retirement - PERIOD!

Pensions began to disappear at about the same time leisure suits and Betamax video did - and NONE of these are coming back! When it comes to Social Security, Americans everywhere of all ages are concerned about the Federal Government's ability to continue the program as it currently exists. Also, it was never intended to be anyone's main source of retirement income. However for 1/3 of elderly Americans, it is the source of nearly all their income. This is according to the Center on Budget and Policy Priorities.

Your 401(k) - or 403(b) if you work for a non-profit organization may be ALL YOU HAVE!

Hewitt's study also shows about 28% of participants don't contribute enough to even get the full matching benefit from their employers. That's frightening especially considering that many companies have reduced or eliminated matching contributions over the past year. Penelope Wang reports in her March 2010 article, Make the Best of a Bad 401(k) that "before the financial crisis, only 6% of plans didn't offer workers a matching contribution as an incentive to boost participation. But that number spiked last year, as another 12% of employers reduced or suspended their matches." 

Ms. Wang goes on to add - "If you have a missing or reduced match, there's no getting around the fact that you'll have to make up the difference by saving more."




Pamela Hess of Hewitt says, "It was interesting to watch employee reactions to the match suspension. We had expected some really serious impacts to the savings rates, but it didn't change things as much as we thought."

Mistake # 2 - We Don't Rebalance

Here's a question for you. How often do you visit your dentist? What would happen to your teeth if you didn't brush or visit the dentist regularly?

Just like the dentist, you need to review your 401(k) plan with a professional to make sure you are on track with your retirement goals and that you have the right mix. Balance helps you to lower your overal risk. You get your tires re-balanced to keep your car straight, and rebalancing your account serves the same purpose.

With that in mind, target-date funds have become much more popular. A 'target-date fund' is one made up of a blend of several mutual funds. You can easily spot them in your menu of investment choices because they have a year in the name of the fund. "Fidelity Freedom 2040" would be an example of a target-date fund. The year represents the approximate time in which you would wish to retire. With this type of fund, it gradually become more and more conservative as the year approaches.

Hewitt's study from Mr. Mott's article shows that in 2009, 25% of workers use target-date funds in their  401(k) plans. Mr. Mott explains that some of this is due to employers who automatically enroll their new workers into the company 401(k) plan. 69% of these employers use a target-date fund as the default option.
Greg Johnson, president and CEO of Franklin Resources says that "target-date funds will become a bigger and bigger part of the new money that's flowing into 401(k)s."  

Even if you do use a target-date fund, please review your account with an advisor. Ask them about the mix. Is it too conservative? too aggressive? or just about right? Are you saving enough to reach your goals? What will your income needs be at retirement? How will your 401(k) be able to meet your income needs? All great questions for an advisor. Don't do your own dental work! Get a pro to prevent 'decay' in your 401(k).

Mistake # 3 - We Kill Our 401(k)s From Withdrawals

Hewitt's study shows that in 2009, 7.1% of participants withdrew from reitrement plans. That is more than in any year since 2002. Loans kill 401(k)s also, and loans automatically become withdrawals once employment ends at the company. Hewitt reports that more than 25% of employees had an existing loan on their 401(k) plan at the end of 2009.

This isn't all that surprising to me. I have spoken with several people who have cashed out 401(k)s. The reasons are varied, but they all boil down to "I need the money right now." It is especially common among younger workers who don't see the future and feel the need to use the money for something else. They don't seem to realize or be concerned that this money may be cut almost IN HALF after taxes and penalties are taken out. A $20,000 account could be reduced to about $11,000 or $12,000 easily when it is withdrawn.

Joe Mont's article is right on time. Please AVOID these big mistakes in your 401(k). I have attempted to contact Mr. Mott after reading this piece and offer him a guest spot on Improving Your Financial Health. As of today, I am waiting to hear back from him.

Please contact me at my website, http://www.helpmy401k.us/ for more information and a FREE REPORT, The Five Biggest Problems With 401(k) Plans - And How To Fix Them! I'm also well equipped to help with 401(k) rollovers or plan reviews.


You can follow me on Twitter, Linked In, or Facebook. I also host a radio program, Improving Your Financial Health, on WHME-FM (103.1) in South Bend, IN.

Happy 30th Birthday!

Happy 30th Birthday!


Did you know that the 401(k) plan is 30 this year? In 1980, Ted Benna, a Human Resources representative for Johnson & Johnson was asked to put together a new retirement savings plan for the employees there. The plan he devised was based on a new section of the Federal Tax Code, section 401(k).

Section 401(k) allowed corporate employees to direct a portion of their income into a special savings plan for their retirement. There are very similar sections in the code for employees of non-profit organizations - 403(b), and for governement workers - 457(b). Employees were encouraged to do this to create their own savings AND lower their taxable income. For example, if you had a salary of $40,000/year and you were able to put $4000 into your plan, your taxable income automatically drops to $36,000. Savings plans quickly became known as "401(k) plans" from this part of the tax code.

Mr. Benna realized that pensions could not continue effectively. People were living much longer than they did in the 1930's and 1940's. Because people were living longer on average, it created a serious cash flow problem for companies. They simply could not afford to pay retirees for 20 or 30 years. We are also seeing the same problem with Social Security, which is our national 'pension' plan.

What the 401(k) plan did was to shift the responsibility of retirement savings from the employer to the employee. That changed everything!

Once Mr. Benna's new savings plan was in place at Johnson & Johnson, this idea spread like crazy around the country. Companies saw that they could save millions of dollars by eliminating pensions and having workers fund their own retirement. Companies were able to acheive even greater tax savings by making matching contributions on behalf of their employees.

So what does the 401(k) mean to you?
Why do you need one as a corporate worker?

That's simple. No one else (including your employer) will help you to save for your future! For years, financial advisors have thought of retirement income as a three-legged stool - Pension Income, Social Security Income, and income from personal savings.

