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How to Buy Annuities

June 16th, 2010 . Posted in Investing | Comments Off
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Annuities can be an excellent way to save money and secure post retirement benefits. An annuity is an income for life offered by an insurance company in exchange for a retirement fund. Getting money from annuity payments is an easy, fast way to turn the money received on a schedule into a lump sum of cash. Here are some tips on how to buy annuities wisely.

This type of investments and related insurance products are complex and take time to understand. Before buying annuities you need to know what to expect from them, and the reasons why you are buying them. First of all, it is important to understand that annuities may help you meet some of your goals, as they can be used as insurance against “living too long.” Once you buy an annuity, you will get a guaranteed income stream, even if you outlive your annuity’s principal.

Annuities can play an essential role in funding your retirement plans. You can start by doing some research on how to buy annuities. Insurance companies, mutual-fund companies, nonprofit organizations, brokerage houses, and banks sell annuities. Secondly, you have to understand the difference between the two main types of annuities. Fixed annuities guarantee that your money will accrue at predetermined annuity rates. The payment is determined based on your life expectancy, the current level of your interest rates and the money invested. This option is perfect for very conservative investors who do not want to take any great risks with their investments. Those who opt for variable annuities should know that the amount of money received every month may vary according to the performance of the sub accounts that you invest in.

With most plans, your family does not have the possibility to recover the remaining payments once you die. This means that buying annuities is not the best solution if you want to leave your loved ones a lump sum of liquid money. The earnings that occur during the term of the annuity are tax-deferred. Thus, the annuity becomes a way to turn your tax-free account into a tax-free retirement income that you can not outlive.

It is very important to choose the right plan and the right time to invest in annuity products. Making a wrong decision may lead to unexpected penalty fees. Before comparing annuities choose whether you would like your retirement income to change in line with inflation, increase at a fixed rate each year, or remain at the same level for life. Be clear on what the other fees are, such as any administrative fees and expense risks charges.

Get advice from your financial planner before choosing an annuity and ask him everything you want to know about how to buy annuities. Make sure that you get recommendations on the financial planner that you choose. Unless you have an in-depth knowledge on this subject it is always recommended to ask for professional advice before deciding on an annuity because once it is brought it cannot be changed.

The Reality of Filing Bankruptcy

June 3rd, 2010 . Posted in Debt | Comments Off
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There’s still a serious stigma attached to personal bankruptcy. People view it as a sign that you’ve failed, that you’ve been reckless with your money and that you’re now trying to take the easy way out.

But filing for bankruptcy is hardly a free pass. It comes with serious consequences, ones that can negatively impact your life for a full decade. Before you file for bankruptcy protection, then, make sure that you’ve considered all of your other options. There is nothing easy about bankruptcy.

If your debts are too high, if they’re keeping you awake at night or if they’re negatively impacting your personal life, bankruptcy may be an option. But remember, it should only be a last option. Only if you can’t pay down your debt through personal loans, home equity loans or with the help of family members should you seek bankruptcy protection.

There’s a reason for this: A chapter 7 bankruptcy, in which your creditors forgive your debt, remains on your record for 10 years. That’s a long time. During this time, you won’t be able to qualify for many loans. And when you do find a lender willing to lend you money, you’ll pay high interest rates for the privilege. This holds whether you need to borrow money for a car, house or to return to school. In chapter 7, you might also lose your most important possessions, including your car and home.

Chapter 13 bankruptcy is a less severe form of bankruptcy. In it, you agree to a payment plan set up by a judge that allows you to pay back your creditors on a timetable that you can afford. However, even this less severe form of bankruptcy comes with huge negatives. Chapter 13 stays on your credit report for seven years. During this time, again, you’ll struggle to take out loans that don’t come with exorbitant interest rates or fees. You’ll also struggle to qualify for even the least attractive of credit cards. Having a chapter 13 bankruptcy on your record is hardly an ideal situation, either.

Sometimes, though, there is no other option. In these cases, don’t feel guilty or feel like a failure. Bankruptcy protection is there for a reason: to offer some assistance to consumers who are down on their financial luck. In today’s challenging economy, the number of bankruptcy filings is rising quickly. There’s not shame today in admitting that you’ve suffered serious financial hardships.

