Tuesday, February 24, 2015

Handling a windfall. Do nothing for at least a few months

"I stand to inherit a lot from my father, including high cholesterol and diabetes. Oh, and maybe a few Beatles records. Actually, the first two don't sound bad compared to the last," -  Jarod Kintz, author and humorist  (1982 -  ) -- "This Book is Not FOR SALE."

By Julia Anderson
Your grandmother leaves you an unexpected chunk of money in her will. A great aunt dies with you as her only heir.  Your spouse dies leaving you a substantial life insurance payout.
An employer offers you a lump sum pension buy-out.
You settle a lawsuit.
You win the lottery!
Coming into a large amount of money, especially if it is unexpected, may at first sound like a wonderful surprise, a good thing. But financial advisers say people often lose their heads when they see dollar signs. They put the new money in a special category and go on a spending spree. Later they may have regrets about how the money was used.
In one case, a middle-aged woman received $3 million in life-insurance money when her husband was killed in an on-the-job accident. She gave money to friends and family, took expensive trips, bought and sold houses and expensive cars. Within five years the money was gone.
Coming into money can happen at any age but women over age 50 will likely be among a large category of recipients. That’s because they stand to inherit 70 percent of the assets that will be passed down over the next two generations. Those assets likely will come from their elderly 90-something mothers when they die or when a long-time spouse passes on. Or both.
Whatever way it may happen, coming into money has psychological implications, says Susan Bradley, author of “Sudden Money: Managing a Financial Windfall.”  “People think windfalls are about money. But it’s really all about change and transition…and people need time to adjust,” she says.
Plan ahead, if you can
If you have the slightest hint that you might inherit money, make your plans in advance to avoid bad decisions. If it’s a surprise, establish a money moratorium. Some advise that you should not tell anyone of your windfall…not your kids, not friends.
Do nothing with your money for at least a few months, if not an entire year, advise the experts at Bankrate.com. Put it in safe place such as short-term bank CDs. Get it out of your checking account so you don’t see it every day.
Seek the help of a therapist to sort through the emotional impact of your sudden wealth. Money changes who you are, affects relationships and may create resentments. “Everything a person has spent decades building changes in one fell swoop,” says Dennis Pearne, psychologist and co-author of “The Challenges of Wealth.” “Half the people who attain sudden riches spiral into self-destructive behaviors.”
Set up a team of advisers
If your windfall is substantial, the experts recommend that you weather the storm by setting up a team of advisers whom you trust: a fee-based financial planner, an estate attorney and an accountant. Don’t ignore taxes. Some windfalls such as an insurance payout are tax-free. However, a large inherited estate could be subject to federal and state taxes. Or if you cash out an inherited (and tax-deferred) individual retirement account you may owe taxes on the entire amount. How to handle these issues requires tax advice.
Meanwhile, don’t quit your day job. Windfall recipients often under-estimate how much money they’ll need to replace their income, says William Hammer in the Kiplinger Personal Finance newsletter. “If you earn $50,000 a year, you’ll need to invest anywhere from $1 million to $1.5 million to generate enough to replace that income, he said. Those who are retiring already know this from calculating how much they can withdraw from their 401(k) nest eggs.
Geoff Williams, writing for usnews.com says getting rich can be easy compared to staying rich. “Do nothing for as long as possible,” he says. “Don’t spend unusually large amounts of money. The last thing you want to do is blunder into an expensive purchase you can’t return and will soon regret.” Issues worth thinking about include your current debt, your plans for retirement and taxes, he said.
The experts all seem to be throwing a wet blanket on having any fun from your new found money. But at least one suggested a “small splurge” on say, a trip you’ve always wanted to take. “A small indulgence could reduce the chance that you’ll blow your entire windfall,” said Mitch Brill, a CFP with MassMutual Financial Group.
Let’s face it,  a windfall will likely only come around once in a lifetime, so give yourself time to figure out how to make it last a lifetime.
Definition:  Windfall – noun. An unexpected, unearned or sudden gain or advantage usually to do with money. The English word windfall originates from the Middles Ages when royalty or lords owned most land and estates and serfs were forbidden to pick fruit or fell a tree. However, if a storm or strong wind blew down a tree, it was referred to as a “windfall” and free for the taking.

Wednesday, February 11, 2015

Working in Retirement. It may mean different things to different people

"If we don't change, we don't grow. If we don't grow, we aren't really living,"  - Gail Sheehy, author of "Passages" and 16 other books.

Editor's note on SOCIAL SECURITY RULES:
Full retirement age for Social Security is 66 for people born in 1943 to 1954 and will gradually increase to 67 for people born in 1960 or later. But Social Security allows people to begin taking benefits with a lower payout at age 62. If you are under full retirement age but start collecting benefits and continue to work, Social Security will deduct $1 from your benefit payments for every $2 you earn above the annual limit of $15,720 this year. (For more, visit
www.ssa.gov) In the year you reach full retirement age, $1 in benefits is deducted for every $3 you earn above $41,880 this year. That’s only for the months before you reach full retirement age. Once you reach full retirement age, you can collect benefits without deductions even if you’re working full-time. Even better, if you keep working and don’t take benefits, your benefits will increase 8 percent for every year you wait, up to age 70.

