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Friday, February 29, 2008

Some Great Ideas To Maximize Social Security Payments

Although it will be many years before we are qualified to receive Social Security benefits, I've noticed that there are quite a number of articles that examine ways to maximize payments. I don't know if I am just more aware or if financial planners are becoming more creative. Probably a little of both:-)

Previous articles I read discussed the maximizing of benefits for married couples waiting until 70 to start payments or the approach of using the spousal benefit for the younger person to increase total payouts. The recent articles I've read discuss how to claim benefits at 62 and then later increase ones benefits signficantly at the full retirement age of 70.

A hidden Social Security benefit by MSN.com and Trade in Your Social Security Check by Forbes.com both share the following strategy:

  1. Starting taking reduced benefits at 62.


  2. Increase payments to maximum benefits at 70, by repaying all benefits received since 62.
This is allowed by using Social Security's form 521, "Request for Withdrawal of Application", returning all payments previously received, and then reapplying for new Social Security benefits. While this approach can be costly, it does allow one to receive signficantly higher payments because of being 70. Of course, many factors, including other sources of income and whether Social Security payments are taxable, need to be considered to determine whether this approach is an optimal financial solution.

All of these articles provide interesting insights on how to maximize the benefits from Social Security. As we get closer to qualifying for Social Security benefits, I will work with our financial advisor to do a more detailed analysis on what is best for our situation.

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

Thursday, February 28, 2008

Creating Great Childhood Memories

Some of my best childhood memories were the times I spent playing with and learning from my parents. I still remember playing horsey, flying kites, ice skating, and fishing with my dad. I remember reading books and imagining about growing up with my mom. While I also went to summer camp and played organized sports, I feel the fun times with my parents were the best.

Looking back, I wish I had done more of these things with my parents. I realize now that these times with my parents are now very special moments to me. I try to apply some of this insight to raising our three year old daughter. I want her to have many great memories from her childhood. So I try to be available and play many of the games she likes. In the course of a day, we will either play hide and seek, horsey, or build with blocks. If there is time, we also play her favorite board games such as Caribou and Hungry Caterpillar.

We also have memberships to a children's museum, an amusement park and a zoo. We go to these venues for her development and entertainment. However, I'm betting her best childhood memories will be playing her favorite games with us :-)

For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial or family advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

Wednesday, February 27, 2008

Hunkering Down Financially

It's time for us to hunker down. It doesn't appear the economy or stock market will recover for a while, perhaps not until 2009. When times appear tough financially, I like to do an inventory of our situation and make changes to protect ourselves. Here are the three areas on which I focus:

  • Investing: Cash Is King - As I have written before, I have a relatively conservative investment profile, with a relatively large percentage in cash and fixed income. I will continue to maintain this proportion for the total portfolio and have moved our short term expense needs into 100% cash and fixed income. Since we have retired, we have been working toward reallocating our equity portion from my company's stock to more diversified equity portfolio. We will continue to sell our company stock, but will wait until better market conditions to reinvest the proceeds.

    We had begun to invest in CDs and bonds in mid 2006. In hindsight, we were lucky and locked in some good rates through 2012. Several CDs were callable due to having interest rates above 5%. Unfortunately, with the decline of interest rates, these CDs have been or will be called. For now, we will keep the funds from called CDs in cash.


  • Spending: Buy Only What We Need - To note, we are frugal spenders, which doesn't leave much room for cutting in this area. For example, we don't have cable, gym memberships or a cell phone for the adults in the family. (I still don't want a cell phone :-) Our daily expenses have been stable for the past two years. There are only a couple major expenses that we expect in the next couple years - a new roof and a new driveway. These will be big expenses, but we have been planning for them. Our cars should be good for at least another 3 to 5 years.

    At this point, we do not plan to reduce spending. However, we do not plan to increase our spending either.


  • Risk: Be Prudent - The bursting of the tech stock, real estate, and securitized debt bubbles have made me more sensitized to issues of underestimating downside risk. In these three cases, many people thought the they wouldn't lose money because others were consistently making money.

    To me, the issue isn't the level of risk, but the amount funds put at high risk. I like to keep the percent invested in high risk investments at less that 5%, preferably closer to 1-3%. For us, examples high risk would be buying foreclosed real estate, buying stock IPOs, or starting a new business. We would not avoid such investments, but we would want to limit the maximum loss to no more than 5% of our savings.

  • At this time, we only expect to make a few minor adjustments to protect our financial situation. While we are not nervous enough yet to make major changes, I expect there is a reasonable chance that we may need consider more extensive changes in the future, e.g. reversing retirement and going back to full time work. OK, hopefully not that extensive :-)

    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Links to Carnivals From February 25 - 27, 2008

    Here are links to Carnivals from February 25 -27, 2008 in which My Wealth Builder participated:

    Carnival of Family Life

    Carnival of Personal Finance #141

    Festival of Stocks #77

    Carnival of Twenty Something Finances

    Simply Investing Blog Carnival

    Cavalcade of Risk #46

    For some interesting articles from the Blogosphere, check out these Carnivals and give the hosts some recognition for their excellent work.

    This is not financial, family, insurance or investing advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Tuesday, February 26, 2008

    Want To Keep Your Analog TV Working?

    In January, 2008, I wrote that we would be buying an HD TV in 2009. After February 17, 2009, all TV broadcasts will be converted to digital signals, making current analog televisions which are not connected to cable or satellite non-functional. However, a reader commented that there was an alternate, less expensive option. One can buy a digital converter box, which would allow current analog TVs to receive digital (but not HD) over air signals. The information is at the TV Converter Box Coupon Program Website.

    Here are some of the details:

    1. Digital converter boxes will allow current analog TVs to receive digital signals over the air. TVs connected to cable or satellite can already receive digital signals and will not need a converter.


    2. The government will provide requesting households up to two $40 coupons towards the purchase of two converter boxes. I checked with local retailers and the boxes are selling for $59.95. So the net cost would be $20 plus tax.


    3. Circuit City, Best Buy, Radio Shack, and Walmart are a few of the retailers in my area participating in the program.
    For us, the converter option would be less expensive than a new digital TV or cable/satellite service. I've order one coupon and will purchase one converter box once we receive it.

    For more on Ideas You Can Use, check back every Tuesday for a new segment.

