Archives For July 2007

JLP’s Tip of the Day

July 27, 2007

This one’s for all you newspaper delivery people out there.

On days when it is either raining or looks like it is going to rain, either double bag the paper or throw it in the grass rather than the driveway. Most driveways are slopped so that they carry the water to the street. When it rains, they essentially become rivers. And, even if the paper is in a bad that is tied shut, it will inevitably tear from the friction of being tossed on the driveway. Tossing the paper in the grass works perfectly since the blades of grass tend to hold the paper up away from the water.

One wouldn’t think this would be hard to figure out but I guess it is since every time it rains, my paper gets soaked.

Okay, I’m through with my rant. Carry on!

Today’s Wall Street Journal Cranky Consumer column was about Calculating Your Retirement Nest Egg. They tested the following five online retirement calculators:

To their list, I would like to add:

TIAA-CREF:

    T. Rowe Price:

    • Retirement Income Calculator How much will you really need once you’ve retired, and what are your chances of meeting your goals? The Retirement Income Calculator shows how market uncertainty affects your retirement income strategy.
    • Retirement Planning Worksheet This worksheet gives you a quick estimate of amount of money you’re likely to need for retirement.
    • Rollover IRA Distribution CalculatorBased on information you provide, the T. Rowe Price Distribution Calculator shows the cost of taking an immediate cash distribution versus keeping your money in a tax-deferred account.
    • Company Stock ToolUse this tool to compare the tax consequences and long-term value of rolling over company stock to a Rollover IRA versus taking a distribution of stock into a taxable account.
    • Small Plans Contribution CalculatorBusiness owners can calculate contribution amounts to SEP-IRA, Individual 401(k) and Keogh plans.
    • SIMPLE IRA CalculatorBusiness owners and employees who participate in a SIMPLE IRA plan can use this tool to calculate contribution amounts and tax savings.
    • 403(b) Contribution CalculatorUse this tool as a guide to determine the maximum amount you can contribute to your 403(b) account.

    Vanguard:

    The Scottrade Retirement Center:

    Beneficiary Planners

    • Beneficiary Options Calculator – Review the options available for all types of beneficiaries to determine which will best assist you in maximizing tax deferrals and minimizing RMDs.
    • Payout Projections Calculator – The RMD Projector is designed to assist beneficiaries of deceased IRA holders in projecting future required distributions from the decedent’s IRA.
    • Beneficiary Payout Calculator – The RMD Calculator is designed to assist beneficiaries of deceased IRA holders in calculating required distributions from the decedent’s IRA.

    Early Payout Planners (IRC Sec. 72(t))

    • Comparison Projector Calculator – Use this tool to compare the three basic “substantially equal periodic payment” structures authorized by the IRS for avoiding the 10% early distribution penalty.
    • Distribution Calculator – After you’ve selected a payment method, use this tool to structure your substantially equal periodic payment plan.

    IRA Eligibility Calculator

    IRA Selector Tools

    • Basic Comparison Calculator – This straightforward tool helps you compare Traditional and Roth IRAs on the basis of projected (after-tax) retirement income.
    • Legacy Planning Calculator – This tool helps you measure the potential wealth accumulation implications of selecting a Traditional or Roth IRA (for you and your beneficiaries).
    • Breakeven Analysis Calculator – Unsure of what your tax rates will be in 20 years? This unique tool helps you look at IRA selection from the standpoint of breakeven analysis (e.g. what if my effective tax rate in retirement is 30% rather than 25%?).

    Required Minimum Distribution (RMD) Planners

    • Comparison Projector Calculator – The RMD Projector is designed to project future required distributions.
    • Distribution Calculator – The RMD Calculator is designed to calculate required distributions.

    Rollover Planners

    • Plan Participant Calculator – Receiving a lump sum distribution from an employer-sponsored retirement plan? This tool will help you identify the tax options available to you and compare the retirement income implications of your various alternatives.
    • Beneficiary Rollover Planner – Are you a beneficiary receiving a lump sum distribution from an employer-sponsored retirement plan? This tool will help you identify the tax options available to you and compare the retirement income implications of your various alternatives.

    Roth IRA Conversion Tools

    • Basic Conversion Calculator – This straightforward tool helps you quantify the potential benefits of a Roth IRA conversion on the basis of projected (after-tax) retirement income.
    • Legacy Planning Calculator – This tool helps you meaure the potential wealth accumulation implications of selecting a Roth IRA conversion (for you and your beneficiaries).
    • Breakeven Analysis Calculator – Unsure of what your tax rates will be in 20 years? This unique tool helps you look at a potentional Roth IRA conversion from the standpoint of breakeven analysis (e.g. what if my effective tax rate in retirement is 30% rather than 25%?).