Well, these days 2 of the 3 legs are broken! If you have no savings, the whole stool is collapsed. For many people I know, the 401(k) at work may be the only real savings they have. Because "life happens", as I have seen on a bumper sticker, it can be very tempting to stop putting money into your 401(k). You may also be tempted because of the doom & gloom we see on the news. Some people have also taken money out which can significantly affect your taxes.
Even after 30 years, the biggest concern with 401(k) plans is that companies don't really do much to inform their employees on how to properly use their 401(k). It's just not enough to have a guy come out twice a year and hand out packets.

Remember, this is your future savings after all! Ask questions. Work out a plan for how much you should save based on your age, income needs, and willingness to take risk.

You need to build a solid 401(k) to give yourself a chance in retirement. Without it, your future vocabulary may include the sentence "Welcome to Walmart."

Those who are unwilling to take risk should listen to what Gen. Douglas Mac Arthur says on the subject. "There is no security on this earth; there is only opportunity."

There is a difference though between taking educated and uneducated risks.

My book, Help! My 401(k) Has Fallen - And Must Get Up! will help with this. In the book, I will share secrets with you about your 401(k) which will let you get more out of the plan. For about the price of a pizza, you can learn about how to get your 401(k) back on its feet. Please contact me at my website, http://www.helpmy401k.us/ for more information and a FREE REPORT, The Five Biggest Problems With 401(k) Plans - And How To Fix Them!

You can follow me on Twitter, Linked In, or Facebook. I also host a radio program, Improving Your Financial Health, on WHME-FM (103.1) in South Bend, IN.

What Do Mary Kay and Your 401(k) Have In Common?

I finally got some feedback from my compliance supervisor, regarding my upcoming book, "Help! My 401(k) Has Fallen - And Must Get Up!"  
As a licensed Financial Advisor, I certainly want to be sure my book stays "in bounds". I need to "C M A" - so to say.

How do I C M A? (Cover My ***) Two main rules -

             1. No wild promises.
             2. No product endorsements.

Years ago, I remember reading the story of Mary Kay Ash, founder of Mary Kay Cosmetics. Mary Kay said that she lived by a principle which I found fitting. "I never promised a woman that my products would make her beautiful, but I always tried to give her hope." 

I like that. You could certainly apply the same concept to financial services and even more specifically to my book. We have been bombarded by the media with "hopelessness" at every turn. My job is to be a beacon of light. Straight talk and common sense to show the way. With no pensions, a weak Social Security system, and people living much longer, you really need your 401(k) to grow strong.

In the book, there are examples which DO show specific mutual funds. However, I was asked to simply enter a disclaimer footnote. This avoids endorsement of a certain product or fund.

"Investors should carefully consider the investment objectives, risks, charges, and expenses of mutual funds. This and other important information is contained in each fund's summary prospectus and/or prospectus, which can be obtained from a financial professional and should be read carefully before investing. Investments outside the United States involve additional risks - as does investing in smaller companies - such as currency fluctuations, political instability, differing securities regulations, and periods of illiquidity. Equity investments are subject to market fluctuations."    

There. I feel much better now, don't you? I have also taken a lot of time to make sure that "Help! My 401(k) Has Fallen - And Must Get Up!" is properly referenced and indexed. If someone else said it, it must be OK for me to say it - as long as I credit the source.

In the end, I'm happy with the way the book is turning out. My next piece will be on the final editing.
I'm proud to say - I covered my "A".

You can contact me through my website. I am currently accepting new clients and specialize in 401(k) rollovers. You can get a FREE REPORT there also, "The 5 Biggest Problems With 401(k) Plans - And How to Fix Them". Follow me on Twitter or Linked In.

My radio program, "Improving Your Financial Health" is weekly on Saturday mornings at 9:00am EST on Harvest 103.1 WHME-FM in South Bend. Archived programs are also on my website under WHME.
Best wishes to you!   

Get The Word OUT!

I've been getting a lot of questions about the book, "Help! My 401(k) Has Fallen - And Must Get Up!" The book will be available shortly (end of May) for ordering from Amazon. Since this book was written to help EVERYONE with a 401(k) or 403(b), my biggest concern now is -

How do I make sure that EVERYONE knows about it?

Having a radio program is a real bonus. In fact, on May 29, I am doing a special edition of "Improving Your Financial Health". With so many questions about this unique book, I thought the best way to answer them would be on the air. Be sure to listen to the program Sat. May 29 at 9:00 am on Harvest 103.1 WHME-FM. If you don't live in the South Bend area, or aren't able to listen at that time, no worries. You can still catch the archived recording on my website, www.helpmy401k.us . All previously recorded programs are kept there.

My book website, http://www.my401khasfallen.com/ will also include FAQs and resources which were helpful in writing the book. The new video will be there also, and can currently be seen on You Tube. I will write some more about this, and I've gotten a lot of positive feedback so far on the video.

Most people are thrilled that I didn't strip nude, a la Erykah Badu. (You DON'T want to see this body in the buff!) Although I can't say the same for the pig, who is the main character in the video.

Sooooo, if you want to see a naked piggy bank reading a book, you will like this! (Don't worry the nudity is tastefully done in an 'artsy' way.)

Anything that you can do to help get the word out about the book

"Help! My 401(k) Has Fallen - And Must Get Up!" would be greatly appreciated.

For rolling over a 401(k), or the best rates on tax-free bonds, you can contact me through my website http://www.helpmy401k.us/. You can also follow me on Twitter @deanvoelker or Linked In. 

"Improving Your Financial Health" is a weekly financial advice radio program, which also showcases interesting guests. This program airs Saturday mornings at 9:00 am on WHME-FM in South Bend, IN and on my website.

