A Roadmap for 2010

By Ken Mahoney

2009 was a year during which you needed more than a roadmap to navigate the financial markets. It was a year of volatility and amplifying investors’ mistakes. It was a year when a lot of ‘scared’ money moved out of Wall Street. It was a year with the lowest levels. And if investors did not enter the markets they missed one of the biggest rallies ever - the Dow Jones bounced more than 60% from the low to the high in 2009.

Some thought I ‘nailed it’ for 2008. In a December 2007 article about predictions for 2008, I was quoted as saying I was concerned about subprime lending and that perhaps that the bond market would do better than stocks and that perhaps stocks would be down. I did not know that the ‘wheels’ would come off the economy and that we would experience one of the greatest crashes in a generation. I had simply reviewed pre- 2008 statistics and averages – as the market was up for the fifth year. In an early 2009 blog posting I spoke about the need to re-balance. It was my opinion that although the stock market was ailing perhaps it was time to rebalance and add to stock holdings. These were not predictions for 2008 or 2009 but rather examples of how money management and rebalancing can work to your benefit.

As we begin our journey into 2010 I would like to share some thoughts, not predictions, about where we are headed financially. Following are some factors you should keep on your radar screen.

The Federal Reserve Bank

Ben Bernanke, Chairman of the Federal Reserve Bank, was named Time magazine’s Person of the Year for 2009. According to Time, he saved us from going into a depression. He cut rates and was creative in implementing programs to help the ailing mortgage and real estate markets. I am not so sure he will receive the same distinction for 2010. Sooner or later Mr. Bernanke will have to take away the proverbial ‘punch bowl’ and raise rates. During the last meeting of the Federal Reserve Bank in December 2009, the Fed stated that they will keep rates low for an extended period of time. What the Fed means by “an extended period” and when that extended period will end will play a key



role in the future of our economy. This does not mean you need to ‘duck and cover’ should the Fed raise rates but you will need to monitor the situation. The question for most market observers will be how fast and how much the Fed will raise rates?

Washington, DC and Taxes

As always, we have to watch what Washington does. Government policies shape our economy, impacting the various sectors differently and affecting the stock market. Many investors will be watching how the Government will raise taxes. Will higher taxes be a burden to businesses and/or consumers and/or investors? How will capital gains be treated? Will owning stocks be advantageous or disadvantageous? Until we can get a better handle on what Washington plans to do there are several avenues for investors to consider - converting your IRA to a Roth IRA, reviewing your portfolio positions in relation to a potential increase in the long term capital gains tax rate and maintaining a balanced portfolio.

Smaller is Bigger?

As consumers we are looking for smaller and smaller electronics - we started with desktops then downsized to laptops and now our cellular phones, often just larger than a credit card, meet many of our computing and communicating needs. In the works are smaller and more efficient mobile chips as well as enhanced software programs. With newer and more efficient technological developments emerging almost every day worth looking at are the companies behind them.

Oil

Oil prices play a significant role for consumers in the U.S. Oil prices indicate levels of worldwide demand. Most consumers, needless to say, would like to see gasoline at two dollars a gallon and crude at forty dollars a barrel but what would that say about the state of our economy? And the world economy? Oil gives us a lot of clues as to what is going on in the world. As the world economy emerges slowly from recession, developing countries will increase the demand for oil with almost every expert predicting significantly higher prices. While that in turn will benefit the producers it will certainly negatively impact the consumers.

China

Can you imagine China as the world’s engine? There are some reports that put China’s gross domestic product growth at 8 percent. The Chinese consumer is seeking more and driving global demand. In November of 2009 our trade deficit shrank as our exports increased - and where are so many of these exports going? To China. So, keep in an eye out for China in the coming year.

In 2010 we will have some tailwinds in our favor as the global economy rebounds but we will continue to face the headwinds with consumer leveraging and high unemployment. There are of course many factors to consider but the factors noted above are certainly worth tracking as you and/or your financial advisor plan for the future.



I wish you and your family peace and prosperity in 2010.

I welcome the opportunity to discuss this email with you in greater detail. Please feel free to call me at 845/371-0101 or email me at kmahoney@auroracapital.com.

And don’t forget to visit my blog for additional articles and comments – http://kenmahoney.blogspot.com




Mr. Mahoney is a registered broker with Aurora Capital, LLC, an SEC registered broker-dealer and member FINRA and SIPC. Aurora Capital Brokerage, trades cleared by Legent Clearing.

Disclaimer: This email and its contents is neither a solicitation nor an offer to buy/sell any insurance and/or financial product(s). Information about insurance and/or financial product(s) and/or investment products provided herein may not be suitable for all individuals and/or investors. Moreover, the information contained herein has been obtained from sources believed to be reliable; its accuracy and completeness cannot be guaranteed. Individuals and/or investors are advised to contact their appropriate professional for all personal planning, including but not limited to healthcare planning, retirement and estate planning, tax planning and/or corporate planning.

To Roth or not to Roth? by Ken Mahoney

The number of Google searches for information about Roth IRA conversions has increased dramatically recently. In fact, search data reveals that the number of people searching for the phrase “Roth IRA conversions” more than tripled between January and November 2009.1

This surge in interest about Roth IRA conversions is hardly surprising considering that starting in 2010, all taxpayers, regardless of income, are eligible to convert tax-deferred retirement assets to a Roth IRA. Prior to the change, the law prevented taxpayers with household incomes above $100,000 from converting assets to a Roth IRA.
If you are among the nearly 50% of Americans who believe their own taxes are going to increase, you may be interested in the possibility of a tax-free income that a Roth IRA conversion can bring.

A Roth IRA is a retirement savings vehicle that differs from tax-deferred retirement accounts such as traditional IRAs and most employer-sponsored retirement plans. With a Roth IRA, you make contributions with after-tax dollars, but qualified withdrawals after age 59½ are tax-free. Furthermore, a Roth IRA does not require minimum annual withdrawals after age 70½. It should be noted that there are still annual income limits in place for determining eligibility to contribute to a Roth IRA. The income limitation was eliminated only for conversions.

To qualify for the tax-free and penalty-free withdrawal of earnings and amounts converted to a Roth IRA, the account must be in place for at least five tax years and the distribution must take place after age 59½ or as a result of death, disability, or a first-time home purchase ($10,000 lifetime maximum).

Taxing Choices
When you convert tax-deferred assets from a traditional IRA and/or a former employer’s 401(k), 403(b), or 457 plan, the amount you convert in a given year needs to be declared as income on your tax return. If you are younger than age 59½ and pay the taxes from money that is not in the tax-deferred account (the recommended option), you can avoid a 10% federal income tax penalty.

Fortunately, you have options when it comes to paying the taxes on a Roth IRA conversion. In 2010 only, you can convert eligible retirement assets to a Roth IRA without having to claim the amount as income on your 2010 tax return. If you elect to do this, you must declare half of the converted amount as income in 2011 and the other half as income in 2012. In this way, you wouldn’t have to start paying taxes on a 2010 Roth IRA conversion until April 15, 2012.

However, by deferring the taxes on a 2010 conversion, the converted amount will be taxed at the income tax rates in effect in 2011 and 2012. As it stands, tax rates are scheduled to increase in 2011. Unless Congress acts to avert the tax rate increase, the taxes on Roth IRA conversions will be higher after 2010.
Also consider whether converting a sizable amount to a Roth IRA could move you into a higher tax bracket. If so, you may decide to convert smaller amounts over a period of several years.

If you have IRAs into which you have made both deductible and nondeductible contributions, the tax implications of a Roth IRA conversion can become complicated. It may be prudent to consult a tax professional.

You Can Change Your Mind Later

If you change your mind after utilizing a Roth IRA conversion, you can elect a “do over,” called a recharacterization. The assets would be converted back to tax-deferred status and you can file an amended tax return seeking a refund of the income taxes you paid on the conversion. In order to qualify, you must recharacterize the funds before October 15 of the year following the year in which you converted.

Roth IRA conversions offer the potential for tax-free income in retirement for taxpayers at all income levels. If you want more information about converting to a Roth IRA, call today. It’s critical to review your individual situation before making a decision about moving important assets.