    This is not financial or electronics advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Monday, February 25, 2008

    2/25/08 Stock Purchase Update - Trimming The Portfolio

    With the market decline of early 2008, the stock purchase updates have not been as fun to write. However, I am going to remain disciplined and do a weekly update until I sell the positions from the portfolios. Currently, the portfolio is based on a 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) and a January, 2008 stock pick update of Apple (AAPL), Research in Motion (RIMM), Intuitive Surgical (ISRG), Priceline (PCLN), Core Labs (CLB), and Google (GOOG). The total portfolio has a gain of 7.4% due primarily to the strength of Potash and Research in Motion. Unfortunately, AAPL and GOOG continued to decline this week and offset the gains. I also was able to sell three of the stocks that have dropped from the buy list - PCU, BHP and CLB. In addition, I sold RIMM because gain may not be sustainable since the good news (subscriber growth) didn't lead to increased revenues. Here's the current status of the stocks in the portfolio:

    My Wealth Builder 10/15/07 Buy List
    Stock [purchase date]SharesPurchase Price

    Current Price 2/22/08

    Potash (POT) [6/7/07]50

    $71.59

    $157.00

    Southern Copper* (PCU) [11/13/07]40

    $108.24

    sold 2/19/08 @ 109.05

    CNH Global NV** (CNH) [11/13/07]50

    $55.22

    $51.61

    BHP Billiton*** (BHP) [11/27/07]50

    $71.54

    sold 2/19/08 @ $73.98


    *On 1/18/2008, the system gave a sell signal for PCU.
    **On 2/1/2008, the system gave a sell signal for CNH.
    ***On 2/15/2008, the system gave a sell signal for BHP.
    I will try to sell CNH during an upcoming market rally, hopefully above the purchase price.

    My Wealth Builder
    January, 2008 Buy List
    Stock [purchase date]SharesPurchase Price

    Current Price 2/22/08

    Apple (AAPL) [1/17/08]25

    $160.93

    $119.46

    Research in Motion (RIMM) [1/17/08]25

    $88.71

    sold 2/22/08 @ 103.23

    Intuitive Surgical (ISRG) [1/18/08]20

    $261.81

    $291.57

    Priceline (PCLN) [1/18/08]25

    $92.33

    $127.25

    Core Labs* (CLB) [1/25/08]25

    $116.25

    sold 2/19/08 @ $121.67

    Google (GOOG) [1/25/08]20

    $582.66

    $507.80

    Google (GOOG) [2/1/08]10

    $521.27

    $507.80


    *On 2/8/2008, the system gave a sell signal for CLB.


    The market activity appears to stabilized with a short term bottom. As of the close on 2/22/08, the Dow, Nasdaq and S&P 500 indices were respectively down 6.27%, 13.16%, and 7.55% year to date, still off from the lows of the year.

    I continue to believe that the probability of a recession in 2008 is relatively high. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data in early 2008 may cause the bull market to end earlier. For either case, I expect the market to continue to be choppy in 2008. At this time, I plan to sell CNH and continue to hold the balance of the portfolio. However, with the exception of Google, I do not plan to add any more to the amounts that I have already invested in the above tables.

    Full disclosure: I own all the stocks mentioned in this post that are not indicated as sold.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Sunday, February 24, 2008

    From Where My Wealth Builder Ideas Come

    "The way to get good ideas is to get lots of ideas, and throw the bad ones away" ~ Linus Pauling

    My Wealth Builder
    was born on August 13, 2006 at 11:30 AM with a post on Saving Is The Starting Point. I have been writing at least one article daily since December 1, 2006. This is the 623rd article that has been posted. Here's how I get some of the ideas for the articles I write:


  • Personal experience - A large proportion of articles are based on my personal experience - covering a range of topics that include saving, investing, education, working and retirement. I typcially am a student of example and I learn best from others who have had the experience. In return, I share some of my experiences on this blog.


  • Publications - I enjoy reading Yahoo! Finance, the money section of MSN.com, The Wall Street Journal, Business Week and Barron's. For the last three, I subscribe to and read the hard copy version. Personal finance blogs and Carnivals are also a source of potential topics. For this case, the original source will be referenced and have a link.


  • Stories of others - Family, friends, colleagues and readers often share their own personal finance stories. I am careful to never share such a story without their permission. However, often their stories connect me to a personal experience or a general topic, which I feel is appropriate to share.


  • Inspirational connections - Sometimes ideas seem to come out of nowhere. However, I know better:-) These seemingly new ideas are generally a recombination of various concepts to which I had been previously exposed. In my opinion, there isn't much new in personal finance. However, I do believe that the environment and the economic landscape are constantly changing. The writing opportunity is to describe how timeless principles of personal finance can be leveraged in this period of change.
  • Most the time I have about ten ideas for articles in the queue. Of course, I do have periods of writer's block. But then an event durng the day, a comment by a colleague or a plunge in the stock market (which is pretty frequent nowadays) will spark an idea that leads to a future article:-)

    For more on New Beginnings, check back every Sunday for the next segment.

    This is not financial or literary advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Saturday, February 23, 2008

    The Emotional Value Of Asset Diversification

    The stock market has been pretty gut wrenching for us in 2008. The overall returns have been mainly in one direction - negative. While I usually do a quarterly update of our financial situation, I decided to do a mid-quarter analysis this weekend. Not surprisingly, our retirement savings are down this year, by 12.3%.

    When I did an analysis by the main investment component of the accounts (e.g cash and fixed income, stocks and stock options), I noticed there was a significant difference in returns depending on the type of investment. In addition, the order of returns by account flipped between 2007 and 2008 YTD. The analysis is shown in the table below.

    Returns By Year
    Main Component of Account2007 overall2008 YTD
    Cash and Fixed Income

    6.5%

    -0.2%

    Equity

    14.4%

    -8.1%

    Stock Options

    64.9%

    -31.5%

    Total Investments

    18.5%

    -12.3%



    The results in the table were not unexpected. The surprise was that with asset diversification I could usually be happy with at least one segment of my investments, although it may be a different segment each year. Last year, we were very pleased with how well my company's stock options were performing. This year, I am very happy that we have a portion of our savings in cash and fixed income. Although I don't know which one, it is likely I will be pleased with returns of a segment at the end of 2008. Hopefully, that segment will also have a large positive gain :-)

    For more on Reflections and Musings , check back every Saturday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Friday, February 22, 2008

    Three Ways We Maximized Our Retirement Savings

    Looking back over our time working, I think we took some excellent steps to maximize our retirement savings. Here are the top three that we did:


    1. Contributing to a 401K or traditional IRA - I like 401Ks and traditional IRAs because contributions are before taxes. Thus, contributions are partially funded by the government, since our tax liability was reduced. As I've written before, I like the idea of using other people's money to fund our retirement savings.


    2. Taking advantage of an employer match in a 401k - To me, an employer match is like getting free money. If an employer matches 100% up to 3% of one's salary, then it is the equivalent of getting a 100% return on up to 3% of salary. There are not many investments that can guarantee a 100% return.

      My spouse's employer matched up to 2% of her salary. Unfortunately, my employer did not match. However, I still contributed to take advantage of the tax benefits from #1.