You DO Judge A Book By Its Cover

Well, its all coming together now. Here is the final cover design by Aimee Sims for my upcoming book "Help! My 401(k) Has Fallen - And Must Get Up!"
Currently the book is in typesetting and from there will be sent to Create Space. I am very excited about this and look forward to helping people get more from their 401(k) or IRA. Because it focuses on the
401(k), which is the biggest source of savings for many of us, and it is easy to understand - this book is unique.

It should be available to order by the end of May!

If you feel like you need your 401(k) working harder for you, please contact me. You can contact me through my website , Linked In, or on Twitter. I also host an advice program "Improving Your Financial Health" on Blog Talk Radio and on Harvest 103.1 WHME-FM in South Bend.

The book website will be http://www.my401khasfallen.com/.

Is Your Employer 'Wimpy'?

When was the last time you had something happen that really pissed you off - but you were also extremely thankful for it?

First, if you are offended by the word "pissed", I apologize. I use that word to get your attention and it does a much better job of describing my feelings in this case than "angry" or "mad". I was "pissed" because I witnessed some real wimpiness from an employer.

I did a 401(k) plan review for a local small business recently. These reviews are to help employers to look at their retirement savings plans and find places where they can improve. The goal for everyone is to lower their fees, reduce their liability, and provide better education for employees as well. Everyone wins!

So what pissed me off? My contact person at the company ABSOLUTELY DID NOT CARE!! It doesn't bother me if someone doesn't know their 401(k), and wants to learn. It bothers me greatly when you don't give a ****.  She wasn't even the owner, but a rather small-minded, pencil-pushing "Gate Keeper".

Why am I extremely thankful? Simple. This is one of the main reasons I wrote my book "Help! My 401(k) Has Fallen - And Must Get Up!"

There are some wimpy employers out there, and this "Gate Keeper" (I'll refer to her as G.K.) was a vivid example of what's wrong with many 401(k) plans today. She is part of a 3 person 401(k) committee, which also included the company president and V.P. The first part of my review is a questionaire and gathering information about the funds in the plan.

Money Magazine Senior Writer Penelope Wang wrote a recent article "Make the Best of a Bad 401(k)" . She points out that "even the nation's biggest 401(k) plans fall short in some key areas". 

Employers must understand that they have a fiduciary responsibility to their employees. If a retirement plan is offered by the company, it needs to include the best possible mutual funds at the lowest possible cost. Also, employees must be kept well-informed about how the plan works and what the benefits are.

Fiduciary responsibility is not just a "good idea". Its the law, part of the Pension Protection Act of 2006, and recent updates to ERISA (Employee Retirement Income Security Act).  Companies may be exposed to potential lawsuits by not doing their best for their employees.

Let's get back to "G.K." Here are some of the highlights (or lowlights) of her responses to my questions about their plan.

Q: How often does the trustee committee meet to review the plan.
A: We let the advisor take care of that. 

Q: Are all 3 members of your committee aware of the meaning & responsibility of being a 'fiduciary'?
A: Yes. 

Q: Are you also aware of potential personal liability which comes with fiduciary repsonsibility?
A: Well, that's what we have insurance for.

Q: How does your company help the participants in the plan to make informed investment decisions?
A: Information is available on-line and they can call the advisor. 

Q: How often does he meet with your employees?
A: I think once a year. People can call him if they have other questions.

Q: What process do you use for monitoring the mutual funds in the plan for performance and expenses?
A: We rely on the advisor for that.

Q: Do you have a current enrollment kit?
A: (She handed me a packet from 2008 - NO KIDDING, I couldn't make this stuff up!)

Q: Do you have a more current kit?
A: Our advisor needs to get us some new ones. We haven't had any new employees so it hasn't been
     needed.

Q: How are employees kept informed of mutual fund expenses?
A: We rely on the advisor for that.

There is more, but you get the idea. People like G.K. just don't get it. Her small-minded attitude costs her company money. She is also depriving the employees there of their rights to learn more about their benefits and their rights to better investments. (I will talk about this in the next segment. Stay tuned - it gets MUCH WORSE when we review the investments.)

The bad news is that there are plenty of G.K. s out there. If I were an employee at this company, I'd either want a different person in charge of the 401(k) plan or learn what my legal options are. G.K. is a time-bomb.

You can contact me at http://www.helpmy401k.us/ . Pick up your free report on my website – "The 5 Biggest Problems With 401(k) Plans – And How to Fix Them". My new book, "Help! My 401(k) Has Fallen - And Must Get Up!" is due out in April.

My weekly financial advice program, Improving Your Financial Health is on Blog Talk Radio and Saturday mornings at WHME-FM.      

 

Diary of a Wimpy 401(k) - Movie

Well, my daughter wanted to see the "Wimpy Kid" movie yesterday. I know she likes the book series and they are pretty funny so we went.

The movie was pretty funny, a bit different from the book with several new adventures for the Wimpy Kid, Greg Heffley, as he deals with surviving middle school. You really don't want to know about the "cheese touch".

I'm not planning a "movie" for my book "Help! My 401(k) Has Fallen - And Must Get Up!" Although if Bruce Willis' agent will return my calls, I may change my mind. James Gandolfini might be interesting also......
a 'mafia' financial advisor......hmmmmm.

Seriously, don't look for a movie with either of these guys. Although I am still planning a short video clip with Pentavision. I'm supposed to meet with them again this week.When we put up the new website, the video will be there and we can direct orders to the page on Amazon.

I'm also getting more book cover ideas this week, which I hope to be able to post and get feedback.

My other project is to find blogs on 401(k)s and IRAs and post responses to questions. I have several which I know of.

If any readers want to send me links for 401(k) blogs, please contact me.

You can get a copy of a free report on my website – "The 5 Biggest Problems With 401(k) Plans – And How to Fix Them".


