Financial Planning

Advisors who have clients converting a traditional IRA into a Roth IRA should consider the following strategy: use several accounts and then cherry-pick at year-end if there are possible tax savings. The IRS allows a taxpayer to “undo” a conversion by October 15 of the year following the conversion to a Roth IRA. 

According to Fidelity Investments, typical wage earners should aim to save at least eight times their final annual pay to help ensure they can afford basic living expenses in retirement. By age 35, the goal should be to have saved at least an amount equal to your gross salary; by age 45, the goal is to have cumulatively saved three times one’s annual salary.

For the 2011–2012 academic year, the average tuition and fees across the U.S. were $8,244 at four-year public universities and $28,500 at private institutions (source: the College Board). At the end of March 2012, Americans owed $904 billion in student loans compared with $679 billion owed on credit cards.

According to authors Diamandis and Kotler (Abundance), if every word written from the earliest days of civilization to the year 2003 would represent five exabytes of information.  A single Exabyte is one billion gigabytes (a one followed by 18 zeros). From 2003 through 2010, the world created five exabytes of information every two days. By the year 2013, we will produce five exabytes of digital information every 10 minutes.

A survey by LMSR and Invesco Van Kampen Consulting shows what words are preferred by investors when describing their current situation and advisors.

Even though national divorce rates have declined since peaking in the 1980s, divorce rates for those ages 40-69 have dramatically increased. In 1990, only 1-in-10 of those who went through divorce was age 50 or older; by 2009, the number was 1-in-4. More than 600,000 age 50+ got divorced in 2009.

Since the end of 2008, a point in time when the financial crisis was near its worst, investors took out more than $105 billion in stock ETFs and mutual funds than they put in. During 2011, withdrew a net $34 billion in large cap stock funds. Yet, since the end of 2008, investors have added more than $55 billion to sector funds (including $12 billion in real estate funds). The question is, “Has derisking turned into rerisking?”

According to Reverse Mortgage Insight, the top three reverse mortgage lenders for 2011 were MetLife Bank, One Reverse Mortgage and Urban Financial Group. Origination fees with lenders can be as high as 2% of the home’s value, capped at $6,000. Closing costs are frequently an additional 2% and there are mortgage insurance fees charged by HUD. The interest rate charged on these loans is generally higher than the rate someone would pay with a traditional fixed-rate mortgage.