    3. Avoiding an early withdrawal - The penalty for early withdrawals is typically 10%, unless it is for a qualifying reason. In addition, taxes may also need to be paid on all or part of the withdrawal. While there may be good reasons for an early withdrawal, 10% is a pretty high penalty to pay for non-qualified expenses.

    Doing the above does not necessary guarantee sufficient retirement savings. However, I think doing these helped us to retire, especially since we retired early.

    For more on Reaping the Rewards, check back every Friday for a new segment.

    This is not financial or retirement advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Thursday, February 21, 2008

    People Receiving Only Social Security Retirement Income May Want To File A Tax Return

    People who have only Social Security retirement income usually do not owe taxes and do not need to file a tax return. In 2007, tax filers with no tax liability and at least $3000 of "qualifying income" may be eligible to receive a tax rebate payment of $300 (single filers) or $600 (joint filers). Social Security benefits reported in Box 5 of the 1099-SSA count as "qualifying income."

    To be eligible for a tax rebate payment in 2008, one must file a 2007 tax return. Therefore, people with over $3000 of Social Security retirement income may want to file a 2007 tax return, even if they have zero tax liability and do not need to file.

    For more information, see this IRS Questions and Answers document.

    For more on Crossing Generations, check back every Thursday for a new segment.

    This is not financial or tax advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Links to Carnivals from February 18 - 21, 2008

    Here are links to select Carnivals from February 18 - 21, 2008:

    Festival of Stocks #76

    Carnival of Personal Finance #140

    Festival of Frugality

    Carnival of Financial Planning

    For some interesting articles from the blogosphere, visit these Carnivals and enjoy the excellent work of the hosts.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Wednesday, February 20, 2008

    Stressful Personal Finance Situations We Like To Avoid

    I prefer that my personal finances be boring and uneventful. No living of the edge for us, when it comes to personal finance. Here are some of the stressful situations of personal finance we like to avoid:

  • Living paycheck to paycheck - According to a Careerbuilder.com survey, over 40% of people live paycheck to paycheck. In this situation, every paycheck is already committed to monthly fixed expenses, e.g. rent or mortgage, utilities, food, clothing and transportation. Typically, there isn't much money left for items such as retirement savings.


  • Under estimating retirement expenses - Most Americans Unprepared for Retirement shares that many people are under estimating the cost of health care during retirement. In addition, many also postpone saving with their employers plans. As a result, they are not saving enough for retirement.


  • Credit card debt - According to an MSN.com article by Liz Pulliam Weston about 45% of households carry credit card debt. They have a median balance of $2,200, with 8.3% of households owing $9,000 or more on their credit cards.

  • For us, avoiding stressful personal finance situations begins with saving and buying only want I need. These two strategies have helped us spend less than we earn and save enough to retire in our forties.

    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    Photo Credit: morgueFile.com, Author Name

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Tuesday, February 19, 2008

    Figuring Out My Tax Rebate

    Making the simple complicated is commonplace; making the complicated simple, awesomely simple, that's creativity. - Charles Mingus

    The quote describes how I feel about the tax rebate. Ever since the rebate was proposed, it hasn't been clear to me how it worked and how much I would receive. The IRS has recently published information on the stimulus payments , which have helped me figure out my situation...I think.

    Here are the key points I found in the information:

    1. The 2007 stimulus payment is really a rebate against 2008 tax liability. The 2007 payments will be based on 2007 tax returns and reconciled in the 2008 return. If a higher rebate is owed based on the 2008 return, then the IRS will send an additional payment. If a lower rebate is calculated based the 2008 return, the IRS will not require a pay back from the tax payer.


    2. To qualify for a 2007 stimulus payment, a taxpayer needs to file a 2007 return, have over $3000 of "qualifying income," and not be eligible to be claimed as a dependent. Qualifying income includes wages, net self employment income, Social Security payments, certain Railroad Retirement benefits, veteran's benefits, and non-taxable combat pay if elected as earned income. To note, interest, dividends and gambling winnings are not qualifying income. If the taxpayer qualifies for a larger rebate based on 2008, they will need to file a 2008 return.

      The rebate begins phasing out for an AGI over $75,000 (single filers) and $150,000 (joint filers) at a rate equal to 5% of the amount over the AGI, e.g. $50 for each $1000.


    3. The amount of the basic payment is the maximum of 2007 net income tax liability or $600 individual filers or $1200 joint filers. As long as the taxpayer had qualifying income over $3000, they will receive a minimum of $300 single and $600 joint. For purpose of the basic tax rebate, net income tax liability excludes the child tax credit, equaling line 57 plus line 52 on the 1040, line 35 plus line 32 on the 1040A, and line 10 on the 1040EZ.


    4. Taxpayers who qualify for the basic payment may receive an extra $300 for each qualifying child under age 17.

    After reading through the documentation, here are my conclusions on calculating our tax rebate:

    1. I need to have over $3000 of qualifying income to get the minimum basic payment of $300 for single filers and $600 for joint filers. In addition, I may get an additional $300 for each child under 17, who is qualified for the child tax credit. I must file a tax return in order to qualify for a rebate, even if I otherwise did not need to file.


    2. If I have over $300 (single filers) or $600 (joint filers) of net tax liability (line 57 plus line 52 on the 1040, line 35 plus line 32 on the 1040A, or line 10 on the 1040EZ), then I will receive either the maximum of my net tax liability or $600 (single filers) or $1200 (joint filers). In addition, I may get an additional $300 for each child under 17, who is qualified for the child tax credit.

      An AGI over $75,000 (single) and $150,000 (joint) will reduce my rebate by 5% of the amount that exceeds the limit.


    3. The final rebate will be the "better" of either the 2007 or 2008 tax return. For example, if I have a new child born in 2008, I may qualify for an additional $300, even though I had already received a rebate in 2007.
    Until I read IRS memos, the two terms that were most unclear to me were "qualifying income" and "net tax liability." The IRS Stimulus Payment FAQ document did help clarify the definitions and I think I have figured out my tentative rebate.

    For more on Ideas You Can Use, check back every Tuesday for a new segment.