You may also contact me on Linked In or Twitter at http://www.twitter.com/deanvoelker. I also host a weekly financial advice program, Improving Your Financial Health on Blog Talk Radio and WHME-FM.

Diary of a Wimpy 401(k) - Wimpy Cost Explanation

When I go to buy something – a new pair of shoes, furniture, or dinner at a restaurant – I want to know exactly what I am paying for. You probably do also, unless your name is Bill Gates. Fee clarity is more important than ever.


Since I have been an advisor in South Bend, I’ve gotten to know a lot of people. I’ve been asked on several occasions to join marketing or networking groups. Recently I was invited to join a group which focused on marketing ideas. The ideas seemed good, and I saw some value in joining the group. I thought it may be a great way to plug the upcoming book as well.

However, this week I decided absolutely not to join this marketing group.

Why not ? The group leader did a poor job of explaining all of the costs involved (wimpy?). I went to 3 different meetings, I was bombarded with marketing information, but never once saw cost explained either verbally or in print. When I finally did find out HOW MUCH, it was quite a lot more than what I was originally told. Whatever credibility he had worked to build was gone.

“No B.S.”?…….Yeah, Riiiiiiiiight. One of my first sales managers told me “A confused prospect never buys.”

What does this have to do with 401(k) plans? Simple. One of the biggest problems with plans now is that fees aren’t clearly explained. Employers don’t know costs, and therefore can’t explain them to employees, who are really picking up the bill. Federal law has made it mandatory that all fees for 401(k) plans are clearly itemized and easy to understand.

If a contractor came to my house and told me he would fix my roof for $10,000, and then due to “unforseen expenses” the tab came to $15,000 or more, I’d be upset. You would be too! By the same token, when I review plans for employers, I want to make sure they know all of the fees in the plan. I have also stumbled onto plans which are badly in need of an update. They are still paying for the plan as a ’small’ business, when in fact they could be saving a lot of money once they have reached certain dollar amounts, or breakpoints.

In my book, “Help! My 401(k) Has Fallen – And Must Get Up!” I use an example of cell phones to explain this.

Why would you still pay for a “1980’s backpack style” cell phone, when newer, better, and cheaper models are available?

As an employer, you need to review your 401(k) plan and update it. Don’t be ‘wimpy’. Make sure you know all the costs and your people do too.

You can also get a copy of a free report on my website – “The 5 Biggest Problems With 401(k) Plans – And How to Fix Them”.

You may also contact me on Linked In at http://www.linkedin.com/in/dvoelker or Twitter at http://www.twitter.com/deanvoelker. I also host a weekly financial advice program, Improving Your Financial Health at http://www.blogtalkradio.com/401kcoach.

Diary of a Wimpy 401(k) - Wimpy Friends

The interesting thing about writing a book - I am learning who my friends are.

One of the things I had wanted was to get testimonials from people from all walks of life. The book was written in simple language with plenty of stories to make it easy for anyone to understand.

We all have a 401(k) or 403(b) - almost all of us anyway. Unless you are self-employed or one of the rare few who still have a pension.  

So about a month ago, I sent requests for testimonials to about 65 people. Some I knew better than others. Some were financial experts who I had interviewed on "Improving Your Financial Health". Some were friends in the financial industry. Some were friends and clients I knew locally, or small business owners. Still others were people who were involved in the project in some way. 

A few were celebs who I didn't know, but I wanted to get a testimonial from them.

In asking for testimonials, I believe that we are all very busy. I am willing to be patient and follow up a few times to get testimonials. These 'blurbs' from others can help to promote the book.

If you have a 401(k) and you aren't happy with it, and you are nervous about the future, you should read this book!

One guy (a writer whom I won't name) turned me down, but was very nice about it. He explained that he gets many similar requests and he simply does not have time to answer them all. He also didn't believe that his testimonial would carry much weight, with him not having a financial background.

Although I was slightly disappointed, I appreciated his sincerity and his prompt response.

I've also had a few of my financial heroes tell me that although they like the book and see its value, they aren't allowed to respond due to compliance constraints. Again, I respect this.

That's one way to do it. Here's the WRONG WAY!

Another previous guest on my program (I won't name her - but I promise she WON'T BE BACK!) had her assistant send this "snooty form letter" remark. "As a policy, our team focuses on content that is being published by a major imprint. We don’t read or consider unsolicited material. Should your book get picked up by a major imprint, please do feel free to reach out to me at that time, and I’ll do my best to get it to (her) for a possible endorsement."


Again, this type of chilly response really alienated me. I've lost a lot of respect for this person and needless to say, she won't be back as a guest on my program.

I am still looking for testimonials. I've gotten several very ones so far. Let me kinow if you'd like a copy of the book for review. If you want to learn more about 401(k)s and think you can write a couple of kind words - contact me and I will gladly send you a copy of the draft.

Here are some of my favorite testimonials so far.

"Unless you plan to work till you drop, the 401(k) is your eventual ticket to freedom. Your plan may have fallen in 2008 and Dean Voelker is just the person to help get it back up." -

Jonathan Chevreau, Financial Post columnist, and author of Findependence Day.

“Dean Voelker does a great job of laying out the case for aggressively pursuing your 401(k). This book presents compelling reasons for getting involved in your future TODAY, rather than tomorrow. Dean’s story telling approach takes the 401(k) from its birth through today in an easy to read and storytelling manner.” - Len Fox, author of Recipe Investing.

“Dean Voelker is a real pro. He reveals some things about the Social Security system and how
401(k)s work that I never knew. This book is short, sweet and to the point. Everyone needs to read it quickly to see if they are doing what they should to get their retirement plans back on track. Thanks, Dean for putting this together for us.” - John S. Cohoat, President of Cohoat Business Growth Advisors, and author of No Thank You, Mr. President.