1) InvestmentNews, November 16, 2009
2) Rasmussen Reports, September 3, 2009

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2009 Emerald.

From the website www.thesmartinvestors.com

Disclaimer: This communication and its contents is neither a solicitation nor an offer to buy/sell any insurance and/or financial product(s). Information about insurance and/or financial product(s) and/or investment products provided herein may not be suitable for all individuals and/or investors. Moreover, the information contained herein has been obtained from sources believed to be reliable; its accuracy and completeness cannot be guaranteed. Individuals and/or investors are advised to contact their appropriate professional for all personal planning, including but not limited to healthcare planning, retirement and estate planning, tax planning and/or corporate planning

A LAWYER’S PERSPECTIVE ON SHORT SALES
by Michael A. Starvaggi, Esq.

For better or worse, short sales will be a common part of the real estate transactional landscape for the foreseeable future. It makes sense, then, to understand why they exist and how, exactly, they work. A short sale occurs when the value of a property is less than outstanding balance on the mortgage or mortgages affecting it and the mortgage holder(s) agree to accept less than the amount owed to them in order to facilitate the sale of the property.

Why would a mortgage lender agree to take less than the outstanding balance? For one reason, very often the homeowner is in default or foreclosure when the short sale takes place. Therefore, the lender’s only choices are to pursue the foreclosure or strike a deal to allow the property to be sold. Foreclosure is costly and time consuming, and the auction sale price often does not cover the mortgage debt anyway. Furthermore, if the lender cannot sell the property at auction, it ends up as another REO (“real estate owned” by the bank) and the lender must incur the cost of maintaining the property which is not a profitable enterprise. So it makes sense that the mortgage holder would consider reducing its payoff so that the property can be sold privately.

Should you find yourself involved in a short sale transaction, there are several things you must keep a lookout for. Here are the main ones.
First, remember that there are other choices for a distressed homeowner who wishes to remain in their home. Mortgage modification programs abound these days. Many are backed by the government (such as the HAMP programs) and others are private. So if the homeowner is considering a short sale only because they cannot afford their payment, be sure all other avenues are explored first.

If the sort sale does proceed, it must be understood that listing a property, or even entering into a contract with a buyer for a short sale, does not prevent the lender from foreclosing on the premises. Often, the lender or its counsel will give the homeowner ample opportunity to sell the home if there is a contract in place, but they are generally not obligated to do so. Thus, even if the lender knows that that a private sale is pending, they can proceed to sell the property at auction. In some cases, federally insured lenders must forego foreclosure proceedings while a short sale is pending, but this is not a universal rule and should not be relied upon. Always insist upon written confirmation that the lender has temporarily stayed its foreclosure proceedings and be keep active communication with the lender’s attorneys.

In addition, it must be clear to all parties that it is strictly in the lender’s sole discretion whether or not to allow a short sale. Thus, any contract of sale must reflect the contingency that the sale is subject to the approval of the mortgage holder or holders. Buyers should be aware that the process may take much longer than a traditional transaction and should be guided accordingly when locking rates and making arrangements to sell any real estate of their own.

Even if the short sale is approved, the lender may pursue the homeowner for the difference between the amount they accept at closing and the balance owed to them. This difference is called a “deficiency” and a judgment can be entered against the homeowner for this amount. Thus it is crucial for the seller to negotiate this point with their lender in advance and to have a written agreement as to whether or not the lender will pursue a deficiency judgment.

And the pitfalls don’t end there. If the lender does not pursue the deficiency amount, that amount may be taxable income to the seller. Currently there are laws that relieve taxpayers from claiming such amounts as income, but these laws may expire or may not apply to a particular transaction short sale. It is important to discuss this potentiality with a tax professional.

There are also numerous rules about the structure of the short sale transaction that must be borne in mind.

First, the seller will not be entitled to keep any money from the short sale and there must be no “side deals” or other arrangements with the buyer that attempt to circumvent this rule. If you sense that there is something amiss, do not proceed.
Second, the short sale must be an “arms length transaction.” This means the buyer and seller may not be friends, family members or any other parties who have had a previous relationship.

Third, it is advisable to steer clear of sale and leaseback arrangements. Any transaction wherein the buyer is agreeing to rent the premises back to the seller and eventually reconvey the premises is suspect and should be avoided, as it may run afoul of New York’s Home Equity Theft Prevention Act. For more information, see my article at http://www.starlawpc.com/index.php?page=blog_detail&blog_id=2.

Fourth, the short sale must be an as-is transaction, as the lender will not allow repair credits or the like to be part of the deal.

Although there is no uniformity to the short sale process, there are guidelines being promulgated that will provide similar treatment of for the short sale of all Fannie Mae/Freddie Mac loans as well as for all FHA/HUD loans.

As always, it is essential to seek legal counsel if you are considering the sale or purchase of real estate. Be sure to discuss all of these points with your legal advisor.

Michael A. Starvaggi is an attorney admitted to practice in New York and New Jersey. To contact Mr. Starvaggi, please call (845) 589-9456, write to mstarvaggi@starlawpc.com or visit www.starlawpc.com.
This article is intended for informational purposes only. Please discuss your particular situation with an attorney of your choosing.

The article is written by a professional and is intedened for general use. Always contact your advisors before making a decision. The Smart Investor, or Ken Mahoney does not agree or disagree with the above article. The article is provided as a 'starting point' for your research.

Can You Retire With The Equity In Your Home?

By Ken Mahoney

The collapse of the housing market has provided a painful lesson for those who were counting on their homes as a source of retirement income. Falling home prices illustrate the potential difficulties of relying on the sale of a home to pay for retirement.

Since 1987, U.S. housing prices have risen 4.1% annually.1 During that same period, the Consumer Price Index rose 3% annually.2 Thus, when you subtract inflation, home prices produced a real return of only 1.1%. Additionally, you need to factor in property taxes, maintenance, and insurance, which can all serve to erode the long-term growth of a home’s value.

Movin’ on Out

The prospect of cashing in your home’s equity to pay for retirement may be enticing when home prices are rising. However, when prices are falling, it’s much easier to see why this is an unreliable strategy.

First, home values are subject to cyclical trends, so there’s no guarantee that your home will be worth what you were planning on when you are ready to retire. There is also the possibility that, depending on market conditions, you may have trouble selling it.

Next, you’ll still need somewhere to live. If you buy a smaller place, you will need to pay transaction and relocation costs, which could consume money you thought would help pay for retirement.

Throw It in Reverse

One way for older homeowners to capitalize on the equity in their homes is a reverse mortgage. But despite their recent surge in popularity (the government insured 11,660 reverse mortgages in April 2009, the highest monthly total since the program began in 1990), reverse mortgages may not be an appropriate strategy for some people.3

Homeowners aged 62 and older can use a reverse mortgage to borrow against the value of their homes, and there’s no need to pay back the loan as long as they continue to live there. The loan is paid off by the sale of the home after they move out or after both spouses pass away. The amount a homeowner might be able to receive from a reverse mortgage will depend on the loan’s interest rate, the owner’s age, and the home’s equity value. Reverse mortgage loan fees are typically high and can reach up to 10% of a home’s value over the life of the loan.4

The collapse of the housing market has caused many people to take a second look at the way they view their homes.


1) The Wall Street Journal, May 27, 2009
2) Thomson Reuters, 2009 (CPI for the period 12/31/1986 to 3/31/2009)
3–4) The Wall Street Journal, June 10, 2009



Mr. Mahoney is a registered broker with Aurora Capital, LLC, an SEC registered broker-dealer and member FINRA and SIPC.

Disclaimer: This communication and its contents is neither a solicitation nor an offer to buy/sell any insurance and/or financial product(s). Information about insurance and/or financial product(s) and/or investment products provided herein may not be suitable for all individuals and/or investors. Moreover, the information contained herein has been obtained from sources believed to be reliable; its accuracy and completeness cannot be guaranteed. Individuals and/or investors are advised to contact their appropriate professional for all personal planning, including but not limited to healthcare planning, retirement and estate planning, tax planning and/or corporate planning

The Dollar and Gold and Inflation
By Ken Mahoney

So, why is the dollar weaker? We hear and read about it all the time.