Successful Investing In The Stock Market

May 29th, 2010 . Posted in Investing | Comments Off
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There’s a nice simplicity in the old mantra about making money in the stock market: Buy low. Sell high. That’s as simple as it gets. Unfortunately, putting this rule into practice isn’t nearly as simple. The reason? The stock market is volatile and most of us dont know how to invest in it. Sure we may have a retirement account or a Roth IRA but that doesn’t mean we know how to work with the swings the market takes. Just because a stock has soared during the last three months doesn’t mean it won’t tank immediately after you buy it. And once it tanks, there is no guarantee that the stock’s value will again rise. There’s that other important rule regarding the stock market, too: Past performance in no way indicates future value. Just because a stock has been hot for a long time, doesn’t mean that it will continue to perform well in the future.

That’s why the best stock market investing strategy is to take a long-term view. This means that you shouldn’t try to guess which stocks will rise and which will fall. Sure, you can read plenty of predictions online from financial experts and analysts. But there’s no guarantee at all that these experts will be right.

The sad truth is this: No one can predict the performance of either a single stock or the entire stock market. It’s simply too volatile of an investment. People who tell you that they can are like those radio sports bookies who tell you that they can predict the winner of tomorrow’s football game: They’re either lying or they’re deluded.

When investing in stocks, it’s best to do your research beforehand. Read as much as you can about the company behind the stock. Find companies in which you believe. Then invest in them for the long haul. If their stocks take a slight tumble, don’t panic and sell. If they rise in value, enjoy the ride. Investing in stocks is a bit like investing in residential real estate. You have to be patient to have a shot at solid earnings.

The numbers bear this out. Most investors will make a solid profit if they keep their money in the stock market for a long enough period of time. That’s because historically, the stock market usually rises if you only look at seven- to 10-year periods. Yes, markets will take big falls, such as during the country’s recent Great Recession. But the market always bounces back. We’re seeing that now.

So don’t try to predict the next big stock trend. Don’t move your money back and forth between stocks in a frenzied attempt to guess right on the next big deal. Be patient. Invest in stocks in which you truly believe. And don’t withdraw your money too quickly. By following this advice, you’ll watch as your stock market investments steadily grow.

How To Find Information on Annuities

May 20th, 2010 . Posted in Investing | Comments Off
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Annuity information is available almost everywhere. These investment tools are sold by insurance companies and by banks to assist clients with their investment and retirement needs. An annuity is a contract held by an insurance company where payments are collected for a certain time, then distributed as instructed. It is similar to a life insurance policy except the date of distribution is determined as a date or an event and the policy is usually repaid to the investor, not the heirs. There are many different kinds of amenities available and each have different expenses. Finding one that works with the financial goals of the investor just takes a bit of work.

Annuities are available from many banks and insurance companies; they are advertised on the Internet, in newspapers, by direct mail, and in the Yellow Pages telephone books. Banks and insurance companies are an excellent source of information. Books on this subject can be purchased at a book store, ordered online or borrowed from a library. Many financial advisers offer free lectures with the hopes of attracting new business. Financial planners have annuities to sell and give guidance into which program best works with the client’s financial goals. Different people have needs, some have a long time to plan for their retirement and some have a short time. Some investors want to maximize their returns as soon as possible and others are more concerned with a safe growth.

There are three parts to an annuity investment. The first is the kind of annuity to purchase. This can be a fixed annuity where every year a certain interest rate is paid on funds and accumulates. The other kind is the variable rate where the annuity is invested in stocks or bonds and the investor takes the rewards or the losses of the market place. The second consideration is the costs involved. Different insurance companies have different expenses to be paid out of these funds. An investor should obtain a complete list of expenses and understand what they are, when they are due, how they will be paid and how it will affect the fund’s growth. The third determination is how the account will be paid out. It can be paid out in a lump sum, in monthly payments for as long as the annuity holders is alive, paid out over a period of time or paid on an event, like a retirement or the death of the holder. The owner also determines who receives the money.

Annuity information is available almost everywhere. An investor can obtain the information he needs to make wise decisions in his investment future by reading a book, visiting a bank, insurance company or financial planner and reviewing the different types of annuities available. When choosing a financial planner, it is best to ask family or friends who they have had good experiences with and alternatively, who is not recommended. Once a program has been chosen, the investor will know his retirement future is safer.