Go ahead, don't be "wimpy". Contact me today. You can also get a copy of a free report on my website -
"The 5 Biggest Problems With 401(k) Plans - And How to Fix Them"

You may also contact me on Linked In at http://www.linkedin.com/in/dvoelker or Twitter at http://www.twitter.com/deanvoelker. I also host a weekly financial advice program, Improving Your Financial Health at http://www.blogtalkradio.com/401kcoach.







 

Diary of a Wimpy 401(k) - Getting It Printed

Probably the biggest question to answer was "How are we going to print this thing anyway?"


The LAST thing I want or need is to print up a bunch of books and have them sitting in my garage. I also know that most publishers have never heard of me. So I started getting all kinds of advice from different people. Also did you know that if you sell books to a "brick and mortar" bookstore, they will send you the unsold or damaged books back and are entitled to a full refund including shipping costs? Its in the 'fine print' of the contract.

People suggested e-books, or partial e-books, or different print houses. In January, I interviewed a man named Len Fox, author of Recipe Investing, a book which was not unlike mine, in terms of size and content. Len had used a division of Amazon called Create Space. Len had liked it because it was connected to Amazon. They handled the ordering through Amazon.com and could print 1 book orders. Once a month, they would then pay Len his cut from the book orders. Len didn't have to handle any of it. He got a statement once a month with the orders and a paycheck. No hassle, no damaged books, no refunds, no crates in his garage, no shipping. All of it was done there, by Create Space.

Hmmm - that sounds good to me. I was still working on the writing part at the time, so I kept it on the back burner and also continued to get ideas from others. A few weeks ago, I sent a copy to Carlos Frank, another friend of mine. I had interviewed Carlos twice for my financial show, "Improving Your Financial Health". Carlos suggested that I talk with John Rizzo, who worked for....Create Space.

John Rizzo called me last week and after speaking with him, I was convinced that this was the right path for me.

Create Space offers all types of services that will help you to self-publish your book. Self-Publishing allows you much more freedom and can really lower your cost. John was extremely helpful in explaining all of the services offered. There are 2 things I really like about using Create Space.

First, the services are all seperate. If you need them to typeset or edit or promote your book, they will do it OR if you already have someone that you are using, you can do that. You have the choice. When it comes to assembling the book, all I have to do is send them my material and cover design, and they do it. This is also impressive, since my index and resource guide are seperate from the main manuscript.

Secondly, because of their affiliation with Amazon, they will take care of posting your book on Amazon's site and handle customer ordering and shipping for you. Not only is this a real time and money saver, it also prevents the possiblity of having crates of books taking up space in my garage! I am really looking forward to working with John Rizzo, and I would certainly recommend Create Space if you are looking to get a book printed.

Diary of a Wimpy 401(k)

OK, here we go. One of the things I have done so far in the publishing process was to read a book titled "The Well-Fed Self Publisher" by Peter Bowerman. Mr. Bowerman has some very good & practical ideas on why it is better to self publish instead of going through a publisher.

Kudos to my good friend, Nikki Stauffer who recommended the book. Nikki always seems to come through for me when I really need some advice. If her firm was willing to promote the book, I'd hire her in a heartbeat.

Bowerman told several "horror stories" about publishing houses. Most people have a fantasy that they can simply write a book and sell a gazillion copies and then live like John Grisham for the rest of their life. Needless to say, I am pretty grounded in reality. The truth is, many authors have a hard time getting it published. Jack Canfield, author of the "Chicken Soup" books has a favorite word when he was getting multiple rejections - "Next!"  

Anyway, even if you finally do get a publisher to take on your book project, and a promotion agent to write a press release, you will still end of doing the promotion leg work yourself. also, the publisher gets to keep most of the money. He shows examples of authors who wrote books that sell for about $15 and their cut is about .50 per book. Now THAT is wimpy!

According to Bowerman, once they write the press release, the publisher is done. On to the next Stephen King wannabe. There is only one person in the whole world who really cares about making sure that your book is promoted regularly - the author. So if you have to promote it yourself, why not publish it yourself.

The whole reason for this book was that I was meeting many people in this area who really weren't getting the most from their 401(k). Northern Indiana is one of the hardest hit areas for unemployment, and many folks simply cashed it in, in spite of taxes and penalties. Others who didn't cash in stopped contributing to their 401(k) especially if their company stopped matching contributions. There is no doubt in my mind that people need to have a much better understanding of how the 401(k) works.

Someone needs to say - This is your retirement plan. It may also be the only savings you have, so you'd better stop being 'wimpy' about it and start saving.

"Help! My 401(k) Has Fallen - And Must Get Up!" reveals little known secrets about 401(k) plans and IRAs. If you read the book, you will understand them and get more from them.

That's all for today. I really apreciate those who have been reading this, and those who have been supporting me. Also thanks to those who have been listening to "Improving Your Financial Health" on either Blog Talk Radio or WHME-FM.      

Blog Talk Radio - Be Our Guest

I've been a bit busy this week, working on my upcoming book, "Help! My 401(k) Has Fallen - And Must Get Up!" . This is an "everyman's" (and everywoman's) guide to getting more from your 401(k) plan. Most books I have seen on 401(k) plans really are geared more to advisors and financial people, which is what inspired me to write it.

For most of us, the 401(k) is a major source of our savings, and for some it may be the ONLY source of savings. We need to get more out of it if we want to retire someday and have our money last the rest of our lives. I'm very excited to contribute something unique - and hope others find it helpful.

Anyway, I plan on doing more with the blog and hope that my message finds the right people. Last week I wrote about Blog Talk Radio. My experience with Blog Talk Radio has been great. I began using it in July 2009 on the advice of a friend of mine, Brian Seim, a radio veteran.