A simple answer is interest rates. Unlike the interest rates in other countries, interest rates in the U.S. are at historic lows. Lower interest rates can be a boon to the economy by easing the purchase of big ticket items like your home and lower interest rates allow institutions to borrow dollars which they can sell to invest in higher rate currencies. This practice called “currency carry trade” in which investors borrow low-yielding currencies and lend high-yielding currencies weakens the currency that is borrowed because investors sell the borrowed sum and convert it to other currencies. The downside to lower interest rates is the increased chance of higher inflation and the reduced value of the dollar which then results in reduced purchasing power for the consumer. The Federal Reserve, however, has stated several times that it will keep interest rates low for the foreseeable future.

And what about gold? I'm glad you asked. In the past several weeks gold has gone as high as $1,070 an ounce and may be trending higher. Some experts and investors see the increase in gold as a result of the struggling dollar and a concern over inflation. On the other hand, it is difficult to see inflation as an issue with near 10% unemployment and 70% capacity utilization (a full 10% below its long term average). Remember, a simple definition of inflation is “too much money chasing too few goods”. With 10% unemployment, you get the picture. But when the dollar falls, investors buy gold as a hedge against the depreciation of the paper currency. As interest rates are so low, it’s a low cost hedge.

Further, the bond market does not appear too concerned with inflation. Wouldn't we see rates much higher in the bond market if inflation were a real threat? TIPS (Treasury Inflation Protected Securities) are telling us that inflation will be under 2% for the next 10 years.

It has been clear for months now that Asia, particularly China, is leading the economic recovery around the world. The Chinese government has implemented massive government stimulus and the result may be near double digit growth rates. China insists on pegging its currency to the dollar to protect their export market. It might actually make sense for the U.S. and China to organize an 'informal' G-2 to see if there couldn’t be a common denominator that would work for both countries. Currently, there seems to be some friction between the two countries, as they both want to export their way back to property.

While The University of Michigan consumer sentiment index fell last week – it showed higher gas prices and unemployment continuing to weigh heavily on consumers’ minds – other economic data points show recent improvement. For example, the earnings we have seen have been better than expected mostly because companies have cut costs (unfortunately, most of the cost cutting has been in the form of layoffs).

And so, we continue to have this push/pull dynamic with the economy, investor and consumer confidence, and the dollar.

I welcome the opportunity to discuss this email with you in greater detail. Please feel free to call me at 845/371-0101 or email me at kmahoney@auroracapital.com

And don’t forget to visit my blog for additional articles and comments - http://kenmahoney.blogspot.com/

Mr. Mahoney is a registered broker with Aurora Capital, LLC, an SEC registered broker-dealer and member FINRA and SIPC. Aurora Capital Brokerage, trades cleared by Legent Clearing.

Disclaimer: This email and its contents is neither a solicitation nor an offer to buy/sell any insurance and/or financial product(s). Information about insurance and/or financial product(s) and/or investment products provided herein may not be suitable for all individuals and/or investors. Moreover, the information contained herein has been obtained from sources believed to be reliable; its accuracy and completeness cannot be guaranteed. Individuals and/or investors are advised to contact their appropriate professional for all personal planning, including but not limited to healthcare planning, retirement and estate planning, tax planning and/or corporate planning.

Get Ready for Earnings Season by Ken Mahoney

In the next couple of weeks, companies will be reporting earnings that ended Sept 30 We will find out from corporate America how revenues and profits were for the third quarter. The stock market has ‘run up’ and has had the best quarter in over 10 years. The question will be if companies will be able to show better profits to match the markets anticipation of better times ahead.

Why Companies Try to Shape Perceptions of Quarterly Results
Regardless of whether publicly traded corporations meet expectations, beat the street, or disappoint investors, the government requires them to report their quarterly earnings to shareholders and regulatory agencies.
Earnings season is the hectic period during which corporations release their quarterly earnings to the public. For most companies, this begins shortly after the last month of each quarter; as a result, these reports can profoundly influence the financial markets each October, January, April, and July.
In addition to their regulatory filings, many companies announce their earnings results through press releases, conference calls, and the Internet, rather than allowing stock analysts alone to share—and shape—the information. These quarterly reports typically include unaudited financial statements, a discussion of business conditions during the quarter, and some guidance about the company’s expectations for the near future.

Here is a look at how and why companies attempt to exert some influence over these announcements.

Control
Leaving analysts to search through quarterly financial statements and publish their findings and impressions might not result in a message the company is comfortable with. Although analysts typically have already weighed in with their forecasts of the company’s earnings, the company can help shape public and analyst perceptions by announcing its own earnings results, often emphasizing positive aspects of the report while downplaying the negatives.

Timing
Quarterly report due dates are usually set by the company’s fiscal calendar. A company can employ strategic timing by pre-announcing earnings results on a day of its choosing. When the news is good, the company may seek the maximum exposure. If it knows the earnings results are going to disappoint, the company may strive to bury the information by releasing the report when fewer people are watching for it or are distracted by other news. Otherwise, pre-announcement can help the firm put negative results in the past and move forward with corrective actions.

Publicity
There are thousands of publicly traded companies, so many of them will not capture the attention of the media or the general public. A surprising earnings announcement can help a company draw attention and gain valuable publicity.
Earnings can provide a key to understanding the performance of an individual company and the behavior of the stock market in general. However, it’s critical to be aware of some of the techniques companies use that could potentially influence public perceptions of their earnings results.

Is there a Disconnect between Wall Street and Main Street?

By Ken Mahoney

October 2009

While most of us are concerned about the high unemployment rate – currently running around 9.7%, the poor housing market and reduced consumer spending the stock market has shown significant gains. Just since the spring of this year the market has rallied 30 percent or better. So why do we see these gains on Wall Street despite the concerns of Main Street?

Often with the market we see these extremes. We see it like a rubber band stretching and contracting. Earlier this year, we saw the rubber band being stretched on the downside - the fundamentals were poor and the market fell off sharply. Now, we're seeing the other side. Both trailing and forward P/E ratios are at some of the highest levels to date. During the past six months the market has performed well in large part because of a sense of optimism with regard to both national and global economies. The financial markets appear to be doing well, leading many, including Federal Reserve Bank chairman Ben Bernanke, to declare the recession is over.

Governments around the world have provided funding to help stabilize failing or potentially failing financial institutions and large corporations and as a result we are seeing the improved positions of these financial institutions and corporations. At the same time experts state the U.S. government is operating at a 10% deficit. Added to mix is the devaluation of the U.S. dollar – since the early 1970’s the value of the U.S. dollar has decreased 25%. But is the upswing in the market that we are seeing real and long term? What Wall Street is considering profit may in fact just be the bail out funds. Unfortunately, fixes are generally temporary and the failure of certain industries – the airline industry for example as well as small businesses – could be next.

And yet, despite the concerns of Main Street, we do see Wall Street performing well and we see small investors, not just the large institutional investors, with the opportunity to take advantage of these optimistic market conditions.

I welcome the opportunity to discuss Wall Street versus Main Street with you in greater detail. Please feel free to call me at 845/371-0101 or email me at kmahoney@auroracapital.com

And don’t forget to visit my blog for additional articles and comments - http://kenmahoney.blogspot.com/

Everything you wanted to know about Health Care, but were afraid to ask, by Ken Mahoney

Mahoney Asset Management

Your health will drive your retirement decisions and options. The older you get, the more likely it becomes that health care will be a major and recurring concern. You need to be very careful when choosing and using health care providers--as well as other people who can make life and death decisions for you, when you can’t. You’ll want to consider long-term care insurance, Medicare Part B, Medicare Supplemental and Medicare Part D. You may also profit from understanding the various Medicaid tricks, traps, and troubles which have bankrupted many a family when one member needed nursing home care.

What you need to know about health insurance

With the health care costs continuing to rise, it is important to understand that health insurance is not really an option for most individuals—more like a necessity. While you are working, most employees obtain a health plan from their employer, but once you hit retirement the employer paid premiums, low co-payments, and cheap out-of-pocket expenses for you may get thrown out their window. Unless your retirement with your employers covers your health insurance after retirement (which most do not) then you need to consider what options of health care coverage are available to you. And choosing the best health insurance policy and coverage takes time to research before you can make a decision on which is the right plan for you and your needs.