BY JULIA ANDERSON
Jean Morris likes her job, likes her clients and could never think of a reason to stop working even though she is well over full retirement age. “The incentives for working are many fold,” said Morris, 74, who is a financial adviser for iQ Credit Union in Vancouver, Wash.
With 44 years of experience in the financial services arena, Morris said she likes her employer and finds her job rewarding. “When people ask me when I’m going to retire, I give them my pat answer…in eight more years. I’ve been saying that for quite a long time,” she said.
Morris is among a growing number of older Americans who are working full- or part-time even though they are at retirement age. For some it’s a financial necessity and helps stretch their savings. For others, working brings stimulation and social rewards.
According to the U.S. Census Bureau, workplace participation by Americans 65 and older has reached 22.1 percent for men and 13.8 percent for women, up from 17.7 percent and 9.4 percent in 2000. Increased life expectancy, a rising “full” retirement age as determined by Social Security and a shift away from defined benefit pension plans all are factors, the Census Bureau said.
Experts say that workers at age 65 should have saved seven times their current salary for retirement. For example, if you’re earning $65,000 a year, you should at least have $455,000 stashed in a 401(k) tax-deferred retirement plan. Many people have not achieved that goal, which means working in retirement is a requirement.
“Increased cash flow is an obvious incentive,” Patsy Eby, a Vancouver CPA, said. “Professionals who have expertise in management or sales…accountants who only work during tax season are good candidates for working part-time in retirement. Some people like to keep an active mind. Retirement can be isolating,” Eby said.
Eby’s advice: Keep working and hold off on collecting Social Security benefits as long as possible. “It’s a gamble, but you get more money, if you wait,” she said.
Fear of running out
Many, especially women, who are approaching retirement, have a fear of running out of money in their later years, even if they’ve saved a substantial nest egg. With concerns about the economy, a rising cost of living and swings in stock markets, many may feel that staying on the job or taking part-time work is a good way to go. Experts recommend retiring in phases. Ken Dychtwald, CEO of Age Wave, a research think tank on aging, suggests:
- Do your retirement home work. Give your retirement a new beginning and a new purpose. Talk to your partner, your friends. Sign up for work shops.
- Make a list of things you have always wanted to do. Rank them and evaluate what’s possible.
- Get fit. Make your health a priority. 
- Schedule a face-to-face meeting at your local Social Security office to find out what your benefit options are. Then meet with a financial planner to decide if you can cut back on work without taking Social Security benefits.
- Come up with a new structure for your days…volunteering, church, part-time work.
- Get a new job. It may be something you’ve never done before but keeps your life productive.
Steve Pierce, who lives in Tacoma, Wash., has three “jobs” and one volunteer commitment in retirement.
Since leaving full-time work as communications director of the Washington state Department of Transportation, Pierce, 66, is filling his days by teaching piano lessons, doing yard work for neighbors and driving for the Department of Services for the Blind. He also volunteers for the local Humane Society.
His advice: Don’t wait until retirement to plan your retirement.
Using as a resource the New York Times best seller, “Younger Next Year,” by Chris Crowley, Pierce identified passions that he’s had for a long time.
“I’ve played the piano since grade school and decided to take on my granddaughter as a student,” he said. “Now I have four students. It’s a joy to see them learn.”
By driving for the blind, he’s formed new rewarding friendships. As a driver, he works for the local Department of Services for the Blind Office, which pays $15 an hour for his time.
 “I like yard work so I began doing yard work is for neighbors for which I’m paid or in one case, I trade work for a weekend at their beach house.”
 The money, he said, is secondary to the rewarding experiences.
“Money can’t be the focus, but if you’re passionate about certain things you might be surprised that there’s a revenue stream from it,” Pierce said.
In his book, “The Confident Retirement,” author Ron Kelemen observes that “some people view retirement as a solution to their unhappiness at work. They are running away from something instead of to something.”
He suggests making a list of what you like and what you don’t like about your job. Then he recommends (if possible) changing your work situation so that it is more sustainable and enjoyable. Kelemen, an Oregon-based financial adviser, has seen clients develop a new attitude toward their work by tweaking the job they have. Thus, delaying real job loss.
“And, of course, their retirement became more financially secure as a nice side benefit,” he said.
Clueless in retirement
Many people are totally wrapped up in an all-consuming job and are clueless about what they might do with their time if they leave that job. Planning the final third of your life might take work and will likely evolve over time.
“People who retire may need to pull some layers away to get at what they might find rewarding, Pierce said
Both Morris and Pierce advise those who want to work full- or part-time in retirement to do their homework for what makes sense both financially and emotionally.
“I know a retired school principal who now works at a hardware store because he gets to talk to people all day,” Morris said. In her job, Morris estimates that she manages about 600 clients and handles 60 or more phone calls in an average week.“I don’t consider this working in retirement but just working,” she said.
Pierce left his state job with the full knowledge that he would find a new life in retirement.
“My advice is not to wait but start thinking ahead about what you’re passionate about and whether there’s a way to make some money doing it,” he said.
HELPFUL WEB SITES:
www.Retirementjobs.com
www.Retiredbrains.com
www.NOWCC.org
www.Nationalservice.gov/programs/senior-corps
www.ssa.gov/retire
BOOKS:
“Younger Next Year,” by Chris Crowley
“The Confident Retirement Journey,” by Ron Kelemen.
“Roadmap for the Rest of Your life,” by Bart Astor
“Can I Retire?” by Mike Piper, CPA
 “How to Retire Happy,” by Stan Hinden
“Working After Retirement for Dummies,” by Lita Epstein

Saturday, February 7, 2015

Trip report: Six Days Exploring Crete on Our Own

"One must live as if it would be forever, and as if one might die each moment. Always both at once," - Mary Renault, English author of "The Bull from the Sea," "Fire from Heaven," and "The Last of the Wine," among others.

