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.