Health plan coverage

There are many health plans to choose from and these plans also have many features and exclusions. The older you get, the harder it can be to get health insurance coverage. So keep in mind that the sooner you can establish one after retirement and the healthier you are when you get one, the better off you will be where the costs, terms, and conditions of the policy are concerned.

Types of coverage
There are five main areas of coverage you need to be concerned with when shopping for a health insurance plan--major medical coverage, choice of health care providers, lifetime maximum benefits, deductibles and co-payments, and guaranteed renewals.

Major medical coverage is your primary concern because it is the most expensive part of health care that can drain your wallet if you have a major accident or are diagnosed with a major illness. This type of coverage includes hospital stays, visits to the doctor, X-rays, and laboratory work.

The next type of coverage you need to be concerned with is your ability to choose the doctors and specialists you want. While being able to choose any doctor you want should not be the deciding factor for you to choose a health plan, you should be aware of what your patient rights are with the policy. A plan that allows you to choose any doctor may be very expensive—making it cost prohibitive for you to have. a contestant. mafia and townspeople are chosen at random.

The most common and least expensive of health plans are Health Maintenance Organizations (HMO) plans and Preferred Provider Organizations (PPO) plans. Both HMOs and PPOs help to keep the cost of health insurance, co-payments, and out-of-pocket expenses down.

While there are differences between HMO and PPO plans, these plans have more similarities than differences. The main difference between the two plans occurs when the doctor you wan to see is not on the preferred provider list. If you have an HMO, it may not cover the cost of services from the doctor. A PPO may still pay the majority of the expenses, and then you are responsible for paying the rest.

The third item you want to be ware of when shopping for a health plan is the lifetime maximum benefits. This is the total amount the insurance will pay over the life of the policy. Ideally, you may want to choose a plan that has a maximum lifetime benefit of $5 million or does not have a maximum limit at all—just in case you have a scenario where you come down with a major disease or have a horrible accident.

Fourth, you need to consider the deductibles and co-payments involved with the policy. These two items have a direct affect on the premium of the policy, so the higher the amount of the deductible and the higher the amount of the co-payments, the lower the monthly premium payments. The best way to keep your health insurance premiums affordable for you is to choose a plan with the highest deductible and co-payments you can afford.

Finally, you may want to seek a plan that has a guaranteed renewal feature—especially as you get older. This feature allows your policy to continue to renew, unless you cancel it, regardless of your health condition and without having to administer to a physical exam. Again, as we age, our bodies are more susceptible to illness, disease, and complications. We need a policy that sticks by us no matter how healthy we are as we age. The guaranteed renewal feature extends our protection at a time when we probably need it the most.

Visit us at www.thesmartinvestors.com

Now What? book sold on Amazon

How to maximize your retirement savings if you are a late starter by ken Mahoney
www.thesmartinvestors.com

Are you closer to retirement than you would like to be without a retirement account in place? Have you been freaking out while reading this book, trying to figure out how in the world to get started saving for retirement at this late date? No worries--getting a late start on retirement savings is better than never getting started at all. Even though time is not on your side, there are a few things you can start doing now to maximize your savings for retirement.

Start now
You have delayed enough, so whatever you do, do not procrastinate any longer. Even if you only a have a few years left until retirement, take for granted the time you have and use it to your advantage. So whether you have 2 years or 20 years left, it is important to start planning and saving for retirement as soon as you can. Don’t worry about how much you can save either. Whether you can afford to save $25 per month or $250 per month, saving it now is better in the long-run than waiting until later to do something about your retirement.

Be conservative
If you are a late starter, it doesn’t mean you should go into saving and investing like gangbusters. Being aggressive and taking a lot of risk can do your retirement savings and investments more harm than good. Be wise and approach investing your money conservatively. It is important to grow and increase the value of your retirement account, but it is just as important to protect the principal you invest in the first place.

Get help
Try not to play the hero either. Do-it-yourself retirement savings hasn’t been your forte up until now if you waited to the last minute to start, so you should consider getting some professional help and advice. Everybody needs a little help sometime and your time may be now. Consider working with a Certified Financial Planner or Financial Advisor, who will help you put your goals on paper and create a realistic plan to help you carry it out through your retirement years. Financial planners can help you to turn your plans into actions—actions that help you achieve your retirement goals.

Take time into consideration
With your retirement savings plan in place, you should invest for the highest possible return for the time you have left until retirement. Obviously, the more time you have until retirement, the more risk you can take with your investments. The less time you have until retirement, the less risk you can take with your investments. Many high return investments seem like a good idea but these investments are usually volatile. If you take too much risk, you put your principal in danger.

So while a late start is better than no start at all, it is important to take the steps necessary to preserve your principal. Take the time to consider your investment opportunities before launching into any type of retirement savings plan and try to get some professional help to increase your odds of achieving your goal. Do not wait any longer than now to start some kind of a retirement plan and fund. Leverage what you have today to create your future.

August 17, 2009


School supplies on a budget

Karen Croke
kcroke1@lohud.com

The rules of back-to-school shopping have changed. This year, it's buy only what you need, check for sales and coupons before you hit the stores, and, like Linda Fraylick of Pleasantville, consider alternative sources for your supplies.

Fraylick has two kids in high school, and their age, she says, helps, because older kids can make do with the bare minimum. "It's so nice not to have that list of things that they must have for each class," she says. "I definitely make the kids reuse anything we have in the house."

When she does shop, it's "Target or wherever they're having a sale, even ShopRite. If I have to, I go to Staples for items my kids have to have that I can't find anywhere else."

And whether that's colored markers for kindergarten, a graphing calculator for high school or a laptop for college, it's just one more thing to budget for.

"I am definitely cutting back," says Katonah's Stacey Cohen, the mother of two girls.

And so are a lot of other parents. Here are six ways to save when and where you can.

1. Needs versus wants: Your daughter wants new skinny jeans, but she needs a backpack. She wants a cute Pylones flash drive, but she really needs a calculator. What to do?

Make a list. The first thing you have to do is to figure out what you actually need. Chances are kids in elementary and middle school will already have a teacher-generated supply list, and those things are essentials.

(Although, honestly, how many glue sticks can one kid really need? Check out savings tip No. 2)

Stick to the list. No matter how much your child complains, cross those essentials off your list before venturing into the "wants" territory. Then consider extra costs that will crop up in the course of the school year, such as field trips, sports equipment, drama club dues, and yearbooks.

"If there's money left in the budget, have your child prioritize their 'wants' and let them get one or two on the list," says North Salem's Ken Mahoney, a financial planner, who has two school-aged boys.

2. Shop at home: Before you buy anything, look over your list and figure out what you already have. You'd be surprised. Last year, Wendy Wechler of Pearl River bought new supplies for all three of her sons - twins age 8, and an 11-year-old middle schooler.

This year, her closet yielded unused floppy binders, two packages of looseleaf paper, graphing paper and two entire boxes of glue sticks (see savings tip No. 1 above) - all items from last year's list. "I guess all those essentials weren't that essential," she laughs.

Even some of the things your kids did use are bound to be in good enough condition to re-use this year, such as rulers, protractors and that trusty Larousse Spanish-English dictionary.

"I definitely am taking stock of what supplies I have in-house," says Cohen, whose daughters are 12 and 15. "In previous years, I would end up buying all the items on the girls' school list without regard of what supplies we already had."

3. Incredible bulk: You do it with paper towels, water, even cleaning supplies, so why not school supplies??Take advantage of bulk discounts on pens, pencils, paper, and you'll have a ready supply to dispense as the year progresses.

4. Buy now and you will not save later: Whether it's that pair of must-have shoes, or a trendy lunch box, it's best to hold off buying some items until after school starts. Why??Once your kids arrive at school and discover everyone else has a different trendy lunch box, they are going to pester you relentlessly to trade in theirs for another model. And that's more money spent.