Although I have made a TON of mistakes (and still do!), I must have done a few things right also. A few weeks ago I began an affiliation with WHME-FM in South Bend (103.1) . We agreed to replay my interviews from Blog Talk Radio as a 30 minute program on Saturday mornings - "Improving Your Financial Health" .

If I had to pick the one factor which has made the show appealing - its the GUESTS! My guests have mostly been financial experts and authors, although some have been very interesting people with great personalities with no financial background at all. Even so, they had something of value to share with listeners and wer a lot of fun to talk with. Some examples would be Ruben Gonzalez, a 4 time Olympian who has written 3 books on staying motivated, or Charlie Adams, who is also a professional speaker and helps High School athletes to get college scholarships. Kristen Harmel who has written 6 novels and has a passion for helping kids with reading, Kay Yasin who overcame personal tragedies to change her life and is now an expert trainer and bodybuilder, and Darin Pritchett who is well known in the South Bend area for his Weekday Sportsbeat show. These and many others are wonderful people and gave fun & interesting interviews. All would all be welcome guests in the future.

Once I committed myself to doing the program, I have always been on the lookout for people who would make great guests . When I find someone I like, I contact them and and tell them about the program and try to schedule a time for them to be on. Always let them know that you are doing this regularly (for me once a week) and tell them names of other guests I've interviewed.

Whatever you choose to do a program about - for business or for fun - I would certainly recommend having interesting guests that fit in with your message. Again, the guests make the show fun. (Who would want to listen to just me for 30 minutes?)

People have often asked me where I find my guests. You can find guests in several places. My main source would be searching the internet for financial blogs or articles I also subscribe to Money and Smart Money magazines and have found great articles there.

Referrals can be a great source also once you tell others what you are doing. My friend, Nikki Stauffer in Ada, MI deserves a special mention. She has referred 2 nationally recognized financial experts and authors to me who are guests. Eric Tyson (author of "Investing for Dummies" and "Personal Finance for Dummies") was one. There aren't many financial advisors out there who can say they have their own "jingle" written by Paul Shaffer of the David Letterman band.  Another is Robert Krakower, who has graciously agreed to be interviewed on March 23. His new book is titled "Redefining Retirement for a New Generation".

By the way, Nikki Stauffer has a great weekly show of her own, "Gather Round the Table" .  She has also done pretty well with guests, including Megyn Price (Rules of Engagement), Maria Canals-Barrera (Wizards of Waverly Place), and Mayim Bialik (Blossom), among others. This program promotes the importance of family values by eating meals together, and Nikki's guests normally share one of their favorite recipes. Check out her site and archived interviews at http://www.gatherroundthetable.com/. 

I also need to thank Erica Sandberg one of my early guests, and author of "Expecting Money", for her referral of a colleague of hers, Sally Herigstad, CPA, and author of "Help! I Can't Pay My Bills!". Both ladies were wonderful guests and I look to have them on Blog Talk Radio again.

Pam Batcho of Express Pros, also has been a great referral source. She referred Ruben Gonzalez, whom I mentioned earlier and also her boss, Norm Robertson, owner of the local Express Pros branch.

Sometimes, it pays to be persistant. Anya Kamenetz was a young lady I had really admired from reading her first book, "Generation Debt" a few years ago. It highlights the challenges of being young today, especially with the high costs of college and student loans. Anya was nominated for a Pulitzer Prize for her efforts.
She is also a nationally recognized speaker, and has appeared on college campuses nationwide.

I knew Anya would make a great guest, and tried to e-mail her (4 times over 6 weeks) with no reply. Finally one day out of the blue, I got a very kind note from her. She apologized that she had been out of town and wasn't getting her e-mails. She also sent me her personal e-mail and agreed to an interview. The interview went great and it was quite an honor for me.  

Whoever the guest is, I really try to be respectful of their time. I really want to make sure the experience goes well for them - I may want to have them back sometime, or want their help with a project.

Before doing a program, I send the guest specific instructions confirming the date and time and Call-In phone number. Since some of my guests live in different parts of the country, I also make sure I note EST - and whatever time it may be for them. 1:00 pm here is 10:00 am in California. That may seem like a small thing, but trust me - its important!

Another habit of mine is to send the guest a list of questions personally tailored to them. Some guests have even suggested questions that the like to be asked. By reviewing their website or reading their books, it has helped me quite a bit to learn about them. It helps the interview to go more smoothly.

My objective is to build them up as an expert which (I hope) makes me look like a good guy as well. Speaking of building up, its also very important to use a proper introduction. A good introduction should be at least 3 sentences, highlighting their achievements. You are telling your listeners why you chose this person to be on your show and why their advice will be valuable to them.

One last point on guests - You can't say "Thank You" enough. I always thank them at the end of the program and give them a chance to give contact information and promote their book or services . After the show, I also send an e-mail thanking them for their time once more.

Blog Talk Radio has been a great venue for me. I plan on writing one more article about Blog Talk Radio, which includes tips and techniques. You can contact me through my website, http://www.helpmy401k.us/ and
through Linked In or Twitter.

There is a Free Report now available through my website, "The 5 Biggest Problems With 401(k)s - And How To Fix Them". Please contact me to receive your free copy. This is a sample of my upcoming book, "Help! My 401(k) Has Fallen - And Must Get Up!"

Tax Credit For Small Businesses

Are you a small business owner? If not, do you know any?


These days its hard enough to make ends meet and keep your business going. Small businesses like yours are the key to reviving our economy.

Would you like an idea that will help you and your employees to save money and reduce your taxes?

Did you know that when you establish a 401(k) or other kind of qualified retirement plan, you may be eligible for a tax credit equal to 50% of the cost of starting up and administering the plan? The maximum allowable credit is $500 per year for each of the first 3 years of the retirement program. This is according to EGTRRA (Economic Growth and Tax Relief Reconciliation Act of 2001) .