    This is not financial or tax advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Monday, February 18, 2008

    2/18/08 Stock Purchase Update - Potash and Priceline Boost Portfolio

    With the market decline of early 2008, the stock purchase updates have not been as fun to write. However, I am going to remain disciplined and do a weekly update until I sell the positions from the portfolios. Currently, the portfolio is based on a 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) and a January, 2008 stock pick update of Apple (AAPL), Research in Motion (RIMM), Intuitive Surgical (ISRG), Priceline (PCLN), Core Labs (CLB), and Google (GOOG). The total portfolio has a gain of 6.5% (up from 1.6% last week) due primarily to a $10.38 rise in Potash and a $22.07 rise in Priceline. Here's the current status of the stocks in the portfolio:


    My Wealth Builder 10/15/07 Buy List
    Stock [purchase date]SharesPurchase Price

    Current Price
    2/15/08

    Potash (POT) [6/7/07]50

    $71.59

    $147.88

    Southern Copper* (PCU) [11/13/07]40

    $108.24

    $101.39

    CNH Global NV** (CNH) [11/13/07]50

    $55.22

    $48.37

    BHP Billiton*** (BHP) [11/27/07]50

    $71.54

    $70.00



    *On 1/18/2008, the system gave a sell signal for PCU.
    **On 2/1/2008, the system gave a sell signal for CNH.
    ***On 2/15/2008, the system gave a sell signal for BHP.
    I will try to sell PCU, CNH and BHP during an upcoming market rally, hopefully above the purchase price.


    My Wealth Builder
    January, 2008 Buy List
    Stock [purchase date]SharesPurchase Price

    Current Price 2/15/08

    Apple (AAPL) [1/17/08]25

    $160.93

    $124.63

    Research in Motion (RIMM) [1/17/08]25

    $88.71

    $95.19

    Intuitive Surgical (ISRG) [1/18/08]20

    $261.81

    $303.27

    Priceline (PCLN) [1/18/08]25

    $92.33

    $123.86

    Core Labs* (CLB) [1/25/08]25

    $116.25

    $118.55

    Google (GOOG) [1/25/08]20

    $582.66

    $529.64

    Google (GOOG) [2/1/08]10

    $521.27

    $529.64



    *On 2/8/2008, the system gave a sell signal for CLB.
    I will try to sell CLB during an upcoming market rally, hopefully above the purchase price.

    The market activity appears to stabilized with a short term bottom. As of the close on 2/15/08, the Dow, Nasdaq and S&P 500 indices were down 6.6%, 12.5%, and 7.8% year to date, still off from the lows of the year.

    I continue to believe that the probability of a recession in 2008 is relatively high. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data in early 2008 may cause the bull market to end earlier. For either case, I expect the market to continue to be choppy in 2008. At this time, I plan to sell PCU, CNH, BHP, and CLB and continue to hold the balance of the portfolio. However, with the exception of Google, I do not plan to add any more to the amounts that I have already invested in the above tables.

    Full disclosure: I own all the stocks mentioned in this post.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Sunday, February 17, 2008

    Asia: The Next Land Of Opportunity?

    Throughout the history, people immigrated to the United States for an opportunity of a better life. Immigrants came "because it's the land of opportunity and upward mobility where achievement is more important than inheritance. Uprooting themselves from the familiarity of family, community, and even language and culture, they are self-selected risk-takers, which is why they tend to be hardworking, self-starting, creative, and smart," as noted in the article Land of Opportunity by Mortimer B. Zuckerman.

    However, it isn't obvious to me that the United States will maintain being the land of opportunity in the 21st century. China has already become an economic powerhouse, with many other Asia economies also growing rapidly. Here is some interesting information about Asia:
    1. In 2006, the U.S. had 1.3 million college graduates. India had 3.1 million. China had 3.3 million.


    2. 100% of India's college graduates speak English.


    3. In 10 years, China is predicted to become the largest English speaking country.

    Already, some people, such as well known investor Jim Rogers, are moving to Asia to be "where the action is." While I did do an assignment in Japan during my career, I am not currently interested in another international move, now that we've retired. I guess I becoming less flexible as I get older:-)

    However, I think permanent relocation outside of the United States may be a normal option for our daughter in the future, especially if America's economic status declines significantly. Although she is only in pre-school, we have already enrolled her in a Chinese language course. We would not want her future opportunities to be limited by geography.

    For more on New Beginnings, check back every Sunday for the next segment.
    Photo Credit: morgueFile.com, Kevin Connors

    This is not financial or career advice. Please consult a professional advisor.
    Copyright © 2008 Achievement Catalyst, LLC

    Saturday, February 16, 2008

    Tax Season Humor: A Simple Tax Return

    “The hardest thing in the world to understand is the income tax.” — Albert Einstein

    Here's a simple solution for the IRS to streamline the income tax code. Anybody will be able to do their own taxes, eliminating the need for tax preparers, tax accountants and tax software. The proposed single page form is shown below :-)


    1040 - Simple

    1. How much did you earn? ______

    2. Other income (interest, dividends, gambling, etc.) ________

    3. Total of 1 + 2 __________ Send this amount to the IRS.

    Rebate to be sent in May.



    Name ________________ SSN______________ Date______________



    For more on Reflections and Musings , check back every Saturday for a new segment.

    This is not financial or tax advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Friday, February 15, 2008

    Simple Pleasures In Retirement

    "Little Things Mean A Lot" by Edith Lindeman and Carl Stutz

    While working, it was easy for me to forget to relax and have fun. It was easier work hard and spend money to have fun, i.e. the work hard, play hard approach. In retirement, I have tried to break away from this syndrome and invest in more relaxation time for myself. Here are some of my favorite "simple pleasures:"

    Hot baths - The last time I routinely took hot baths was in high school when I was nursing sports injuries. Recently, I have been taking occasional hot baths in the evening and enjoying reading a paper. I have come to enjoy my 30 minute hot baths. I sleep better and my sports injuries seem to be healing faster.

    Sleeping later - When I was working, I would wake up at 5:30 AM before my alarm clock buzzed. Since I was regularly awake before 6 AM, even on weekends, I assumed I would continue doing so in retirement. Wrong! I now wake up at 7 to 7:30 and usually when my alarm rings. Occasionally, I have been sleeping until 8 or 9 AM. It's been great to sleep until our alarm sounds.

    Playing with our three year old - Anytime or any place, I can plan with our daughter when she asks. Games, painting, or building, I can do it. Recently, she commented that she missed me because I was doing some part time seasonal work.

    Here are "simple pleasures" I will try in the future:

    Reading books - Although I am not an avid reader, I do enjoy reading for enjoyment. There are several books on my "to read" list that I still need to crack open :-)

    New hobbies - I've always wanted to become competent at enough magic tricks to do an amateur show. While I have become good at several tricks, I need to significantly expand my repertoire in order to do a show.

    It's amazing how much I didn't appreciate these simple activities while I was working.

    For more on Reaping the Rewards, check back every Friday for a new segment.

    This is not financial or retirement advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Thursday, February 14, 2008

    Wii Sports: Appeal and Risk To Older Players

    Since its introduction, the Wii has much broader appeal than just to the young male gamer. This Chicago Tribune article shares that the Wii is attracting older players, even those in retirement homes. The active use of the Wii controller, versus thumb controls, has provided a new outlet for physical activity and participation across generations. The increased appeal has been positive since the Wii is providing physical activity for participants.