How to Invest Your Tax Return

May 15th, 2010 . Posted in Investing | Comments Off
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You receive a tax return every year sometime in the first quarter. What do you usually do with it? Spend it on things that you don’t need but want? Probably so. However, what if you could do something with your tax return that would help you in the future rather than just meeting your desires now and blowing it all?

Well, you can do just that. Rather than blowing all of the money that you received back from the IRS, use it for the good of your financial future. Below you will find a few things that you can do to save or invest your tax return to better your financial future.

First off, you could start a savings account. This money can be used for future emergencies, your child’s college education and future, or even a down payment on a home if that’s what you want. This is an excellent way to invest your tax return and still have it accessible when and if needed for emergencies.

Invest your tax return into your 401(k) plan. You’ll need a savings account of some sort in order to do this with your 401(k) plan at work. Deposit the funds into a savings account and then increase your contribution to your 401(k) plan at work. For example, if you received $2,400 as your tax return, you’ll deposit it into a savings account and then up your contribution at work to $200 – $250 per month. Your paycheck will be less when you receive it but that’s why you opened the savings account so that you could replace it.

Invest your tax return into an IRA. If you open up a traditional or a Roth IRA, you can contribute up to $4,000 per year. Of course, there are requirements and limitations that must be met such as income limitations with the Roth IRA. You can only make $110,000 filing single and $160,000 filing jointly. If you do not meet these income requirements, a traditional IRA would suit you better.

Invest your tax return into an ESA. This is an educational savings account that allows you to deposit $2,000 (at this current time) on a yearly basis and your child can withdraw funds from the ESA when he or she turns 18 and use for educational and college related expenses. It is a great way to earn money for your child’s future.

Invest your tax return into a CD at a bank or financial institution. CD’s can be set up for a few months or even several years. You can deposit your tax return into a CD for say two years and at the end of the two years, you’ll have more than what you first deposited because CD’s accrue interest over time. It’s a great way to get more money from your tax return.

Last but not least, you can always invest some of your tax return in the stock market. I don’t recommend investing it all as there is just as much potential to lose it all as there is to earn off it.

Remember, if you don’t want to save or invest all of it, keep a portion of it and use the rest to invest or save. There is no reason not to splurge a little bit on yourself and your family even if you want to protect your financial future.

Are You Saving Enough For Retirement? Probably Not

April 26th, 2010 . Posted in Banking and Saving | Comments Off
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We’d all like to think that we’re saving enough to live out our retirement years in comfort. By are we? A new survey by Hewitt Associates suggests that most U.S. residents aren’t.

The Hewitt survey says that U.S. residents should save an amount equal to 15.7 times their annual salary. If you earn $60,000 a year, then, you should have $942,000 stashed away to cover their retirement years.

How are you faring? Are you anywhere near the figure that Hewitt Associates suggests is ideal for you? If you’re like most people, you’re not.

According to the Hewitt Associates survey, four out of five U.S. residents are not on pace to meet the 15.7 standard. This probably shouldn’t be too surprising. U.S. society long hasn’t placed much value on saving. Instead, consumers are encouraged to go out and spend. Even the federal government prefers consumers to spend their money. It’s the engine that makes capitalism go.

Couple that with the Great Recession, and saving for retirement has become even rarer. A significant number of people today are worried about how they’ll pay next month’s mortgage bill. They’re worried that their job will disappear next week. And they wonder how they’ll make up the lost income from all the unpaid days off their bosses are forcing them to take.

Saving for retirement isn’t even on the radar screen for these U.S. consumers. And who can blame them, what with the national unemployment rate still hovering dangerously close to 10 percent? It’s little surprise that so many U.S. residents treat saving for their retirement years as a luxury that they simply can’t afford.

A closer look at the Hewitt Associates survey produces some interesting data. According to the numbers, the typical U.S. consumer can expect Social Security to provide a total income equal to 4.7 times their final annual salary. To meet the Hewitt goal of 15.7, then, U.S. consumers have to come up with an amount equal to 11 times their last annual salary from other sources.