You can avoid this by planning out a purchase schedule. Determine what you need now, and what you can wait to buy later. Back-to-school shopping is a summerlong process at the Mahoney house. "We don't go out and do it all in one weekend," says Ken Mahoney.

Instead, his wife, Trish, shops all summer long, often going back to stores to see what's on sale.

"There is no big crescendo of shopping,"?he says. "We're out and about, and we make the best of it. It really does help us save a lot of money."

Another way the Mahoneys save: they buy clothes with school spirit. "Our school sells T-shirts and sweats as fundraisers, and ... we buy a lot. It's a win-win."

5. Think outside the pencil box: Consider new other sources for your back-to-school needs. At Futterman's Stationery in Larchmont, owner Minu Shah says the attraction of her small shop is the personal service.

"Customers come in and hand us their school list and get it filled in a half hour," says Shah, who has owned Futterman's with her husband for 23 years.

"It's a small store," she says, "but I?have everything." Shah stocks with the local school-supply lists in mind, and if she sells out of something, no worries.

"If we don't have it, we get if for you in a couple of days," she says.

And shop around. Linda Fraylick goes to ShopRite for basics, and that's good advice because it turns out, if you're not looking for a specific brand or item, supermarkets can be a quick source for pencils, pens and notebook paper, and often have better prices.

6. Shop end-of-summer sales: So it's not the latest style, but end-of-summer sales are great for stocking up on T-shirts, underwear, shorts and even jeans. ?And take advantage of buyer incentives, says Cohen. "There are currently a lot of promotions that I'm paying more attention to." For instance, Staples was offering a $10 card for every $50 you spend. And at Futterman's, most items are 10 percent off the list price.

A Financial Blueprint
by Ken Mahoney

When builders build a house, they start with an architect’s plan--a blueprint prepared by a trained professional. Then, as the project progresses, and as job conditions require changes to the initial design, sometimes the architect is brought back in but, often, the builder makes the necessary adjustments.

The same is true for financial plans, which I believe should be professionally prepared by an advisor who has the necessary experience and tools, then regularly reviewed and, if necessary, modified. Small adjustments can be made on the fly, but major adjustments probably deserve a consultation. Too often, once prepared, financial plans are treated as the “holy grail,” to be put away in a drawer, never again to see the light of day.

I’ve had new clients come into my office with antique financial plans, sometimes decades old that have never been updated to reflect changes in such critical areas as current assets, rates of return, life changes, inflation, and tax rates.

I remind my clients that we’ve established a good starting point, not an irrevocable program, and that, like a golf caddy, not only can I point out the financial water and sand traps, I can help you avoid them.


Perhaps picking a financial advisor doesn’t require the same level of intimate awareness that goes into selecting a life partner, but it does deserve the same care that should go into choosing an auto mechanic, doctor, lawyer, or tax preparer.

Like architects (and doctors and lawyers) financial planners often specialize in a particular area – retirement or estate planning, for example. It is essential to take some time to consider your financial goals and to keep in mind that as you grow older, as your circumstances change, as the market changes, your financial goals will change. Once you have an idea of your goals it is easier to narrow your search for a financial planner and develop a financial blueprint.

The financial planner and the blueprint should compliment your goals. The plan should allow for flexibility in the construction of your financial structure. And the planner should understand not only your goals but you. A good financial planner will understand your risk tolerance and your social preferences (perhaps you want to invest only in eco-friendly companies).

And a good financial planner will want to visit the blueprint from time to time. “Remodeling” is almost always essential to the continuity of a given structure. Taking a look at your financial blueprint from time to time to see where and whether or not improvements are necessary is fundamental to achieving your goals.

Give your financial planner a call and take a look at your financial blueprint today!

This email and its contents is neither a solicitation nor an offer to buy/sell any financial product(s). Information about financial product(s) provided herein may not be suitable for all investors. Moreover, the information contained herein has been obtained from sources believed to be reliable; its accuracy and completeness cannot be guaranteed.

As a Small Business owner, does a SEP make sense?
By Ken Mahoney

A SEP is a Simplified Employee Pension retirement plan for self-employed individuals and small businesses. A SEP allows a self-employed person to contribute towards retirement or allows a small business owner to contribute towards employee retirement plans.

Eligible participants include:
• A self-employed person
• Employee of a small business who has reached the age of 21
• A self-employed person who has worked for you at least 3 of the last 5 years
• An employee of a small business who has worked for you at least 3 of the last 5 years
• A self-employed person who has received at least $450 in compensation for the year
• An employee of a small business who has received at least $450.00 in compensation for the year

Contribution maximums
Just like there are maximum contribution limitations set for IRAs, there are contribution maximums for SEPs also. Self-employed individuals or employees of a small business who are covered by a SEP can contribute 25% of their net self-employment earnings or $45,000, whichever of the two figures is lower.

Advantages of a SEP
There are several advantages for having a SEP retirement plan, which include:
• Investment earnings grow tax-deferred until distribution
• Easy to set up and operate
• You are not locked into making contributions every year
• Sole proprietors, partnerships, C and S corporations, and LLCs can establish a SEP
• Administrative costs are low

Many employers offer matching contributions to employee retirement plans. If your employer does this, try to contribute whatever the employer is willing to match—even if it is only a percentage of your contribution and not a dollar for dollar match. Essentially, this is free money to you and can significantly impact how much money you have at the time of retirement.

For example, Zoe Zoerson contributes $1,000 per year into her retirement account. Her employer matches her contributions dollar for dollar, so her employer also contributes $1,000 per year to her retirement account. Zoe is able to deduct her contribution amount from her taxes, not having to pay tax on it. Furthermore, Zoe’s $1,000 contribution and her employer’s $1,000 are invested in her account and grow as time goes by. Zoe does not have to pay income tax on the interest, dividends, capital gains, or the appreciation of her retirement account investments until she begins to withdraw the money when she turns 70½.

Matching contributions are common for 401k, 403b, and 457 plans. Sometimes the employer is only willing to make a partial match to your contributions, but you should still take advantage of this opportunity. Even if the employer contributes 50 cents for every dollar you contribute, up to the first 6 percent of your salary, it is worth it. This is free money that will compound and grow. Einstein said, “The most powerful force in the universe is compound interest.”

How to help your 401k beat volatility by Ken Mahoney

While there is no surefire formula for protecting the investments in your 401(k), there are some things you can do to help your 401(k) survive when the market is on a rollercoaster cycle.

First, keep a close eye on how the current investments in your 401(k) are performing. By paying attention to what is happening in your portfolio, you can research, diversify, and re-balance your investments to create growth - even in a volatile market.

When the market is down, as we have witnessed recently, it is an opportune time to take advantage of rebalancing and diversifying your portfolio. Rebalancing is a way of changing the allocations of the funds in your portfolio to meet your original goals. For example, if your portfolio was fifty percent stocks and fifty percent bonds but the stock market was very volatile you might rebalance your portfolio to be eighty percent bonds and twenty percent stocks. Not only will you want to consider the allocation of these types of investments you will also want to consider the allocation with in a type of investment. How well are growth versus value stocks, large cap versus midcap versus small cap stocks allocated in your portfolio? To rebalance, you will need to sell enough of the investments that are above your original goal and buy enough of the investments that are below your original goal.

While it is important to look at the investments in your portfolio, it is also important to review the investment options available. Research the track record of each investment and decide which one(s) fit your risk tolerance and investment style. Visit www.stockcharts.com to view historical stock market charts that plot the progress of the stock market for the last few decades. Overall, those who invest in the stock market see long-term growth, but that doesn’t mean you don’t have to pay attention to what is going on with your investments.

Of course all of this may have you confused if you have a 401(k) administrator who manages your account. The administrator is a fiduciary that is responsible for watching and adjusting the investment options offered to you and other 401(k) holders. You, however, can choose from the investment options offered to create your own portfolio. This is why it is important for you to pay attention to how your investments are performing, so you can make changes and adjustments when necessary.
And remember to continue to contribute to your 401(k). Because you plan to use these monies in your retirement remember each contributed dollar reduces your taxable income. And try to ensure that your contributions are in line with your investment goals.