BY JULIA ANDERSON
After checking out the seaside town of Agios Nikolaos on a sunny warm day in October for a couple of hours, we settled into an outdoor table along the city’s waterfront. The menu was inviting, prices reasonable.
Deep-fried anchovies, ummm. A tasty bowl of shrimp in cream sauce and a salad with fresh tomatoes, egg and feta.  Culinary magic…a moment to savor among many during our six days on the island of Crete.
Since childhood (for me it was reading Mary Renault novels about the ancient Minoans and Greeks) both of us have been fascinated with the Mediterranean. When we first met, we discovered that traveling to the region was No. 1 on both our bucket lists. After signing up for a Rick Steves’ Best of Turkey tour in mid-October, we thought a few days on Crete would add to our adventure. Here’s how we did it:
Getting there and getting around: We flew from Portland, Ore. to Athens, did three days in Athens, then flew from Athens to Heraklion International Airport located on the north-central coast of Crete. Just over an hour’s flight. Dimitris Kopidakis met us at the airport with our rental car. Check out AutoRentalsCrete, which is recommended as an efficient and honest rental company. Getting around was easier using our iPad with International GPS link. Even when we were momentarily lost, we knew where we were. Thankfully, most road signs are in Greek as well as in English lettering and sometimes even in English. Driving was not a problem and made the trip more interesting. In terms of our limited time on the island, having a car made things efficient and flexible.
Accommodations:  Exploring all of Crete in six days would be a challenge since it is a big island. Instead we focused on the central region offering many important museums and ancient Minoan sites. Using Villa Kerasia bed & breakfast as our base for all six nights was a great decision for its central, but rural location and lovely setting.
Villa Kerasia from poolside
Owner-operator,  Babis,  provided helpful advice that made our stay more rewarding.  His evening meals were great fun for the wonderful collection of people at the dinner table…Finns, Israelis, Brits, Germans. Surrounded by olive tree orchards, Villa Kerasia in a restored rock farm house with just seven rooms. There’s a pool and paroramic vistas both east and south.
DAY ONE: Flew to Crete from Athens. Got our  rental car and traveled out of town, south to Villa Kerasia. Dinner out off the hillside at a nearby town of Vlahiana.
DAY TWO: Explored south by car to the Minoan ruin of Phaestos (dating from the 15th Century B.C.), then onward for a few hours on the beach at Kommos. It’s easy to understand why the Minoans built Phaestos on this hilltop with its magnificent views south and southwest. This Bronze Age ruin has been extensively excavated and provides a good first opportunity to learn more about the Minoan culture. Habitation here began in 4000 B.C. and peaked about 1500 B.C.
Beautiful location and well interpreted with labeling in Greek and English make this site a must for visitors to the island.
We found plenty of charming small towns where an outdoor lunch was an inexpensive and fun stop. You won’t believe how much feta cheese goes on their salads.
Pheistos, Minoan site
DAY THREE: Destination Agios Nikolaos. We headed north from Villa Kerasia toward Heraklion and managed on the first attempt to negotiate the right hand exit that put us on the well-traveled highway east to Agios Nikolaos. Formerly a fishing village, the city is now a major tourist destination. Quaint streets, gorgeous water, lots of history here. This filled our day. We stopped at Malia on the return to check out the Minoan ruin there.
DAY FOUR: Palace of Knossos and Heraklion Archaeological Museum. The partially restored Palace of Knossos is over-run with tourists (many off of cruise ships or from nearby beach resorts) but is a must, if you go to Crete. The elaborate Bronze Age complex with its stunning frescos and fascinating history provide a context for how civilization started in the Mediterranean. The Minoans were much earlier than the Greeks and the Romans. This stuff is old!
We could have spent more time in the Heraklion Archeaeological Museum. The place is filled with exquisite jewelry, pottery and frescos (See the frescos on the top floor first)! The Cretans know what they have with this collection and show it off beautifully with modern well-lit glass displays and helpful interpretive labeling. This is world-class.
DAY FIVE: Our favorite beach experience began with a hike through the Ayiofarango Gorge to Ayiofrango Beach. The hike-beach experience starts just out of the town of Sivas on the south coast. We drove out of the town to an unpaved rocky parking area where we left the car and walked (1.8 miles) through a beautiful, deep and somewhat shaded rocky gorge to a small pebble beach. The walk was mostly flat with plenty of sights including free-roaming goats along the way. The highlight was the Aghios Andonios Church which dates from the earliest Christian times. The pebbly beach is protected from the wind. Clothing was optional for both sexes.
Aghios Andonios Church