These sources can be anything from 401(k) plans, stock market investments, real estate sales, CDs, savings accounts or annuities. The types of vehicles don’t matter. What is important is that you have enough income streams from all your investment vehicles to live out your retirement years in comfort.

Retirement should be a reward for a life of hard work. Don’t ruin your golden years by not saving enough to make them as stress-free as possible.

Regaining Your Investing Confidence

April 8th, 2010 . Posted in Investing | Comments Off
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No one’s overly confident these days when it comes to investing their money. The economy may be officially out of the Great Recession. But the doubts from that catastrophic economic meltdown remain. It’s simply not easy to invest with any confidence these days.

But if you sit on your money, you might miss out on an opportunity to see your investment grow. The stock market, for instance, has been experiencing steady gains. Other investment vehicles, too, have been showing signs of life. It’s natural to be a bit gun-shy today, especially if you saw your investments tank during the height of the Great Recession. But by sitting on the sidelines, you’ll never recoup your losses. And you’ll miss out on some potentially big gains.

The key is to take a close look at your own personal situation to determine how much financial risk that you are willing to take. For instance, if you are still decades away from retirement, you should be willing to take on a greater amount of risk than would an investor who hopes to retire in five years.

What you should not do, though, is let the economic slowdown of recent years alter your investing strategy. The same concepts that held true for investors six years ago, hold true today: Put your money in a diverse array of financial investments. Don’t try to time the market; you’ll never win by pulling your money in and out of the stock market based on hunches or “expert” advice on “can’t miss” stocks. And invest for the long-term.

Investing today requires patience, just as it did years ago. You can’t expect to sink your money into an investment and watch it explode in value overnight. That was unrealistic before the economic meltdown, and it’s even more unrealistic today.

You also shouldn’t let fear motivate your investing decisions. Many investors did lose money during the Great Recession. But those who lost the most where the ones who pulled their money out of their mutual funds or 401(k) plans at the bottom of the recession. They took out their dollars where they were at their lowest, and then missed out on the opportunity to watch them grow as the economy began its recovery and the stock market took off again.

There are always going to be down times for the stock market and other investments. And you are never guaranteed to make money when you invest. But you can’t live in fear and be an effective investor, no matter how bad the recent economic crash was.

Be Weary of Financial “Experts”

March 24th, 2010 . Posted in Financial Advisors | Comments Off
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Back before 2006, the lead economist of the National Association of Realtors told anyone who’d listen that there was no such thing as a housing bubble.

He meant that housing prices would never appreciate so high that they’d have nowhere to go but down. His theory? Housing prices would stop rising as rapidly as they did in the years from 2000 through 2005. But housing values would never fall.

We all know how wrong this expert was. Starting in late 2006, housing prices did indeed start to fall. By 2008, they’d plummeted. It’s why First American CoreLogic reports today that nearly 25 percent of U.S. homeowners are underwater. They owe more on their mortgage loans than what their homes are worth.

Why bring this up? Only because it’s a perfect example of how you should never place blind faith in the financial opinions and theories of others, even if these people are recognized as experts in their field.

That’s because no one really knows what’s going to happen in the world of finance from one day to the next.

For instance, no one, no matter how much of an expert he or she claims to be, can give you a can’t-miss tip on the next hot stock. No one can guarantee for you that a house in a particular area is guaranteed to rise in value.

There are plenty of “experts” out there who will tell you that they have inside knowledge. They’ll lead you to believe that they’re savants, able to accurately read and predict the future of the markets.

All these people really are, though, is liars. Or, if they truly believe that they can predict the vagaries of our nation’s economy, then they’re delusional.

The best advice you’ll ever receive when it comes to finances and investing is this: Study any investment vehicle you’d like to use. Then be patient. Investments rise and fall in value all the time. Don’t panic when a stock falls and pull your money out. The next week, that stock might soar to new heights. On the other side, if a particular stock’s value suddenly skyrockets, don’t get overexcited and dump money from your other investments into it. That stock can just as easily crash down to earth next month.

Investments are unpredictable. But you can ease some of the stress by only taking on as much risk as you can tolerate. You can also avoid the temptation to look for an expert’s sure thing by practicing patience with your investments.