    On the other hand, the Wii may be providing too much activity for those not accustomed to a wide range of physical motions. Recently, one of the members of our tennis league dropped out for a season, due to an injury from Wii boxing. Apparently, the intensity of Wii boxing caused a shoulder injury and has prevented him from playing tennis this year.

    The Wall Street Journal acknowledged the potential injury issues in an article A Wii Workout: When Video Games Hurt. There is even a collection of anecdotal incidents posted on this blog, where the majority of injuries I saw resulted from striking low ceilings or each other.

    Overall, the articles recognize the benefits of additional physical activity from playing games on the Wii. Perhaps older players also should take the caution to Bii Careful :-)

    For more on Crossing Generations, check back every Thursday for a new segment.

    This is not financial or health advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Wednesday, February 13, 2008

    Building Wealth: Just Start Doing It

    "Just Do It" ~ Nike advertising campaign

    While some elements of wealth building (e.g. career, investments, choosing an advisor) require careful planning and long term effort, other elements just require one to get started and be committed to make it a habit. Here are some elements which I feel are "just do it" activities.

    1. Save more money. Spending less than one earns and putting away a set percentage of one's salary sounds hard. For me, a good approach is to start saving, no matter how small the amount. Here are the hypothetical results from a six month saving challenge with some tips on getting started.


    2. Stop buying stuff. My strategy is to only buy what I really need. To me, there are two categories of purchases, essential and non-essential. I try to reduce non-essential purchases as much as possible. For reference, I consider cell phones, cable or satellite TV, and newspaper subscriptions as non-essential :-)


    3. Pay cash. There's a reason casinos want players to use chips. Using cash increases the emotional impact of betting money. Similarly, paying cash for one's purchases increases the emotional impact of spending. For example, paying cash for our cars helps me make better choices on both the car purchase and the options.

    None of the actions need to be major changes. For example, one could start by saving $10 a month via direct deposit, give up eating out for lunch one time per week and pay cash for purchases for a month. These are few examples of doable actions we used to begin the process of building wealth.

    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Links to Carnivals from February 11 - 13, 2008

    Here are some links to select Carnivals from February 11-13, 2008:

    Carnival of Family Life

    Carnival of Personal Finance #139

    Festival of Stocks #75

    Tax Carnival #30

    Cavalcade of Risk #45

    For some interesting articles on finance, family and taxes, check out these Carnivals.

    This is not financial, family or tax advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Tuesday, February 12, 2008

    Our Approach For Choosing A Financial Advisor

    As those who have the experience know, it is not an easy task to choose someone to manage a significant part of one's net worth. I thought it would be informative to publish some details on why we have chosen our specific financial advisor. Here are some of the factors we considered, listed in relative order of importance


    1. Investment strategies that are compatible with our principles. Our goal is to preserve wealth with our savings and investments. I would not be comfortable placing sizable amounts on hot sectors or a few stocks. We prefer to match market gains in a bull market and have lower losses during market declines. Basically, we wanted someone who would help maximize our gains without taking risks that would make us feel uncomfortable.


    2. Proven record through several market cycles. It's easy to make money when the market is rising. Successful investing is demonstrated when the market is in a downward trend or trading sideways, much like the current market. The senior member of the advisor team had been in the business since the 1980s. He had seen the downturns of 1987, 1990 and 2001. As a result, his team targets to minimize losses during declines.


    3. Access to a wide range of resources. Our advisor is part of a major financial firm. Thus, we have access to a wide range of resources on retirement, estate , tax and investment management. While our advisor is our primary contact, I feel we can get answers from other experts if needed.


    4. Stick to their strategy with minor adjustments. Our advisor has a portfolio allocation strategy (35% fixed income, 65% equities) which they tweak periodically depending on market conditions. I was impressed that our advisor chose not to over invest in the tech run up of the nineties, even when his clients wanted more exposure.


    5. Outlive us. I wanted advisor team who would be able to manage our investments into our nineties. Most important, I didn't want to have to choose an new advisor in the next 20 to 30 years. While the senior member is older than me, most of the team is younger than us. As a result, we will likely have the same advisor team all of our lives.


    6. Good value. Our benchmark for good value is the typical fee for a managed mutual fund, which I estimated at 1.5%. This metric usually eliminated advisors that invested in mutual funds, since they usually add a 0.5% management fee over the mutual fund fees.

      Our advisor targets for a 1% fee for a 35% bond/65% stock portfolio, where the stocks investments are handled by well known portfolio managers. Since we have given our advisor only the equity portion of our savings, we pay a slightly higher fee of 1.25%.

    Since the financial advisors I considered work with a number of employees and retirees from my company, I asked for references and contacted those that I knew. Finally, after choosing an advisor based on the above criteria and references, we put portion of taxable savings account with the advisor to test if we had made a good decision.

    For more on Ideas You Can Use, check back every Tuesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Monday, February 11, 2008

    2/11/08 Stock Purchase Update - Riding Out The Market Decline

    With the market decline of early 2008, the stock purchase updates have not been as fun to write. However, I am going to remain disciplined and do a weekly update until I sell the positions from the portfolios. Currently, the portfolio is based on a 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) and a January, 2008 stock pick update of Apple (AAPL), Research in Motion (RIMM), Intuitive Surgical (ISRG), Priceline (PCLN), Core Labs (CLB), and Google (GOOG). The total portfolio has a gain of 1.6% due primarily to a 92% gain in Potash. Without Potash, the portfolio would be down 10.9%. Here's the current status of the stocks in the portfolio:


    My Wealth Builder 10/15/07 Buy List
    Stock [purchase date]SharesPurchase Price

    Current Price
    2/08/08

    Potash (POT) [6/7/07]50

    $71.59

    $137.50

    Southern Copper* (PCU) [11/13/07]40

    $108.24

    $95.52

    CNH Global NV** (CNH) [11/13/07]50

    $55.22

    $47.78

    BHP Billiton (BHP) [11/27/07]50

    $71.54

    $65.80



    *On 1/18/2008, the system gave a sell signal for PCU. I will sell PCU during an upcoming market rally, hopefully above the purchase price.
    **On 2/1/2008, the system gave a sell signal for CNH. I will also try to sell CNH during one of the upcoming rallies.


    My Wealth Builder
    January, 2008 Buy List
    Stock [purchase date]SharesPurchase Price

    Current Price 2/08/08

    Apple (AAPL) [1/17/08]25

    $160.93

    $125.48

    Research in Motion (RIMM) [1/17/08]25

    $88.71

    $89.71

    Intuitive Surgical (ISRG) [1/18/08]20

    $261.81

    $300.68

    Priceline (PCLN) [1/18/08]25

    $92.33

    $101.79

    Core Labs (CLB) [1/25/08]25

    $116.25

    $109.56

    Google (GOOG) [1/25/08]20

    $582.66

    $516.69

    Google (GOOG) [2/1/08]10

    $521.27

    $516.69



    The market activity appears to stabilized with a short term bottom. As of the close on 2/8/08, the Dow, Nasdaq and S&P 500 indices were down 4.3%, 4.5%, and 4.5% year to date, rebounding from the lows of the year.