DAY SIX: A car trip to Hania (or Chania), west of Heraklion on the north coast. This town takes you deep into another epoch of Crete’s complex history. Starting in 1252, the Venetians established a trading center on Crete with Hania as their administrative center. The town still looks Venetian with brightly painted waterfront buildings, imposing brick warehouse structures and a massive breakwater meant to protect the harbor from pirates and the Turks. The Venetians stayed until 1669 despite repeated rebellions by locals. Rebellions continued under the Ottomans.
Exploring Hania Old Town was a treat with its charming back streets and small restaurants that offered better menu selections at more reasonable price than the tourist-trap watering holes on the waterfront.
Hania, occupied by the Venetians in 1252

WHAT WE LIKED MOST:  Our lunch-time meal in Agios Nikolaos was one of our most memorable but certainly not the only fabulous food experience while exploring the island. One of the healthiest diets in the world, Cretan cuisine embraces olives, greens, delightful cheeses, potatoes in all forms, herbs with plenty of personality and wines. Considering that people have been making wine on the island for several thousand years, you know it is good.
Crete offers ancient ruins with mythical stories from the very beginning of recorded history, landscapes that sweep to the horizon and villages little changed from hundreds of years ago. Our visit was in October toward the end of the tourist season, so beaches that would be teaming with tourists were pleasantly quiet.

TIPS: Villa Kerasia, about 30 minutes south of Heraklion, is a gem. Send email directly to Babis to make a reservation. We paid 60 Euros a night including breakfast. Dinners were additional, so was the wine. But all reasonable.
Renting a car at the airport from Dimitris Kopidakis of AutoRentalsCrete gave us freedom and easy access to most everything we had time for. Roads are surprisingly good. Driving is a bit hectic because slow traffic moves to side to allow faster moving vehicles the non-existent center lane to pass. Take an iPad with GPS. It's a miracle.
Let’s make something clear: We’re active travelers, not beach people. We like to explore, to visit historical sites and learn about local culture by talking to the people and eating their food. But having said that, the beaches in Crete are great. On any beach you will meet plenty of Europeans, especially Germans (who take their clothes off) and Russians, people from throughout the Mediterranean as well as lots of locals.

The people of Crete have a certain energy. Their olive orchards and farms are well-kept Their customer service is excellent. Roads are good (better than in Greece, proper) and the food is extraordinary in terms of fresh ingredients and presentation. All of this at a price well below that of Italy or England, for instance. We would go there again and explore more of the island, both east and west. ( Photos by Julia Anderson. Permission required.)

The waterfront at Agios Nikolaus 

Tuesday, January 27, 2015

McDonald's: Good food, good dividend. But that 'evil empire' label kills me.

"If you work just for money, you'll never make it, but if you love what you're doing and you always put the customer first, success will be yours," - Ray Kroc, McDonald's founder. (1902-1984)