Other types of retirement plans for small businesses which qualify for the tax credit are the SEP IRA (Simplified Employee Pension Plan) and the SIMPLE IRA (Savings Incentive Match Plan for Employees) .

To qualify for the tax credit:

* The plan sponsor must incur qualified startup costs. These would be expenses for setting up or maintaining the plan, or for retirement-related employee education.

* The plan must be a new plan established AFTER December 31, 2001.

* The plan must have at least one non-highly compensated employee. Usually this would be someone who is not an owner and has earned less than $105,000 in the prior year.

* The plan sponsor must have employed 100 people or less who received at least $5000 or more in compensation during the prior year.

Does this sound like your business so far? If I can help you & your employees to save money for your future needs and lower your taxes, please contact me today. This will be part of my upcoming book as well – “Help! My 401(k) Has Fallen and Can’t Get Up!”

I should also mention that unless the current law changes, EGTRRA is set to expire at the end of 2010.

Please contact me for more information on 401(k) plans or IRAs at http://www.helpmy401k.us/.

You may also contact me on Linked In at http://www.linkedin.com/in/dvoelker or Twitter at http://www.twitter.com/deanvoelker.  I also host a weekly financial advice program, Improving Your Financial Health at http://www.blogtalkradio.com/401kcoach.

Tax Free Interest In Indiana - Shhh, Your Bank Doesn't Want You To Know

Do you live in "The Middle"? Besides unpredictable weather and being referred to as "Hoosiers", there are actually a few perks to living in Indiana.

Indiana offers some tax benefits to investors that are unique to our state. Municipal Bonds are very popular here. These bonds are a great (and Safe) way to earn more interest on your savings. The interest you earn on a bond from ANY STATE is FREE from Federal Tax, State Tax, and Local Taxes!

Municipal Bonds, or Munis have been used for over 200 years as a way to raise money to build or improve schools, hospitals, libraries, and roads. These days, stadiums have also been funded by having bonds issued. Once the bond is issued, you can loan money to the project and be repaid with interest which is free from Federal taxes. When the bond matures, you get the amount back which you loaned to the project.

If the bond is issued by your home state, your interest may also be free from State and Local taxes.

Again, the benefit for us "Hoosiers" living in Indiana is this. It doesn't matter which state the bond came from. We enjoy interest income on any muni bond which is free from Federal, State, and Local Taxes!  
That may be worth an additional 1.5% - 2% or more on your savings, depending on your tax bracket. 
(Check with your advisor when buying bonds to see if you may be subject to Alternative Minimum Tax, depending on your total income.)

Currently, http://www.bankrate.com/ (as of Feb. 4, 2010), shows us what the highest rates are for a 1 Year CD
(1.7%) and a 5 Year CD (3.55%).  Dave Ramsey refers to these as "Certificates of Depression". You can see why!

Did you also know that CDs are RISKY? Why is that, you ask?
Easy - You LOSE Future Buying Power!

Let's do the math, and see which option may be better for long term savings.

5 Year Municipal (Investment Quality) Bond at 5%

$10,000 x .05 = $500/year. 
$500 x 5 years = $2500 (TAX FREE) 
Most Bonds pay interest twice per year, directly to you the investor, so you will get 2 checks each year for
$250 for 5 years. When the bond is due, you get the $10,000 back. That may also happen if the bond is called early, but that's another lesson.

5 Year CD at 3.55%
Remember that was the BEST rate in the US today on http://www.bankrate.com/.

$10,000 x .0355 = $355/year.
$355 x 5 years = $1775, and you WILL PAY TAXES on this.

Hmmmm......let's see.....I can get $2500 in interest that is tax free OR $1775 in interest that is taxable. I wonder which one I should pick......

Did you ever wonder how banks make money? They use your money and either loan it or invest it.
Now you can see why your bank may not share the muni bond idea with you.

If you would like to learn more about Municipal Bonds, please contact me. 
You may also contact me for more information on 401(k) plans or IRAs at http://www.helpmy401k.us/.
You may also contact me on Linked In at http://www.linkedin.com/in/dvoelker or Twitter at http://www.twitter.com/deanvoelker. I also host a weekly financial advice program, Improving Your Financial Health at http://www.blogtalkradio.com/401kcoach.

Taking Stock

I'm not a big individual stock fan. For most people, mutual funds are a much better way to invest. Its easier to be diverisfied and its also easier to add money systematically.

However, I did see something recently which I thought my readers may enjoy. If you were going to invest in stocks, which companies would be good ones to own long-term? At least one sign of a great company is one which is able to consistently increase their dividend payment.

If you aren't sure what a dividend is, think of it this way. When you own stock, you own a tiny piece of that company. Your investment rises and falls with the performance of the company. Over time, you would like to think the company will grow, and your money will grow with it. Companies which have established themselves and become profitable will share part of their profits with you as a part owner. Those profit sharing payments are known as dividends and are usually paid once every 3 months.

Again, the sign of a great company is one which has raised its dividend payment consistently, even in tough times. Raising the dividend for shareholders is like giving them a pay raise. (CDs don't do THAT!!) Those companies would be great to own long term.

What if a company were able to raise its dividend 25 years in a row or more?

Here are the ones which have:
Abbott Labs                     (ABT)
Bemis                               (BMS)
Century Tel                     (CTL)
Chubb                               (CB)
Coca-Cola                        (KO)
Exxon-Mobil                    (XOM)
Johnson & Johnson         (JNJ)
Mc Donalds                     (MCD)
3M                                   (MMM)
Pitney Bowes                  (PBI)
PPG                                 (PPG)
Proctor & Gamble          (PG)
Walmart                          (WMT)    

S&P reports that since 1926, dividends have contributed to about 1/3 of the total return on your investment.

Another thing I like about dividends is that when the stock price goes down, the dividend yield goes up. Its a great time to buy more of great companies. That is what Warren Buffett does!