    I continue to believe that the probability of a recession in 2008 is relatively high. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data in early 2008 may cause the bull market to end earlier. For either case, I expect the market to continue to be choppy in 2008. At this time, I will continue to hold this portfolio. However, with the exception of Google, I do not plan to add any more to the amounts that I have already invested in the above tables.

    Full disclosure: I own all the stocks mentioned in this post.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Sunday, February 10, 2008

    Get Ready For The Second Act And More

    To me, one key to success in a business is having more than just one great idea. Success is a great idea, followed by some very good ideas, and then a new great idea. Just one great idea is not good enough. If it is truly a great idea, others won't let one have an advantage for long. Competitor's will dismiss, copy or eventually come up with a better idea. If one isn't ready for such market responses, one's advantage will eventually be lost.

    To note, a great idea can last a long time. Specific examples include Microsoft, with it's PC operating system, and Walmart with its superior lowest cost supply chain system. Both of these business models lasted over 20 years. However, Google and other web competitors may obsolete PC software and Target and Costco are showing quality and variety may have greater appeal than the lowest cost on everyday items.

    Being ready for more than the first act is important for many aspects of life: career, business, personal finance and personal development are just few examples. One solution is to be ready with second (and further) great ideas soon after introducing the first one. Additional great ideas can be created internally, purchased from others, or modeled after existing successes. By having a plan past the first great idea, one can more effectively address competitive responses, whether they come in six months or in 10 years.

    For more on New Beginnings, check back every Sunday for the next segment.

    This is not financial or business advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Saturday, February 09, 2008

    I Want To Owe Taxes

    I know many people prefer to get a large refund when filing a tax return. For some, the tax refund is a great way to force savings or to get a large yearly lump sum to use. The refund can be used for paying bills to paying for a large purchase.

    Personally, I prefer to owe a little bit of tax. Paying a small amount means that I've had full use of my own money for the entire year. Getting a refund means the government has had free use of my money for the previous year. I am happy to write the IRS a check on April 15th each year.

    Of course, it is important not to owe too much. Otherwise, one has to pay penalties and interest. One can avoid the penalty if one paid at least one of the following amounts:
    1. 90% of the tax shown on one's 2007 tax return.


    2. 100% of the tax shown on one's 2006 tax return (110% of that amount if one is not a farmer or fisherman and the adjusted gross income (AGI) shown on that return is more than $150,000, or, if married filing separately for 2007, more than $75,000).
    For our 2007 tax return, I expect that we will owe money for both the Federal and state tax returns. However, since we paid at least the amount in #2, we shouldn't owe any interest or penalties. While it is painful to pay taxes when filing a return, I find comfort in knowing that I had full use of my money through out 2007:-)

    For more on Reflections and Musings, check back every Saturday for a new segment.

    This is not financial or tax advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Friday, February 08, 2008

    Managing Retirement Savings

    Five years ago, we began considering using a financial advisor and started a process to evaluate candidates and identify one for managing our funds in retirement. After a short time, we did find a wealth management group we liked and put 30% of our savings in taxable accounts with them. Several of our friends were surprised I did this, since I enjoyed investing and trading. Here are the reasons we decided to outsource management of our investments:


    1. Successfully managing a large amount of savings would be "work." While I was working, my company's retirement account was 100% invested in company stock. In addition, we kept most of our IRAs in CDs. The remain savings in taxable accounts were split between individual stocks and money markets. This allocation of investments served us well while we were working, since we saved about 20% of our income every year and didn't withdraw from savings. Thus, we were comfortable with my "recreational" investing and the returns on a small part of our savings.

      In retirement, we realized that we would no longer be contributing and that withdrawals would need to be made. It would be important to ensure that the total portfolio was well invested, versus the small portion with which I was actively managing. I also realized that it would take significantly more than the 2-3 hours I spent per week to manage the total portfolio. I didn't want my new full time job to be managing our retirement portfolio :-)


    2. I wanted professionals who were working full time in the field. While I will tend to a small cut myself, I would want a trained, practicing surgeon to repair an injured knee. Similarly, while I am happy to manage small investments myself, I would want a full time financial advisor to manage a large retirement account.

      Of course, just as it is important to find a good surgeon, it is important to find a good financial advisor. That's why we started evaluating advisors before we retired.


    3. Enable myself to enjoy more activities. I do enjoy investing, and I also enjoy sports, family activities, and other entertainment. I didn't want investing to be my major activity in retirement. By paying someone to manage our funds, I free up a lot of time to do the other things I enjoy.
    Some readers may be asking why I don't invest in index mutual funds and save the fees paid to a manager. There are a couple reasons. First, I expect our manager to provide more than just investment management. I also look for him to help in estate planning, education savings planning, and validating future spending plans. In addition, I expect him to stay abreast of market trends, new investment vehicles (e.g. ETFs) and provide options to which I don't typically have access. Overall, for the past four years, I have been happy with the total service of financial advisor, who has kept me invested in the market and freed up some of my time to do other things.

    For more on Reaping the Rewards, check back every Friday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Thursday, February 07, 2008

    Links to Carnivals from February 4 - 5, 2008

    Here are links to select Carnivals from February 4 - 5, 2008:

    Carnival of Family Life

    Carnival of Personal Finance #138

    Carnival of Debt Reduction #125

    74th Festival of Stocks

    Festival of Frugality #111

    Check out these Carnivals for some entertaining and interesting articles from the blogosphere.

    This is not financial, investment or family advice. Please consult a professional advisor.

    Delayed Gratification - A Foundational Life Skill

    I probably think too much about our daughter's future:-) However, being older parents, I realize that we may not be present for much of her adult life. Therefore, I'd like to ensure she develops skills and abilities that will enable her to be successful and happy, especially if we are not there to help.

    One important life skill that I believe she needs is the ability to delay gratification, or being able to wait to obtain something one wants. The ability to delay gratification appears to be a good indicator of potential for life success.

    In the area of personal finance, delayed gratification is an important element of being successful. Saving, not using debt, investing, and spending less that one earns all require the ability to delay gratification. Doing well in school and attending college also require a sense of delayed gratification, since the pay off for the effort happens later in life. Finally, continued education and development for future benefits would also involve the utilization of delayed gratification skills.