BY JULIA ANDERSON
My 30-something children call McDonald’s the “evil empire.” They say the big fast-food chain represents everything bad about America’s industrialized food business. They won’t eat there. In fact they will drive farther by miles to eat at a local food cart or independent café even though they shell out more money to do so. Cost is secondary to their personal values around buying home-grown, chemical-free, organic food.
It’s not just me saying this. Analysts at Standard & Poor’s say McDonald’s “is less appealing to Millennials who want healthier food.” This trend is beginning to show in McDonald’s bottom line with U.S. same-store sales down last year more than 2 percent.
This hurts my heart because I like McDonald’s.  I grew up with McDonald’s. I fed my kids Mickey D’s “Happy Meals” and  have owned stock in the company since my mother gave me my first five shares in the 1980s.
I realize that this change of heart about McDonald’s is a generational thing. In its prime McDonald’s represented everything good about American enterprise and innovation. Through enthusiastic franchise owners (14,000 stores) in small towns and big cities across the country, the company delivered consistent quality food at a reasonable price. You could count on a McDonald’s hamburger to be a cut above the local greasy spoon. The fries were (and are) exceptional... salty, tasty and crunchy, but not too crunchy.
Store décor with their bright colors gives you a happy feeling when you walk in the door. Those primary colors have been a symbol of American proactive can-do business around the world. Meanwhile, the company made a lot of its franchisers rich and became part of the strong dividend-generating middle class stock portfolio for people like my mother.
Global expansion, showing the way
I read lately that McDonald’s (the world’s leading food service organization) is expanding into Kazakhstan. That will add more units to its 36,000-store roster that employs 1.9 million people in 100 countries around the world. McDonald’s generated revenue of $27.4 billion last year.
But U.S. sales were off 1.7 percent. Sales in Europe, down 1.1 percent. Overall consolidated revenues were down 2 percent for several reasons: Strengthening of the U.S. dollar, turmoil in Russia and the Ukraine and supplier issues in China, its most promising market.
However, we are seeing a sea change in the chain's core business in America. My grandson begs me to take him to McDonald’s when we're out together but I he asks me to promise not to tell his dad. The 10-year-old loves the fries. I explain that it’s not a good idea to get in the habit of misleading his dad. We eat the fries and take the heat. It’s not about the calories but the unseen chemicals. It's trendy to hate McDonald's.
Fact: McDonald’s serves 70 million meals a day around the world..
 So what’s going on? Obviously there’s been a cultural shift away from corporate fast-food to fresh-made local eating. Never mind that it costs a lot more.
This change may have to do with a maturing (I’m not sure that the right word) of America since 9/11 and the continuing threat of disaster from a terrorist attack, an economic crash. Twenty-four-hour news makes us think the world is coming to an end any minute, that kids will be snatched off street corners if you don't watch them and that our food is killing us.
Popular movies tell the stories of all powerful evil in the form of space aliens, trolls from fantasy worlds and sinister empires who want to destroy civilization as we know it. Video games prey on the same lurking fears.
The reality in our world evil does exist. We believe it.
After World War II when McDonald’s got its start, we thought we’d defeated evil. The future looked bright. McDonald's reflected that optimism and still does.
Now with evil unknowns in every corner, we seek a cozy dark coffee shop or a restaurant with a retro homey feel as a way to feel protected, safe. We want control over our food as a way to feel in control of something.
McDonald’s with its free, open, bright-colored approach to the world is not how we feel or where we want to be. Never mind that its food, once thought innovative, is now bland when compared with a Chipotle Mexican Grill burrito with hot sauce. 
So what’s going to happen to McDonald’s and to the little old ladies who love the company's 3.7 percent stock dividend?
McDonald’s executives pledge to return $18 to $20 billion to shareholders between 2014 and 2016 and hold steady on the dividend. It will cut capital costs by opening fewer stores this year, only 1,000. Food costs for beef and cheese are coming down after setting records in 2014. That will help the bottom line. And, McDonald’s is reducing the number of menu items to speed up service and simplify choices. In the past four years menu items jumped from 53 to 72. 
I personally think McDonald’s did a good job of improving its coffee and adding the McCafe coffee items. I love the grilled chicken salad as a way to hold down the calories. The calorie content on the back of restaurant place mats helps me explain a few things to my grandson. Hey, I believe that people are responsible for what goes in their mouths and should be managing those calories. Going to McDonald’s is not the problem. Eating too much is. My advice to McDonald’s:
Stop freaking out and get back to your core mission of providing quality fast-food at an attractive price.
- Improve order times and make it easy for customers to read the menu board in the drive-thru and inside stores. Right now my eyes fly around trying to find what I want. Nothing jumps out.
- Forget the “build your own sandwich” program. That's way too complicated.
- Launch a campaign to remind America how many kids get their first jobs at McDonald’s, how many people take home a paycheck from McDonald’s. Make it more transparent to the public that employees have opportunities to advance in the organization.
- Encourage local franchise owners to be more visible in their communities.
- Remind us why Ronald McDonald is such a great guy and raises money for Ronald McDonald’s Houses all over the country that benefit kids.
It truly hurts my heart to hear McDonald’s called the evil empire as if it needs to be destroyed.
America loves hamburgers. That food category ($63 billion in sales) is not going away. McDonald’s is much too innovative to be counted out. That’s why I will continue to own McDonald’s stock, enjoy its food and reinvest that great dividend.

Monday, January 12, 2015

2015 market forecast --- Know what you own and why

“Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”Peter Lynch, (1944 -   ) American stock investor.