Last but not least seek out the assistance of your plan’s administrator, your personal financial advisor or the website for your plan. Their knowledge and your own research will help you keep a handle on protecting your portfolio during both stable and unstable times.

July 2009

Ken Mahoney’s Q&A with Jim Schier, CFA Portfolio Manager, RydexSGI Mid Cap Value Fund

Ken: Why do you like Mid Cap Value versus other asset classes?

Jim: Value stocks are low expectation stocks that offer better downside risk protection. Mid-caps are generally representative of companies that are large enough to have some scale and competitive advantage yet small enough to have above average growth opportunities.

Ken: What are some opportunities that you are looking at?

Jim: While we do not comment on companies that we are currently researching or working a ticket for, recent additions have been select electric utilities that are priced at a discount to peers and have above average growth via investments in higher return Federal Energy Regulatory Commission (FERC) regulated interstate transmission projects that tie wind farms to an interstate grid. We've also

Ken: How do you pick stocks for the portfolio?

Jim: The ideal stock is priced at a discount to the market and lower than usual versus its peers or has a history of being inexpensively priced for transitory and correctable reasons. The company also would have sufficient competitive stature to have strategic attraction and staying power in their industry. The company would have the ability to earn higher return on capital in the future.

Ken: Is there an area that you are over weighing or under weighing? And why?

Jim: Historically, we have had difficulty finding companies that appear to offer the ability to earn higher return on capital in financial and consumer discretionary. Therefore, we are underweight in those sectors.

Investors should consider the investment objectives, risks, and charges and expenses of the mutual funds available under the RydexSGI Funds carefully before investing. You may obtain a prospectus that contains this and other information about the mutual funds by calling 800.820.0888. You should read the prospectus carefully before investing. Investing in mutual funds involves risk and there is no guarantee of investment results.

The opinions expressed are those of Jim Schier, not those of RydexSGI or its affiliates. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or strategy.

Investments in small and/or mid-sized company securities may present additional risks such as less predictable earnings, higher volatility and less liquidity than larger, more established companies.

Rydex Distributors, Inc. distributes the Rydex funds, which are managed by Rydex Investments, and Security Distributors, Inc. distributes the Security funds, which are managed by Security Global Investors. Rydex Investments, Security Global Investors, Rydex Distributors, Inc., and Security Distributors, Inc. are subsidiaries of Security Benefit Corporation (Security Benefit). Security Global Investors (Security Global Investors, LLC and Security Investors, LLC) and Rydex Investments (PADCO Advisors, Inc. and PADCO Advisors II, Inc.) make up the investment advisory arm of Security Benefit.

The funds are distributed by Rydex Distributors, Inc. (RDI). Security Global InvestorsSM is the investment advisory arm of Security Benefit Corporation (Security Benefit). Security Global Investors consists of Security Global Investors, LLC, Security Investors, LLC and Rydex Investments. Rydex Investments is the primary business name for PADCO Advisors, Inc. and PADCO Advisors II, Inc. SGI and RDI are both affiliates and are subsidiaries of Security Benefit.

This newsletter and its contents is neither a solicitation nor an offer to buy/sell any financial product(s). Information about financial product(s) provided herein may not be suitable for all investors. Moreover, the information contained herein has been obtained from sources believed to be reliable; its accuracy and completeness cannot be guaranteed.

Which baby boomer investor are you? By Ken Mahoneyhttp://www.thesmartinvestors.com/

There is dissention in the ranks of your own generation. Obviously, not everyone is the same. So, what one baby boomer has in mind may vary greatly from another. It does seem though that boomers fall into one of five categories: empowered, wealth-builders, leisure lizards, anxious idealists, and those who feel stretched and stressed.

Empowered: These boomers are ready to take on retirement. No matter how they plan to spend their time, they are ready to make their choices, cutting back where they need to stretch their dollars, and they have a positive outlook on everything working out one way or the other.

Wealth-builders: This group of boomers is still looking to grow their wealth. Investing-whether it be financial investments or real estate-in their future to create more of an income stream is their main focus.

Leisure lizards: Leisure is the name of their game. What they define as leisure may vary greatly-reading, playing golf, or volunteering-but these boomers are looking to slow the pace on money earning activities and ramp up on fulfilling activities.

Anxious idealists: Ahhhh….the ultimate optimists. This group is suffering anxiety over the possibility of a dismal financial future, but knows somehow, someway everything will work out for the good. Their nerves are shot, but their heart is open to what the future may bring-and they think it's a prize winner.Stretched and stressed: On the other side, you have the ultimate pessimists. Their money is stretched to the breaking point and their stress levels are high. They are living day-by-day and know that their money may expire long before they do.Which baby boomer are you? Depending on how you answer, you'll find hints, tips and tricks on how to make it through your retirement years scattered throughout the book. You may even find suggestions that you never thought of before. Be open-minded. Open your mind and your heart to new outlooks on life. You never know what you may come across.IMPORTANT CONSUMER INFORMATION:

(1) This web site has been prepared solely for informational purposes. It is not an offer to buy or sell any security; nor is it a solicitation of an offer to buy or sell any security.This site and the opinions and information therein are based on sources which we believe to be dependable, but we can not guarantee the accuracy of such information.
(2) Representatives of a broker-dealer or investment adviser may only conduct business in a state if the representatives and the broker-dealer or investment adviser they represent: (a) satisfy the qualification requirements of, and are approved to do business by, the state; or (b) are excluded or exempted from the state's licenser requirements.
(3) An investor may obtain information concerning a broker-dealer, an investment advisor, or a representative of a broker-dealer or an investment advisor, including their licenser status and disciplinary history, by contacting the investor's state securities law administrator.
SECURITIES: ARE NOT FDIC-INSURED/ARE NOT BANK-GUARANTEED/MAY LOSE VALUEThis information is intended for use only by residents of CA, CT, DC, FL,, MA, MD, MN, NC, NJ, NY, OH, PA, and VA. Securities-related services may not be provided to individuals residing in any state not listed above. The financial calculator results shown represent analysis and estimates based on the assumptions you have provided, but they do not reflect all relevant elements of your personal situation. The actual effects of your financial decisions may vary significantly from these estimates--so these estimates should not be regarded as predictions, advice, or recommendations. Mahoney Asset Management does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences

Money Maturity = Financial Nirvana
By Ken Mahoney
www.thesmartinvestors.com

Many of us (even some in the field of finance) grow up thinking of money as this mysterious entity that has only to do with numbers and formulas. Some of us are even convinced that if we have enough money, we are guaranteed happiness for the rest of our lives. Others have no concept of money.

The concept of “money maturity” is a relatively new one that is meant to describe how “mature” one acts psychologically and spiritually in relation to money. The phrase has been popularized by George Kinder, a financial planner and Buddhist teacher, in his book, The Seven Stages of Money Maturity: Understanding the Spirit and Value of Money in Your Life. According to his philosophy, someone who is “immature” monetarily may spend his entire paycheck as soon as he gets it or may pinch every penny, thinking that he will go bankrupt if he spends as much as one dollar on something that is not a bare essential. Many of these detrimental practices are often a result of one’s upbringing.

In contrast, someone who is “mature” has achieved balance on both sides of the coin. He knows when it is time to save, and when he can let loose and spend some of the money he has earned. And he can even give some of it away on his own good nature without fear. According to Kinder, there are seven psychological stages of “money maturity” through which one must progress before he can be fully enlightened in a financial sense.

The first two stages are “innocence”, which is knowing nothing about money; and “pain,” the heartbreaking realization that one must work in order to earn money, which yanks one out of the “innocence” stage. These are what Kinder deems the “immature stages,” as people in both stages exhibit a myriad of behaviors that are counterproductive to their financial well-being.

However, there is hope. From there, the first stage of maturity is “knowledge,” where one learns how to save properly and is introduced to the basic concepts of investing, such as stocks, bonds, and mutual funds. The theory here is that by investing money, one helps to set a concrete goal for his/her savings so that the “angst” they have over it is lessened somewhat.

