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PROTECT YOUR FAMILY
1. Prepare and maintain a will.
2. Set up an emergency fund in a regular taxable account. Invest it as the Income Model Portfolio, this will help cover short-term emergencies as they arise. How much do you need to set aside?
3. Buy term life insurance. This is the lowest cost way to financially protect your family. How much do you need to buy?
4. Consider buying disability insurance for income replacement to cover a temporary or permanent disability, that may limit your future income potential.
5. Consider buying long-term care insurance.
MAKE A SPENDING PLAN
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Things to consider:
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How much are you spending?
CHARGE IT! The phrase we all love to say but hate to pay! Stop! Think! Am I able to pay the balance in full when the bill arrives? Most lending institutions tend to be willing to lend more than we should borrow. In our view, except for emergencies, the only acceptable revolving debt one should take on, within reason, is for a home, an automobile, an education or an income producing business. For all the rest, save and pay cash!!!
CONSOLIDATE YOUR ACCOUNTS
Carefully examine the cost and/or tax consequences of such transfers from the current custodians.
1. Choose a low cost brokerage service
or a no-load mutual fund company.2. Directly rollover all retirement plans from previous employers to the no-load mutual fund company or to the brokerage service that you have chosen. This is easily done by first, contacting the new fund family or brokerage service and filling out their required forms. Secondly, contact the current custodian of your accounts to inform them of the transfer.
3. Transfer all other tax deferred and taxable investment accounts to the same fund family or brokerage service. Be sure that the tax considerations of each account stay the same i.e. Roth IRA to a Roth IRA.
SET YOUR GOAL
In the world of investing, your risk tolerance should be dictated by your time horizon. When will you start using the money? Here are some scenarios.
1. For retirement
Goal: retire at age 50
Invest as the FOCUS or TOTAL MARKET MODEL PORTFOLIO
thru age 39
Invest as the TOTAL MARKET MODEL PORTFOLIO from
ages 40 thru 44
Invest as the 50/50 MODEL PORTFOLIO from age 45
thru retirement years
Goal: retire at age 55
Invest as the FOCUS or TOTAL MARKET MODEL PORTFOLIO
thru age 44
Invest as the TOTAL MARKET MODEL PORTFOLIO from
ages 45 thru 49
Invest as the 50/50 MODEL PORTFOLIO from age 50
thru retirement years
Goal: retire at age 60
Invest as the FOCUS or TOTAL MARKET MODEL PORTFOLIO
thru age 49
Invest as the TOTAL MARKET MODEL PORTFOLIO from
ages 50 thru 54
Invest as the 50/50 MODEL PORTFOLIO from age 55
thru retirement years
Goal: retire at age 65
Invest as the FOCUS or TOTAL MARKET MODEL PORTFOLIO
thru age 54
Invest as the TOTAL MARKET MODEL PORTFOLIO from
ages 55 thru 59
Invest as the 50/50 MODEL PORTFOLIO from age 60
thru retirement years
Goal: retire at age 70
Invest as the FOCUS or TOTAL MARKET MODEL PORTFOLIO
thru age 59
Invest as the TOTAL MARKET MODEL PORTFOLIO from
ages 60 thru 64
Invest as the 50/50 MODEL PORTFOLIO from age 65
thru retirement years
What's it going to take to get there?
2. For college savings
College money for your child
Invest as the FOCUS or TOTAL MARKET MODEL
PORTFOLIO thru age 11
Invest as the TOTAL MARKET MODEL PORTFOLIO from
ages 12 thru 14
Invest as the 50/50 MODEL PORTFOLIO from
ages 15 thru 17
Invest as the INCOME MODEL PORTFOLIO from
age 18 thru college years
What's it going to take to get there?
INVEST YOUR MONEY
1. For retirement
A. Max. Out the matching portion of an employer sponsored retirement plan.
If available.
B. Max. Out a Roth IRA.
IRA total contribution limits:
$4,000, age 50 and older $5,000 for tax year 2007
$5,000, age 50 and older $6,000 for tax years 2008 and 2009
Non-working spousal IRA total contribution
limits:
$4,000, age 50 and older $5,000 for tax year 2007
$5,000, age 50 and older $6,000 for tax years 2008 and 2009
For tax year 2007 you can open or contribute to a Roth IRA if you have a modified adjusted gross income (MAGI) of less than $99,000, or you are filing jointly and have a MAGI of less than $156,000. The maximum allowable contribution is phased out for individuals with an MAGI between $99,001 and $114,000, and couples between $156,001 and $166,000.
If you are in or over the Roth phase out levels, you can open or contribute to a traditional IRA for a total of the limits shown above.
C. Max. Out remaining portion of an employer sponsored/self employed retirement plan.
401k contribution limits:
$15,500, age 50 or older $20,500 for tax year 2007
403b Contribution Limits:
$15,500, age 50 or older $20,500 for
tax year 2007
457 contribution limits:
$15,500, age 50 or older $20,500 for
tax year 2007
Simple 401k or Simple IRA plan contribution limits:
$10,500, age 50 or older $13,000 for tax year 2007
Payroll deduction IRA contribution limits:
$4,000, age 50 or older $5,000 for tax year 2007
D. Consider opening a variable annuity, only for those of you who:
Have contributed the maximum to other retirement accounts
Have an additional $5,000 or more to invest
Won’t need annuity assets for 10 years or more, and not before age 59½
E. Invest through a regular taxable account.
Skies the limit.
2. For college savings
A. Contribute to a 529 plan. (Higher education expenses only)
529 contribution limits:
Donate up to $12,000 per contributor for each beneficiary in 2007.
A
"one-time in five-years" lump sum of $60,000, in 2007, can be
made per contributor for each
beneficiary without triggering a federal gift tax. Limits vary by state,
but the maximum total assets for each account is generally $250,000 per
beneficiary.
And/Or
B. Education savings account also called an education IRA. (Withdrawals may be used for all levels of education)
Contribution
limits:
In 2007 you can open or contribute $2,000 per child per year,
if you have a modified adjusted gross income (MAGI) of less than $95,000
or you are filing jointly and have an MAGI of less than $190,000. The
maximum allowable contribution is phased out for individuals with MAGI
between $95,001 and $110,000, and couples between $190,001 and $220,000.
C. Invest through a regular taxable account.
Skies the limit.
SPEND YOUR NEST EGG
1. Make the plan
"Living well in retirement means leaving this world broke." Wisely spend all that you have in your golden years, because you've earned it and you can't take it with you anyway.
If you'd like to pass some of your assets onto your loved ones, do it while you're around. For the tax year 2007, you and your spouse can separately give up to $12,000 to each beneficiary without triggering the federal gift tax. (This annual exemption amount will likely increase in the future). Also, donations to your church and charities may be fully tax deductible.
Thanks to the miracles of modern medicine, the likelihood of you and/or your spouse living to age 90 and beyond is a real possibility. In fact, today's average 50 year old has a life expectancy of 82 years. If you're concerned about outliving your assets, add an additional five years to your most generous estimated life span. It's very important that you establish this guesstimate before drawing from your lifesavings.
2. Tap those assets
What's it going to take to do it?
THINGS TO AVOID
* Insurance policies sold as investments (i.e. whole life).
* Loaded mutual funds or expensive investment plans, as sold through a salesman or most advisors.
* Holding more than 5% of the equity portion of your portfolio in any one individual company stock (The only exception is an employer that matches your contributions with company stock through a retirement plan, but it is recommended that when available, sell at least enough to fall within the 5% threshold).
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