By Julia Anderson
A year ago, I made a few adjustments in my nest egg portfolio to accommodate what I thought would happen in 2014. Market experts were saying in numerous national publications that we were in the late stages of a bull market and that the Federal Reserve would likely raise interest rates. Bond values would drop as interest rates went up.
Consumer stocks tied to retailing would weaken.
Alternative energy stocks – wind, solar -- were a good bet.
Foreign economies were poised for expansion with Germany taking the lead.
Dividend stocks remained a good way to at least stay even with inflation in the U.S. economy as earnings improved.
Nearly all of these predictions turned out to be wrong. Interest rates didn’t go up, bond values didn’t go down. Consumer stocks held their own and foreign economies – China, Europe and Russia – showed weakness, not expansion.
And forget about alternative energy stocks, which were threshed by the big drop-off in oil prices last fall. The only thing that more or less proved true was that the U.S. economy and its roster of blue chip companies remained the best place to put your investment money with domestic markets up about 10 percent for the year.
I keep re-learning the lesson: Don’t try to out guess the market. Or as investment guru Peter Lynch said, "Know what you own and know why you own it."   It's easy to get lured off track.
 Having said that, here are my 2014 stock losers and winners and what the experts say might happen in 2015.
Seadrill, (SDRL) an offshore drilling contractor, saw its stock price drop from $41 to $9 by the end of the year. I bought early in the year and sold at a loss.
SolarCity, (SCTY) had a nice run up through the first half of the year to $88 a share but ended under water for me at $49.  I still own it but should probably sell since the fundamentals for the business are eroding along with fossil fuel prices.
Drug company GlaxoSmithKline looked like a good dividend-paying place to park money for the long-term. Who knew that it would be hit with a big fraud investigation tied to China and announce layoffs. The share price would dropped 18 percent. I still own it because of its 6 percent dividend and because GSL its one of two drug companies developing an Ebola vaccine.
After owning Trimble Navigation (TRMB) for several years, the GPS-positioning products company proved to be a disappointment in 2014 despite revenue growth. Trimble had a share price decline of 23 percent. I still own it but I’m beginning to wonder if GPS technology is being left in the dust.
Investment firm Carlyle Group LP (CG) failed to live up to its hype in 2014 with a share-price decline of 27 percent to $26.58. I’m holding on because of the 7 percent dividend and revenue growth of 31 percent.
Big banks are punished, again
Early optimism about the economy had me looking into bank stocks. My belief was that the worst of the recession was behind us and that banks both large and small had paid all the penalties that federal investigators had levied on them for past sins. An improving business climate and moving beyond the penalties would mean higher share prices.
 I was way wrong. Banks were hit with record penalties through most of 2014. That in turn held down share prices. The drum beat continues with  J.P. Morgan announcing in early January 2015 that it would pay $500 million to settle a class-action lawsuit for shoddy mortgage-backed securities sold by Bear Stearns Cos., which it now owns. In the past two years, JP Morgan has paid out $20 billion to both the government and private investors to settle claims from purchasing assets of Bear Stearns and Seattle thrift Washington Mutual. The way I see it…no good deed goes unpunished.
Having wallowed in my losers how about some winners. There were several:
Microsoft (MSFT), up 30 percent to $47.19 on good earnings and new leadership.
Alcoa (AA), up 59 percent to $16.11, thanks to growing demand for aluminum and reduced over-supply.
Idacorp, holding company for Idaho Power Co., up 26 percent thanks to a strong water year and Idaho’s improving agriculture economy. Thanks mom for giving me shares of that company when I was a kid. Nice dividend of 2.85 percent and a PE of 17. Utility stocks turned out to be winners in 2014.
And while big banks in general continued to struggle to find their footing, U.S. Bancorp seems not to be in the crosshairs of regulators. U.S. Bancorp (USB), up 4 percent year-over-year, but up 37 percent for me because I bought at a low of $31. US Bancorp is now at $42.96. All of these companies have a great track record and have been around a long time. But then, so has JP Morgan. (For banking 2015 outlook, click here.)
We’re in for a bumpy ride
If the start of 2015 is an indication, we’re in for a bumpy ride in 2015 with more volatility and less steady-as-she goes upward momentum for our long-lasting bull market. I don’t think this is a surprise for those who are students of history such as Peter Lynch who said, "I spend 15 minutes a year on economic analysis."
Nevertheless, what are the facts influencing markets in 2015?
Will or won’t the Fed raise interest rates in 2015. I say no based on the continuing shaky recovery in the U.S. economy and the weakness of foreign economies, especially Europe. That means dividend-paying U.S. stocks will continue to be a place to put money.  We can safely say that the U.S. economy found some footing in 2014 and likely will continue to grow this year. The key to more improvement is wages…they need to go up as employers become more confident about business.
Meanwhile, a drop in fuel costs for gasoline, propane and diesel should mean the equivalent of a wage increase for many Americans. Bigger paychecks and lower gas prices mean more money to spend on houses, new cars and consumer items.
On the medical research front, experts say there are big medical advances on the way related to cancer treatment, tissue transplants, immune-system breakthroughs and diabetes. With those will come investment opportunities. But then we’re getting into riskier, no dividend, investments that make me nervous.
Barring a terrorist attack, a huge bad-weather event or another bank scandal, the experts are saying U.S. stock markets will “continue strong” in 2015.
While a short-term correction may be over due, the longer-range outlook is positive. We could see another 11 percent in returns for U.S. markets in 2015, if you add up price increases and dividends, they say.
That outlook makes it easy for me. I’m sitting on some cash, ready to buy in if markets go lower. With the rest, I plan to hold steady in diversified dividend-paying stocks and index stock funds. Will I buy back into a bond fund? Not until the Feds raise interest rates. As Peter Lynch said, “The real key to making money in stocks is not to get scared out of them.”
For more:  "Prepare Your Portfolio for Turbulence," click here.
"How to Play Stocks Now, from the WSJ, click here.
"Simple, Bedrock Rules on Personal Finance," by Brett Arends. click here.

Monday, December 8, 2014

Women are optimistic about retirement but should plan carefully for Social Security

Women represent 57 percent of all Social Security beneficiaries age 62 and older and approximately 68 percent of all beneficiaries age 85 and older - Social Security Administration