Stage Four is that of “understanding.” This stage involves recognizing how one’s emotions play a major role when it comes to all things money-related. The principle behind this stage is that when one recognizes his/her emotional connection to money, they will not allow these emotions to overtake them when making decisions related to their financial well-being, as even the most savvy of us are prone to do.
From understanding is said to stem “vigor.” This is one develops the energy to apply newfound understanding of one’s emotions in reevaluating financial goals and taking the steps to reach them.

The sixth step, “vision,” involves the application of “vigor.” Here, one uses the knowledge gained in the previous steps to use their financial savvy to help others, perhaps by starting a business intended to provide a useful service to the community at large. The final step, “aloha”, is when one uses that same savvy to help others, but for altruistic purposes. Examples may include founding a non-profit organization.

While we are not attempting to plug Kinder’s book, we do believe that this concept we have described carries a great deal of truth and merit. Many people spend countless hours worrying about money when they have a great deal of it. Conversely, many spend frivolously past the point where their expenses outweigh their net income. By taking a few minutes to learn about “money maturity,” we believe that anybody can outgrow those behaviors that may be plaguing their financial well-being.

Social Security: The Retirement Program We Love to Hate by Ken Mahoney www.thesmartinvestors.com

While it’s not perfect, Social Security can play an important role in funding your retirement. The longer you wait to begin collecting, the larger each monthly check will be. But the sooner you start, the more checks you’ll get.

Which is best for you? To decide, you need to consider such factors as whether you’ll continue working and earning past retirement age. If so, Uncle Sam will give with his right hand, and take some back with his left!

An imponderable to ponder is your state of health. In general, the break-even point … when you would have collected more by waiting until your full retirement age … comes at about age 78. If you live longer than 78 years and you collect more by waiting. On the other hand, if you live less than that, you would have been better off collecting earlier!

If you haven’t already received it, contact the Social Security Administration (800-772-1213 or www.ssa.gov) to request your “Personal Earnings and Benefit Estimate Statement.” Fill it out, return it, and in about a month you’ll get an estimate of your future benefits.



The Real Social Security

If you think about it, the idea of retirement has only existed since the mid to late 19th century. Before this time, you worked until you became too old, too ill, or you died. If you were the breadwinner for the family, those who depended on you moved in with other family members for support or ended up living in poverty. Then about 80 or 90 years ago, during the Great Depression, Social Security was created. It paid the primary worker a retirement benefit in a lump sum when they reached the age of 65. In 1940, however, the lump sum payment turned into monthly benefit checks.

While many may think of Social Security as a replacement of their working wages, this was never intended to be the case. The purpose of Social Security is to supplement savings to live in comfort for the rest of your days. At that time quality of life was much lower and life expectancy was much shorter, so this thought may not have been way off base. Now, however, things are different.

Our quality of life has gotten much better and few expect to carry out this lifestyle through our retirement years. The quality life we have attained comes with a relatively expensive price tag. And now you have to decide how you are going to pay for it.

For example, John Collins is an average 65-year-old who is planning to retire and fund his only source of retirement is his monthly Social Security benefit check. His current annual salary is $40,000 and he is taking full retirement when he reaches 65½.

The Social Security Administration website has a calculator on its website for calculating monthly benefits. Using the calculator located at www.ssa.gov/planners/calculators.htm, John’s estimated monthly benefit is approximately $1,101 per month, which is approximately 1/3 or ¼ of the salary John is brining home now.

Here is an estimate of John’s expenses. Unlike some, John has completely paid off his mortgage and does not currently have any credit card balances.
Car payment.....................250.00Power/Gas Utility..............100.00Telephone...........................40.00Insurance (home/auto) .....150.00Cable/water.........................50.00Food/Groceries..................300.00Gasoline...........................50.00

His total monthly expenses are $940, which means John has $161 left over each month for any other expenses that may come up, like health insurance. John can apply for Medicare, but this can cost him up $200 per month, which means he is out of money.
This is just one example of a fictional character. You can use the Social Security Administration calculator to approximate your own monthly benefit checks.

But using this example, you can easily see how Social Security alone may not be enough to cover everything during retirement. John, for example, will not be able to live on his Social Security check alone. While there may be some ways John can cut his expenses, more than likely, he will have to find another source of income in order to live out his retirement years in some kind of comfort

Green Shoots and Weeds: Both Are Now Growing In the Economic Garden

By Ken Mahoney

www.thesmartinvestors.com

In the past several months, a number of economists have been writing about “green shoots” (signs of any growth) in our economy. There have been indicators that the economy, while still contracting, is contracting at a slower rate.

Since World War II, recessions in this country have generally been mild and referred to as “garden variety”. The current recession does not appear to be of the garden variety type – it may be deeper and longer than anything we have seen in the last 70 years.

There has been a market rebound of sorts, or “green shoots”, but we are still faced with the unwanted “weeds” that have infiltrated the housing, commercial real estate and rising unemployment sectors. Many economists believe that unemployment will rise above 10% and when we do recover that it may be a jobless recovery.

Also among the “weeds” of concern is rising inflation. While inflation is always a threat, the current environment is one of deflation or falling prices. It is difficult to see inflation with the decline of earnings and the rise of unemployment. The risk of inflation should always be monitored but presently it does not appear to be a threat.

On the other hand and despite the economic uncertainty we are experiencing there is, as with every investment environment, always opportunity. One should consider researching the municipal bond market. Municipal bonds are issued by states, cities, and counties, to raise capital for public work projects and are generally exempt from federal and state taxes. As tax rates continue to climb to pay for government-sponsored projects, municipal bonds may be more in demand.

Also, during past market cycles, “smaller” companies (small cap) tend to outperform “larger” companies (large cap). Smaller companies tend to have more flexibility, can change quicker, tend to have lower debt ratios and are more adept at taking advantage of market opportunities than their larger counterparts.

We will have to continue to watch the relationship between government and business. The administration has been aggressive with policy, from TARP to TARF. It appears, at times, to be friendly but also over-reaching. Some of the uncertainty in May was a result of several of the banks’ efforts to return TARP money only to have been rebuffed.

A number of the government’s efforts will take awhile to filter through the economy. The Fed's decisions tend to move though the economy quicker than fiscal stimulus, so perhaps in the second half of 2009 we will continue to see more “green sprouts” take hold and fewer weeds.

SWINE FLU UPDATE: ROCKLAND COUNT STILL AT ZERO by Ken Mahoney

A half-dozen new cases of swine flu have brought the New York State total to more than 210. State health officials say 167 of those are in New York City. Several new cases are reported in Westchester County this week, bringing the number there to twelve. As yet, there are no confirmed cases of the H1N1 virus in Rockland,

ENGEL PLEDGES MORE HELP IN FIGHT TO STOP ROCKLAND OVER-FLIGHTS by Ken Mahoney

Congressman Elliott Engel has pledged his continued support for efforts to block the Federal Aviation Administration’s air-space redesign plan. That plan would re-route hundreds of flights daily over Rockland and other suburban counties in Connecticut and Pennsylvania. Engel says he’s petitioned Transportation Secretary Ray Lahood – and even President Obama – to stall the plan. Rockland made its case at a federal court hearing on Monday. The court is expected to rule on the plan by the end of the year.

Bold Moves Can Be Exciting, But Often FruitlessBy Ken Mahoney

Take a long-term approachEver been on a crash diet? Even if you lost the weight, you probably put it back on afterwards, right? As in all worthwhile changes in life, your financial well-being will come about through long-term planning and by taking lots of little steps on a consistent basis over time. Bold moves are exciting, but often fruitless in the end. It’s never too late to learn new behaviorsEven people who lay out careful financial plans encounter new factors – like changing tax laws – that force them to revisit their plans.

Take a step back and consider the state of your finances today. Do you have a balance between cash, growth investments, and savings? Do you know what your needs will be a year from now? Ten years? Will you be prepared? Are your estate planning documents available, should your family ever need them? Past mistakes can be rectified and future mistakes can be avoided. No matter how jumpy the market is, you can be secure and relaxed. You just have to teach yourself to be that way.