    While having the ability itself does not guarantee success, I believe the skill of delayed gratification is a necessary one in many parts of life. Without the skill, one may overly focus on the present and make choices to the detriment of one's future.

    For more on Crossing Generations , check back every Thursday for a new segment.

    Photo Credit: morgueFile.com, Patricia E. Green

    This is not financial or parental advice. Please consult a professional advisor.
    Copyright © 2008 Achievement Catalyst, LLC

    Wednesday, February 06, 2008

    Risk Management Applied To Personal Finance

    With the recent CDO (collateralized debt obligations) crisis, the has been a number of stories about risk management and financial risk management. For some, the concept of using risk management occurs after the issue has happened. However, risk management is best done before the event occurs, in order to prevent significant problems. Here are some of the ways I apply risk management to our personal finances.

    1. Avoid high risk - We tend to avoid investments that tout big gains that are low probability or have potential losses that are high probability. Some examples of low probability big gain investments include penny stocks, put or call options, "guaranteed 20% returns, " or "earn $5000 per week doing _____ from home." These examples also tend to be high probability for losing all or part of one's money.

      We also avoid exotic debt, such as adjusted rate mortgages, which may risk one's home based on the rise of short term interest rates.


    2. Mitigate necessary risk - We try to reduce the impact of stock market declines by putting part of our funds in bonds and CDs. We buy bonds and CDs that have maturities between one and five years to help maintain more stable interest rate returns Finally, within both our stock and fixed income portfolios, we use diversification to improve our return and reduce risk.


    3. Insure against debilitating risk - For low probability, but potentially catastrophic events, we use insurance to protect us against the risk. We used to spend about 3.4% of our pre-retirement income on health, life, disability, property, car and long term care insurance. In retirement, we have dropped life and disability, but will be spending about 4.7% of our retirement income on the other insurance coverages.

    This approach to risk helps maintain steady growth for our overall family wealth. While we won't have phenomenal gains in any one year, we hopefully won't have any catastrophic losses either.

    For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial or risk management advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Tuesday, February 05, 2008

    How Children Can Cause Taxes To Increase Sharply

    Growing children can significantly increase tax liability even though one's income and withholding have not changed. It is important to be aware of how of age of one's children affects tax credits and dependent claims. Otherwise, one could have an unpleasant surprise when doing a tax return. Here are some ages that will affect federal tax liability:

    1. Your child turns 13. From birth until 13, a tax credit of between $600 to $1050 per child (2 children maximum) can be taken for up to $3000 spent for child care, to enable the parents to work, go to school or if a parent is disabled. At 13, a child is no longer eligible for this credit.
    2. Your child turns 17. Currently, taxpayers with low to moderate income can claim up to $1000 tax credit for each child under 17. The tax credit begins phasing in at $11,750 and begins phasing out at $110,000. However, in the year that a child turns 17, they are no longer eligible for the child tax credit. It can be quite a shock to owe $1000 more than the previous year when nothing else has changed.
    3. You child turns 19, earns over $3,400 and is not a full time student. At 19, the child earning over $3,400 can no longer be claimed as a dependent, even if they live full time with the parents. The resulting a loss of one exemption can increase taxes from $340 to $952 if one is in the 10% to 28% tax bracket.
    4. Your child, who is a full time student, turns 24 and earns over $3400. Same results as #2.

    If one's child is near these ages, it can be helpful to assess the impact of losing either a tax credit or exemption. This can help one take action, such as increasing one's withholding early in the year, to minimize (or eliminate) the amount owed the IRS on April 15.

    For more on Ideas You Can Use , check back every Tuesdayfor a new segment.

    This is not financial or tax advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Monday, February 04, 2008

    Super Bowl Indicator Says "Buy"

    For the superstitious, the New York Giants Super Bowl win on Sunday indicates that the stock market will end higher in 2008. According to Snopes.com, the Super Bowl Indicator has been correct 80% of the time from 1967 to 2007, making it one of the better predictors of yearly stock market performance:-)


    For more on Strategies and Plans , check back every Monday for a new segment.

    Photo Credit: morgueFile.com, Kristine Kisky

    This is not financial advice. Please consult a professional advisor.
    Copyright © 2008 Achievement Catalyst, LLC

    2/4/08 Stock Purchase Update - Summary of Old and New Purchases

    In my 1/28/08 stock purchase update, I wrote about how the 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) was performing. In that article, the portfolio had rebounded slightly to a gain of $1,479 for a 10.4% return, due mainly to a jump in POT. As of 2/1/08, the portfolio had rebounded further to a gain of $2,980 for a 20.9% return, due mainly to a jump in POT. The new purchases of PCU, CNH and BHP are down $550 for a 5.1 % loss. Both PCU and CNH continue to have large losses of 9.1% and 9.4% respectively. BHP has returned to a gain this week. Here's the current status of these stocks that I own in the portfolio:

    My Wealth Builder 10/15/07 Buy List
    Stock [purchase date]SharesPurchase Price

    Current Price
    2/01/08

    Potash (POT) [6/7/07]50

    $71.59

    $142.00

    Southern Copper* (PCU) [11/13/07]40

    $108.24

    $98.30

    CNH Global NV (CNH) [11/13/07]50

    $55.22

    $49.99

    BHP Billiton (BHP) [11/27/07]50

    $71.54

    $73.72


    *On 1/18/2008, the system gave a sell signal for PCU. I will sell PCU during an upcoming market rally, hopefully above the purchase price.

    Separately, I have made purchases from the January, 2008 stock pick update of the three stock analysis systems I use. As of 2/1/08, the new portolio is down $757 for a loss of 2.3%.

    My Wealth Builder
    January, 2008 Purchases
    Stock [purchase date]SharesPurchase Price

    Current Price 2/01/08

    Apple (AAPL) [1/17/08]25

    $160.93

    $133.75

    Research in Motion (RIMM) [1/17/08]25

    $88.71

    $92.24

    Intuitive Surgical (ISRG) [1/18/08]20

    $261.81

    $305.61

    Priceline (PCLN) [1/18/08]25

    $92.33

    $107.90

    Core Labs (CLB) [1/25/08]25

    $116.25

    $114.54

    Google (GOOG) [1/25/08]20

    $582.66

    $515.90

    Google (GOOG) [2/1/08]10

    $521.27

    $515.90


    The market activity appears to stabilized with a short term bottom. As of the close on 2/1/08, the Dow, Nasdaq and S&P 500 indices were down 4.4%, 4.9%, and 3.8% year to date, recovering about half the losses in 2008.

    I continue to believe that the probability of a recession in 2008 is relatively high. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data in early 2008 may cause the bull market to end earlier. For either case, I expect the market to continue to be choppy in 2008. At this time, I will continue to hold this portfolio. However, with the exception of Google, I do not plan to add any more to the amounts that I have already invested in the above tables.