For example, lets look at Proctor & Gamble. Shares of PG are currently (2/3/10) at $62.90. Dividends are paid at $1.76/share, which is divided into 4 quarterly payments. You will get a dividend return of 2.8% on any shares purchased at that price.

What if you had been fortunate enough to buy in March of 2009, when it was selling for around $44/share? Well, you still would have gotten $1.76 per share, but that works out to about a 4% dividend return. (Better than a CD, and with potential to grow!)

Warren Buffett has become extremely wealthy because he buys great companies and holds them, collecting dividends which increase year after year after year.

Again, I am not encouraging people to buy individual stocks. There are plenty of financial stocks such as Citigroup and Bank of America which also had wonderful histories of increased dividends, until 2008.
Dividends are certainly something to consider though for any investment - including mutual funds and annuities.

You can contact me through my website, http://www.helpmy401k.us/. You can also contact me on LinkedIn at http://www.linkedin.com/in/dvoelker, or Twitter at http://www.twitter.com/deanvoelker. I am currently hosting a weekly financial advice program, "Improving Your Financial Health" on Blog Talk Radio at http://www.blogtalkradio.com/401kcoach.  Let me know how I may help you!

  

Are You Linked In?

Are you "LinkedIn" to social media? LinkedIn http://www.linkedin.com/  is a professional business networking website, which launched in May 2003.

Wikipedia states that Linked In has over 50 Million users in more than 200 countries and territories. According to LinkedIn, a new member joins the site every minute. You can learn some of the basics of LinkedIn at http://press.linkedin.com/about. There is an orientation video here which may help you to utilize some of the site's features.

My first exposure to LinkedIn was in 2006. I was invited to connect by Debra Gould, an acquaintance of mine, whom I had met at networking events a few times. I figured it wouldn't hurt, so I set up my profile, and "Voila!" - I was now part of social media and the internet!

Of course, I could say that my financial advisory business and LinkedIn page grew like wildfire from there, but that wouldn't be true. Several months went by before I even added a second connection. It can can a while for the "lights to come on". Even as I look through my contacts today, I counted 21 who have only 1 connection (me), and 87 (including the onesies) who have 10 or less. This tells me that LinkedIn is still a largely untapped resource.

After I finally did add a few more people in 2007, I started looking at LinkedIn as a good resource for networking. I could see some value in the site and started looking for ways to utilize it better. I started to join groups and also looked for companies in the South Bend, IN area that I wanted to build relationships with, especially for 401(k) marketing and employee education. Using LinkedIn gave me a chance to show them my 'online resume'.

Of all the Social Media sites, LinkedIn has been viewed by many as the most professional and businesslike. I know of a few people who have effectively used LinkedIn in their career search. (Maybe THAT should have been referred to in the "State Of The Union" address with the topic of 'Job Creation'.)

Before I digress too far - Here are a few basic ways you can use LinkedIn as an effective marketing tool and networking resource for your business.

* Add People - That seems like a no-brainer, but sometimes we need to figure out how to get started.  Don't be shy. When you get business cards from others at networking events or other places, invite them to
connect. Most cards include an e-mail, which makes it easy. LinkedIn has also done many things to make
the site more user friendly. One of them is "People You May Know", which is a bit similar to Facebook's friend suggestions. If you know them, it is easy to invite and add them as contacts.

In fact, invite your Facebook friends also. You may be surprised at how many of them may view you in a
different light when they see your professional profile on LinkedIn. You can also go through your e-mail contacts and import the list into LinkedIn. This will tell you which of your friends already has a profile here. Again, you will be surprised.

* Enhance Your Profile - LinkedIn should be your online resume. Keep it real, and be yourself, but be your BEST self. Don't just fill in the boxes. Tell others up front what makes you unique and what you can do to help them. Why should they work with you? Do you write a blog? Manage a scout troop? Sing in the church choir? Put those things in your profile, along with previous jobs. You never know what may catch someone's eye and attract them to your business.

* Recommendations - These are your testimonials. Ask people you trust to write one for you. (They may ask for one in return.) My only rule of thumb on giving or receiving is - Make it specific and sincere! The testimonial must mention special skills or services you have performed. "John is a great guy." doesn't cut it. Only sincere, well thought out recommendations will make your profile stand out.

* Join A Group - What topics are you interested in? You can probably find a group that discusses them.
Participate in the discussions by asking and answering questions. Some of my current groups include
Chamber of Commerce of St. Joseph County, Indiana Small Business Development Center, Linking Indiana,
and the Economic Club of Michiana. I have also created 2 of my own, Help My 401(k), and Always Illinois.

A great way to add contacts is to look through the members list. Just click on their profile and send them an invite.

* What Are You Reading? - If you have read something recently which you think others may find interesting, add this to your profile. You may see others also who have read the same book, and that can be common ground for a new connection. If you write a blog on Wordpress, you can also have the blog connected to LinkedIn.

* Search - You can search for people or companies. Are there any companies you'd like to call on, but don't know where to start? Look for them on LinkedIn. More and more companies are on LinkedIn everyday. A company search can tell you everyone who is with that company who has a profile. One word of caution - if the person is no longer with the company, and they aren't an active LinkedIn user, the profile may not be current. But profiles do offer great contact information, including e-mail addresses. The search feature is very easy to use.

I hope these tips help you get started with LinkedIn, or help you utilize the site more effectively.

You can contact me through my website, http://www.helpmy401k.us/. You can also contact me on LinkedIn at http://www.linkedin.com/in/dvoelker, or Twitter at http://www.twitter.com/deanvoelker. I am currently hosting a weekly financial advice program, "Improving Your Financial Health" on Blog Talk Radio at http://www.blogtalkradio.com/401kcoach. Let me know how I may help you!