BY JULIA ANDERSON
With bank savings accounts and CDs paying next to nothing and stock markets in risky territory, how and when to take Social Security benefits as part of your retirement income is a key part the planning, especially for women.
However, the strategy is often more complicated than just delaying benefits, says Kelly O’Donnell, executive vice president of Financial Engines Inc., a California-based investment advisory company. 
“Women face unique challenges in retirement because they typically have saved less but will live longer,” O’Donnell said in a recent telephone interview. “Women need to make the most of Social Security decisions.”
That’s not easy since there are 2,700 different claiming rules related to age, marital status, income and survivorship. Those rules, in turn, generate 8,000 possible claiming strategies for those --- married and single -- nearing retirement.
“It’s not just a matter of delaying Social Security,” O’Donnell said. “It’s a personal decision that requires careful planning and maybe outside financial advice.”
Financial Engines is in the business of helping people with planning as the nation’s largest independent investment advisor. It provides services to more than 9 million employees working for more than 580 companies. Clients include more than 140 Fortune 500 corporations. The company recently conducted a survey to find out more about how people are feeling about retirement planning and life in retirement.
Women look forward to retirement!
The Financial Engines survey determined that despite challenges, more women than men look forward to retirement. Fifty-one percent of women surveyed said that they are looking forward to retirement, compared to just 41 percent of men.
“After spending their lives working, raising kids, and often acting as caregivers to aging parents many women see retirement as some much-needed and well-deserved ‘me time,’” she said. “But to get the most of their lives after work, women need a plan for funding their outside interests in retirement. Given the interest rate environment, there are a lot of people facing retirement who just don’t have enough…delaying Social Security is the best deal in town," she said.
That’s because (if you were born in 1943 or later) for every year you delay claiming benefits, Social Security tacks on an 8 percent increase in the annual benefit payout up until you reach age 70.
According to the Social Security Administration as reported by Financial Engines, when a member of a married couple dies, the survivor, who is more likely to be the woman, will live an average of 11 years on his or her own.
When and how you claim Social Security affects the benefit amount you’ll receive and potentially your quality of life in retirement, cautions O’Donnell.
Claiming too early can mean missing out on as much as $100,000 or more in benefits for individuals and $250,000 or more for married couples.
“Deciding when to claim Social Security is an important decision for everyone, but it’s especially important for women,” explained O’Donnell. “The bottom line for women is that it’s important to have a plan to maximize your income in retirement.”
To help women (and men) make informed Social Security claiming decisions, Financial Engines has made its Social Security Planner (click here) available to everyone at no cost. Additional planning information and resources can be found at www.corp.financialengines.com/women.
O’Donnell said it is “amazing”  that when she talks to educated working people that there is still a big “wow” when it comes to the complexities of Social Security.
“Lack of information can mean leaving a lot (of money) on the table,” she said.
Other Financial Engine survey results:
- 29 percent of women vs. 40 percent of men are worried about retirement.
- 20 percent of women vs. 25 percent of men are worried about getting bored in retirement. Women looking forward to retirement are most excited about spending more time with family and friends (74 percent), travel (58 percent), pursuing a favorite hobby or passion (56 percent) and volunteering (44 percent). Forty-eight percent also expressed interest in sleeping in later.
“While women have to plan for living longer and often start out retirement with less accumulated wealth due to absences from the workforce , our survey found that they are more comfortable with themselves as they get older and want to do more in retirement,” O’Donnell said. While the majority of women were looking forward to retirement, one-in-four (27 percent) admit to feeling anxious about their financial futures, regardless of how much money they earn now. Women are most concerned about rising health care costs (44 percent), running out of money (43 percent) and Social Security going bankrupt (30 percent). That general anxiety around retirement is not entirely unfounded, said Financial Engines.
A 65 year-old woman today can expect to live to 86.6—more than two years longer than men. According to Financial Engines, the median 401(k) account balance for men age 60 and older is about $84,000 and only $43,000 for women in that same age group.
According to the Social Security Administration, when a member of a married couple dies, the survivor, who is more likely to be the woman, will live an average of 11 years on his or her own. When you claim Social Security affects the benefit amount you’ll receive and potentially your quality of life in retirement.
For more – Financial Engines recommends these Web sites:
Administration on Aging: National Education and Resource Center on Women and Retirement PlanningChoosetoSave.org
Employee Benefits Security Administration, click here.
Financial Literacy & Education Commission, click here.
IRS: Changes in Your Life May Affect Retirement Planning, click here.
MyMoney.Gov
Retirement Toolkit, click here.
Securities and Exchange Commission: Office of Investor Education and Assistance, click here.
Social Security Administration for Women, click here
USA.Gov: Retirement Resources

Wednesday, November 26, 2014

Why and how to hold a family money-summit when everyone is together

"Be careful to leave your sons well instructed rather than rich, for the hopes of the instructed are better than the wealth of the ignorant," --  Epictetus, Greek philosopher. (55-135 A.D.)