Start todayThere’s never a better time than the present to get your financial house in order. Make it a belated New Year’s resolution. Whether your financial health is tip-top or you’ve been under the weather, it’s never too late to make improvements. Once you have financial well-being, you’ll never want to be without it

When to rebalance and baseball analogy by Ken Mahoney

The general rule of thumb is that you should rebalance your asset allocation when your assets drift 5% or more away from your original allocation plan. A portfolio that is too heavily weighted in one area can be dangerous because the economy moves in cycles, which means your stock holdings could end up plunging so deeply that moving your portfolio back to its original allotment might take years, or might never happen.

Example: Tim Middleton, in his MSN article Spring Training for Your Portfolio in February 2007, compares portfolio rebalancing to bunting in baseball. By re-balancing you may not knock the ball out of the park, but by making small adjustments you’ll gradually move your assets toward home plate, and eventually you’ll score that big winning run.

Re-balancing helps take the emotion out of investing also. Instead of following the herd and selling when others are selling, or buying when everyone else is buying, you can become a contrarian—a maverick investor.

That is, you can zig while the market zags and vice versa. So often, when the market or an industry is doing poorly, there are panic sell offs by those with “weak stomachs.” This is the time when “long-term” investors, like Warren Buffet, step in and buy up the bargains.

While re-balancing is not a guarantee against loss, it:
Ensures that you’ll be buying low and selling high
Reduces volatility in your portfolio
Gives you a sense of consistency
Offers a process in which emotion and guesswork are eliminated

Asset Allocation, (Re-) Balancing and Your Retirement by Ken Mahoney

Because baby boomers are living longer than the generations before them, the United States Labor Department recommends that baby boomers plan for a 30-years worth of income to cover their expenses during retirement. This helps boomers to ensure that they don’t run out of money before they die. Your financial affairs are not going to organize and plan themselves, which means you need to be proactive in planning for your retirement.

And getting your financial future in focus requires taking steps to understand the state of your finances today and to make a plan for what kind of income and expenses you will have during retirement. Once you have these figures, you will be able to plan out the steps you need to take now in order to get you to where you need to be for retirement. It does not end there either. It is not a plan you create and walk away from for 30 years until you are ready to retire. Your retirement plan requires you to regularly review your financial investments to see how each one is performing and making necessary adjustments as time goes by.

Risk

Risk is something you need to adjust as the years go by. When you are in your 20s, you have forty years or so for your investments to grow before you retire. You have the time to take on more risk when choosing investments than you do in your 40s when you only have 20 years or so until retirement time. Even during your retirement years, your risk level changes, decreasing more and more as you get further and further into your retirement.

Asset allocation

It is also important to diversify your retirement investment portfolio. Diversification helps you to balance your portfolio, so when one investment is not doing well, the other investments that are doing well balance the portfolio out—reducing your losses. Once you have a clear sense of your current asset allocation, it is also important to remember that you have to be flexible—even as the years pass away. Flexibility is important because it will allow you to make clear and educated choices on changes that you need to make in your portfolio to get your investments back on track—helping you to reach your retirement goals.

Types of investments

Everyone is different and investment needs are just as different as people. Luckily, there are many different investment possibilities to choose from, which means you can look for and invest in investment vehicles that are right for you.

n Passbook Savings Accounts
n Certificates of Deposit (CDs)Real Estate
n Stocks
n Bonds
n Mutual Funds
n Precious Metals and Commodities
n Foreign currencies
n Annuities

Investment rule of thumb

The rule of thumb used to keep financial portfolios balanced is to deduct your current age from 100. The answer you get is the percentage of your portfolio that should be invested in stocks. The remaining percentage should be invested in bonds and cash. So if you are 40 years old now, 60% of your retirement investment portfolio should be invested in a variety of stocks. The remaining 40% of your portfolio should be in bonds and cash.

Why is this the rule? It goes back to the thought process of asset allocation, which states that as we get older, we should take less risk. Since stocks tend to be volatile, while bonds and cash are more stable, it makes sense that the older we get the more we will reallocate the stock investments in our portfolio into cash and bonds—the safer investments. A stock heavy portfolio can leave you with big losses, which can wreak financial havoc on your retirement when you need to sell or liquidate the stocks for income.

On the flipside, cash and bonds are victims of inflation. These investments usually do not grow at a value that keeps up with or is higher than the inflation rate. For example, cash and bonds may grow at a rate of 2% per year and inflation may increase by 4% per year. In this type of a scenario, your portfolio is not growing enough to cover the costs. So while you may decrease the risk of capital losses by limiting the percentage of your stock investments as time goes by, you can decrease your buying power as inflation eats away at your cash and bond earnings. This is why it is important to find a balance in the investments in your retirement portfolio.

Abundance Thinking: The Laws of Attraction by Ken Mahoney

To a large extent, the sort of retirement you have will be determined by your outlook, as well as by the energy you put into creating the life you want.

Let’s start with the outlook you have about your retirement. How do you view your retirement years? Do you see the glass as half-full or half-empty? People who see their glasses as half-full, tend to be positive thinkers. And positive thinkers tend to attract positive results. Their glasses keep filling up. Negative thoughts, on the other hand, tend to drain those glasses. In the end, those who think they can achieve a goal, whether financial, political, or social, are generally proven correct, while those who think they can’t are similarly likely to be proven correct. Abundance in your positive thinking proves the laws of attraction correct.

We’ve all been in uncomfortable situations with our minds racing, exaggerating likely outcomes, and raising our blood pressure. Those fantasies and fears that compulsively race through our minds need to be noted and consciously controlled. Otherwise, the fears take charge of our lives. This is especially true when planning for your retirement years. It is similar to a self-fulfilling prophecy. If you spend so much time worrying about the doom and gloom of your retirement years—being financially strapped, being bored, contracting a horrible disease—it detracts from the time you have to prepare for your retirement. Spend your time wisely. Prepare now. Worrying about it isn’t going to change the outcome because what is going to happen is going to happen whether you worry about it or not. But you can put plans in place and prepare now for what is to come. This planning and positive thinking can help to alter the outcome, or at least prepare you for it.

We can re-program our minds to think positive by consciously replacing compulsive, half-empty thoughts with those likely to lead to a ‘brighter’ outcome. What are your goals for this free period of your life? What footprints do you wish to leave in the sand? If you have ever taken a yoga class, you have already been introduced to the power of positive thinking. Before every practice, as you are settling into self, you make a purpose for your practice. Then, you have to envision yourself fulfilling your purpose. Doing something similar for envisioning your retirement can work you toward the way of life you are seeking during retirement.

The concept of the power that positive thinking can have on your life isn’t a new concept, but it was most recently revisited by the best-selling book The Secret by Rhonda Byrnes. It covers how to harness positive thinking and use it in every aspect of your life -- money, health, relationships, happiness, and in every interaction you have in the world. As you progress into retirement, use the positive power within you to set and achieve your goals.

You see, who you are affects how you plan for your retirement, and in the book you'll learn more about whether you're empowered, a boomer that's ready to take on retirement or whether you're a Wealth-builder, someone who's still looking to grow their wealth.

Maybe you're a Leisure Lizard where leisure is the name of the game. Or perhaps the ultimate optimist, an Anxious Idealist, and who knows, maybe you're the ultimate pessimist, Stretched and Stressed.

It does not matter, Now What by Ken Mahoney describes and explains everything you need to know about how to retire the right way, the way for you. If you're looking for tips on how you can prepare yourself emotionally for retirement, you'll find them.

Keeping both mentally and physically fit, eating healthy, using medication in a healthy manner, to learning more about regular checkups and even learning about the options available for funding your retirement. All these things are answered and explained in Now What? A Guide to Retirement During Volatile Times.

When we enter the workplace, our five basic needs are met. When entering retirement; do you think your basic needs will be met? Not sure what the basic needs are? The Now What Book defines, and explains these needs.

Just so you know, the best way to fulfill those needs is to not lose touch with your capacity to love; in fact, nurture it, for you will find that it is something that can grow. Let yourself need people, and let them need you. Elizabeth Drew.

The Now What Book also shares with retirees what they need to know about the places they should retire in. Everything from the best towns to the best places for the most affordable homes.

So many factors can alter your retirement plans and cause financial shortages for your plans for retirement. Planning ahead, figuring on needing more than you originally thought you would, all this helps and you'll learn everything you need to in The Now What Book.