    Full disclosure: I own all the stocks mentioned in this post.

    For more on Strategies and Plans, check back every Monday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Sunday, February 03, 2008

    Retired Life - A Four Month Report Card

    It's been exactly four months since retiring in my forties in October, 2007. Here's my personal perspective on how we are doing:

    Work Life Balance - A. This part has been great. Going from a 60+ hour work week in a global organization with moderate travel to flexible part time hours with no travel has been great. The change has give me much more time to spend with family and friends. I take my daughter pre-school, am home to play with her and we have more family events, like the zoo and children's museum.

    In addition, my health is getting better. For the past year, I've been nursing a couple of sports injuries that never seemed to heal. After investing some effort in yoga, hot baths and padding, the injury feels about 80% healed in a couple months.

    Doing My Dream Job - B+. I've started work on developing my dream jobs. The legal infrastructure work has been completed and the business plans are being developed. The business will operate as a Limited Liability Company, or LLC. I've begun to identify and contact potential business partnerships, and they have expressed initial interest. In addition, I am gaining some insights through part time work that has a few elements of one dream job. I'm targeting for a formal startup in March, 2008.

    Financial Status - B. With the stock market decline of January, 2000, the grade could have been a C+. However, it is still a B because we have set aside four years of spending needs in cash, money markets, short term CDs and short term bonds. Also, the part time work and the "dream job" will provide a small financial cushion if the downturn continues.

    Setting Future Goals - C. I'm a little behind in this area, since I haven't read The Three Boxes of Life by Richard Bolles as I had intended. Although life can never been fully planned, I would like to have a proposed road map for the third phase, i.e. retirement. In the meantime, we are planning a number of activities, e.g. reconnecting with college friends, seeing our extended family more often and doing mulitple activities with our three year old, throughout 2008. At this point, I don't feel too bad about a C yet. It's only been three months since I've retired and I am enjoying the break.

    Overall, I am still very happy that I retired from full time work. Retired life is less stressful, more fun and definitely busy, with much more quality time with my family.

    For more on New Beginnings, check back Sunday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Links to Carnivals from January 28 - 29, 2008

    Here are select links to Carnivals from January 28 -29, 2008:

    Carnival of Personal Finance #137

    Festival of Stocks #73

    Tax Carnival #29

    Carnival of Twenty Something Finances - 14th Edition

    Festival of Frugality #110

    Please recognize the excellent work by the hosts and check out their carnivals for some great articles.

    This is not financial or investment advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Saturday, February 02, 2008

    Microsoft and Yahoo! Merger - The Beginning Of The End

    While some analysts are touting the potential Microsoft Yahoo merger as a formidable competitor, especially to Google, I believe the Microsoft's bid is an indication of future declines for both these companies. Both companies are losing market share and dominance to web competitors. I can't see how merging two companies who do not compete effectively with Google can create a new company that will surpass Google. To me it's a case of throwing good money after bad. Here are my reasons:


    1. Combining weaker competitors doesn't help. The automobile industry provides some excellent analogy. Recall Ford's acquisitions of Jaguar, Land Rover and Volvo. If you don't, it's no surprise. Ford bought Jaguar for $2.5 billion in 1989 and Rover for $2.7 billion in 2000 and is selling both to Tata Motors for $2 billion. Ford has not done much better, losing $12.6 billion in 2006 and losing $2 billion in 2007. DaimlerChrysler suffered a similar fate. Eventually, 80% of the $36 billion investment in Chrysler was spun off for $7.4 billion to Cerebus Capital Management LP. During this time, Toyota continued their ascendance to becoming the number one car company in global sales.

      Similarly, both Microsoft and Yahoo! were once leaders in their respectively business segments. While still very strong, they are continue to lose market share, dominance and show few signs of disruptive innovations for the future. I don't believe a merger will change this situation.


    2. Integration will be very challenging. From what I have read, Microsoft and Yahoo! are two very different companies. Having participated in a major corporate integration (and several corporate restructurings,) I can attest that they aren't easy. Culture, processes, and geographical locations make it difficult to seamlessly integrate.


    3. The competitive advantage isn't crystal clear. To me , Microsoft's advantage in personal computer software combined with Yahoo!'s second place search and contextual advertising doesn't seem to be a winning combination. It isn't clear to me how Microsoft's expertise can help Yahoo! compete better with Google's search and advertising or vice versa.

      A clear competitive advantage could occur when one market leader acquires another market leader. For example, a merger of Amazon and Apple would create a company with innovation leadership in both supply chain and design. To me, such a combination would create a new formidable competitor.

    Microsoft's bid for Yahoo! has convinced me that Google won't have much meaningful competition in the short term, either from each company separately or once the acquisition is completed. Based on this news, I feel confident in buying more shares of Google, especially at current prices. On Friday, February 1, 2008, I bought another 10 shares at $521. I will look to buy additional shares next week.

    Full disclosure: I own shares of Google and have no positions in Microsoft or Yahoo!

    For more on Reflections and Musings, check back every Saturday for a new segment.

    This is not financial or advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC

    Friday, February 01, 2008

    Saver's Credit Helps With Retirement Savings

    The Saver's Credit was enacted in 2001, made permanent in 2006 and provides a non-refundable tax credit for contributions to retirement accounts such as IRAs and 401Ks. If one's adjusted gross income (AGI) is under $52,001 (married filing joint), $39,001 (head of household), or $26001 (single, married filing separate, qualifying widow(er)), then one can qualify for a 50%, 20% or 10% tax credit up to a maximum of $1000.

    Filing Status and AGI limits
    Credit RateMarried Filing Joint (MFJ)Head of HouseholdOther Filing Categories
    50%up to $31,000 Up to $23, 250$15,500
    20%$31,001 to $34,000$23,251 to $25,500$15,501 to $17,000
    10%$34,001 to $52,000$25,501 to $39,000$17,001 to $26,000
    0%over $52,000over $39,000over $26,000



    Since the limits are based on AGI, adjustments to income (e.g. tradition IRA contributions, student loan interest, HSA contributions, etc.) may be used to reduce AGI to within the limits. In addition, this is one of the few tax credits ( another being the child tax credit) which applies to the married filing separate (MFS) status. Thus, it may be beneficial to file MFS when the combined AGI is over $52,000 and one spouse has an AGI of less than $26,000.

    To me, this a great way to use the government's money to save for retirement. If one qualifies, the government will pay up to $2000 for MFJ filing and $1000 for other filing categories. The credit would be in addition to other tax savings from deferring income when contributing to traditional IRAs and 401Ks.

    For more on Crossing Generations, check back every Friday for a new segment.

    This is not financial or tax advice. Please consult a professional advisor.

    Copyright © 2008 Achievement Catalyst, LLC