BY JULIA ANDERSON
Financial advisers recommend that families regularly hold "money-summits" to keep everyone in the loop on estate plans, wills and financial decisions. Once a tool of the ultra-wealthy, the family meeting is now used by families of all economic levels, says financial adviser Gordon Bernhardt.
This of course assumes that the people in your family are getting along, are reasonable and can listen to each other without interrupting. If the people in your family don't fit this "normal" profile then this post may not be helpful. Although there are tips lower in this post that may give you a strategy for handling that difficult family member.
The point here is that holiday family gatherings can be a time for good food, football and for (drum roll please) talking about money.
You might ask, why ruin a perfectly good family get-together by bringing up financial matters? Eventually, every family has the conversation. It just might not happen at a very good time, say when there’s an emergency because of a catastrophic illness or accident, or somebody’s funeral when family members turn to each other with blank looks because no body knows where the will is or what the person’s wishes are when it comes to health care or asset distribution or who is in charge.
Good estate planning, say advisers, is all about including all family members in the process. That means talking about it. But while everybody thinks these discussions are important, few actually have the conversations. Why? Because money is a touchy subject, people are afraid of offending each other by bringing up issues and some family members may be competing for influence for how the discussion goes, writes Robyn Post for Money.com. in a post "How Families Can Talk About Money over Thanksgiving."
But parents who are still in charge of their finances and estate planning should talk to their kids and even grandkids about where their wills are, who might be assigned power of attorney when they become incapacitated and how assets will be distributed when they die. A big issue for baby boomers may be how to manage grandma, who at 90-something can no longer care for herself. (See previous post). You may believe that only the wealthy 1 percent need to have a family meeting about money. Not true. Tangible assets such as uncle George's clock, the handmade quilts from a great-great-grandmother or uncle Pete's car and savings account, may be worthwhile topics. Family get-togethers offer an opportunity to have a conversation about these all these issues.
How do you bring it up?
There are do’s and don’ts, experts say.
The No. 1 don’t: Don’t bring money matters or inheritance issues up at the holiday dinner table after everyone has had a few drinks. That may not go so well. Instead, let everyone know ahead of time that you’d like to talk about family money matters some time during the get-together. Set a time that’s convenient for everyone…after breakfast first thing; the day after the holiday or the afternoon before the family socializing starts. If you’d rather, have the money-summit as part of a family vacation or get-away some other time.
“Discussing your will and estate planning needs can be a tough topic because it requires coming to terms with mortality,” say advisers at Fidelity Investments. Your plans may stir reactions from some of your heirs. But a will and a financial plan also can lower the stress and give everyone (including you) peace of mind.
My ex-parents-in-law, who both died in their 90s a couple of years ago, held regular money summits with their two sons during holiday get-togethers. The meetings were behind closed doors, separate from any socializing or meals. No wives, no girlfriends, no grandchildren. It was about managing their assets while they were alive and how they would be distributed when they died. I have no idea what they talked about but as far as I know, the planning went well.  
My mother on the other hand struggled to remain in control but left herself open to bullying until she turned her asset management over to a bank trust department. That wasn't easy but she did it.
Barton Goldsmith writing for Psychology Today magazine offers these tips:
Keep your family meeting upbeat. You might begin with a light-hearted story or two. Ask for family remembrances from those attending. A family meeting is about communication, which can lead to better connections between family members, Goldsmith writes. If you keep the conversation light, it makes the communication easier.
Decide who you want in the meeting. Probably more inclusive is better than, not. Feelings can be hurt. There can be resentment. Every family is unique so plan a careful and thoughtful strategy.
Be creative with the meeting space. It could be a back yard, or a park. Go out. Maybe there’s a restaurant with a private space. Avoid the holiday dinner table.
Be flexible with the agenda. Ask those attending to talk about what’s been happening in their own worlds, what their future plans might be. Start off easy.
Consider one-on-one chats
Ideally, before the first meeting you might meet with each family member separately to hear their issues, give them a chance to talk one-on-one. Then put together a short agenda. First question…what would you like to accomplish as a family in 2015?
Hold these meetings regularly….twice a year or more, so everyone gets used to the format and the goals.
All of this assumes that families are not having troubles, that there are no dysfunctional family members who dominate discussions, who become emotional or angry. Who have an abuse problem or face financial difficulties.
If that’s the case, then careful advance planning may be needed. Or you may decide the holidays may not be the best time. A one-on-one conversation with each family member may be the only thing you do. Or, if you have a meeting, lay out clear ground rules for the discussion.
"Waiting until the holidays to tackle every money skeleton knocking around in your family’s closet may wind up putting you through a lot more stress than necessary," say writers at longliveyourmoney.com, a bank-sponsored Web site. "If time is on your side and you’d like to be more involved in the family’s financial planning then why not use the holidays to decide on a recurring time when you can meet throughout the year to check in on one another," they suggest.
Why are these conversations worth the effort?
Families need to plan for the future. There’s nothing worse than not talking about money, not talking about who you see handling your finances when you no longer can do it yourself. Surprises can leave bitter feelings that destroy relationships. 
This is heavy duty stuff. It gets more complicated and harder to do the longer issues are ignored.
Your children may be more likely to understand your planned distribution of property if they hear the motive behind your decisions directly from you, say Fidelity experts. Your children may have good ideas and opinions that can improve your plan. Talking about estate planning allows you to control how our children learn about your decisions….one-on-one or in a family conference.
First steps before a meeting
The first step is to write a will, designate who will have power of attorney, if you need help. Final wishes are also important. Those spell out your burial or cremation desires and what you want in a memorial or funeral service.
Things to consider: Setting up a trust to protect assets and ease the distribution process. Determining a charitable giving strategy. Writing a will outlines how you want your property distributed at your death or who will be your personal representative of your estate. A will provides for paying costs incurred in settling your estate.
There are many resources available to help with family estate planning through brokerage firms, at bank trust departments and certainly online.
Here are a few Web sites to get you started:
“How Families Can Talk About Money over Thanksgiving,” click here.
“Mediation for Family Money Disputes,”
click here. Savvymoney.com
"Holding a Monthly Family Financial Meeting," click here.
"The family meeting: An Essential Part of the Estate Planning Process," click here.
"What Would a Family Meeting Do for My Family?" - click here.
"How to Talk to Your Parents About Money," click here.
"Try a Family Meeting on Your Summer Vacation," click here.