    All of the above calculators can be found here.

    TD Ameritrade:

    • Disability Income CalculatorSee the effect disability can have on your financial future.
    • Early Payout PlannerView how much money you would net, after tax and penalties, if you cashed in your retirement savings plan early.
    • IRA PlannerAnalyze whether a Roth or traditional IRA may be best for an individual’s unique circumstances.
    • Life Insurance CalculatorCalculate how much life insurance you may need based on your current financial situation.
    • Personal Net Worth CalculatorFind out how much you are worth with this simple net worth calculator, which will help you tally your assets and liabilities, and calculate your debt ratio.
    • Required Minimum Distribution CalculatorCalculate the amount of mandatory withdrawals from IRAs after age 70 ½.
    • Retirement PlannerCalculate a retirement savings goal based on current income and the amount to be invested each year to pursue that goal for a given rate of return.
    • Savings Gap CalculatorEvaluate whether or not your savings are on track to meet your retirement income needs.
    • The Cost of Waiting CalculatorCalculate how much more you’ll need to contribute each year to reach your retirement goal if you put off saving for retirement.
    • Time Value CalculatorCalculate the value of compound returns for different time periods and rates of return.

    I plan to add to this list as I find new calculators and tools. If you know of any that I have missed, please let me know and I’ll add them.

    I was just reading a post over on GenXFinance about stock splits. Jeremy’s post reminded me of something that happened several years ago. My wife’s employer had given their employees some stock options with an exercise price of around $70 per share (I don’t remember the exact amount). At the time, the company’s stock was trading at around $50 per share. As time went on, the stock moved toward the exercise price and as it got closer my wife heard some employees talking about it. One of the employees said:

    “You watch. Once the stock price gets close enough to the strike price, they’ll split the stock 2-for-1 so that we won’t be able to exercise our options.”

    LOL! Fortunately, that’s not the way it works. With a 2-for-1 stock split, the exercise price would adjust for the split. So, on a 2-for-1 split, if the strike price was $70 before, it would become $35 after. In other words, the guy was worrying about nothing.

    According to this week’s Getting Going column, When a Simpler 401(k) Is Just Dumb, by Jeff Opdyke (Jonathan Clements is on vacation), employers are reducing the number of investment options available inside their 401(k) plans. They are doing this in an effort to help those who may be too overwhelmed by the number of options to make a choice. I have to ask:

    Is this a good idea?

    For diversification purposes, this doesn’t seem to be too brilliant. I would rather see companies offer tiered plans with basic funds for the beginners and other funds for those who want to diversify. For instance, on the front page of the plan’s homepage, there could be a list of broad index funds – US Equity, International Equity, and a Bond fund. Participants could then click on a link to see more choices if they preferred or they could just use the three funds on the front page.

    Companies could even encourage participants to learn about their options or to seek help. They (companies) could even set up automatic enrollment into a target date fund based on the participant’s age. Lots of companies are doing this and I think it has a lot of merit. I just don’t see how limiting the choices for everyone is the answer to low participation.

    Thoughts?

    In a few minutes I’ll be a guest on Your Turn with Mike Causey and Francis Rose (thanks to Allan Roth of Dare to be Dull for mentioning my name). This will be my first live program. Hopefully there will be a link to the show afterwards.

    UPDATE: Here’s a direct link to the broadcast. (I had trouble getting it in IE, but it seems to work fine in Firefox)

    Earlier I was on the JC Penney’s website buying some Levis since the store no longer carries decent-looking jeans (I like Levis 560s). I found the jeans I liked on JCPenney.com and put three pairs in my shopping bag. The total came to a little over $86. I went to check out and found out that there was a $15 shipping charge because I my purchase was for less than $100. I didn’t really want anything else but I ended up adding a shirt because I didn’t want to pay $15 shipping.

    The only problem was the shirt was $29.99! LOL! So to save $15, I spent $30! Granted, the shirt really only cost me $15 since I was going to have to pay $15 regardless of whether or not I met the $100 threshold. I guess I subconsciously reasoned with myself that I would rather pay $15 towards a shirt than to pay $15 for shipping. Logical? I’m not sure.

    I saw over on the Consumerist that Starbucks is raising their prices again. This time they are raising them around $.09 per drink (the increase doesn’t apply to bottled drinks and food items as they are already expensive enough). I like their coffee okay, but their prices seem way out of line to me. If I could just get out of the habit of going to Barnes and Noble, I could quit drinking their stuff altogther (there’s just something about coffee and books).

    How does this affect David Bach’s Latte Factor? If you buy a latte 260 days per year (5 days a week × 52 weeks per year), you’ll spend $23.40 per year, which is equivalent to losing $5,000 over 30 years.