Investing Curiouscatblog

Category: quote

  • Retirement Savings Survey Results

    Have less than $25K in savings? Get in line

    Nearly half of all workers saving for retirement have savings that fall short of the $25,000 mark, according to the 2007 Retirement Confidence Survey by the Employee Benefit Research Institute and Matthew Greenwald & Associates. Predictably, the youngest workers (ages 25-34) dominate this group – 68 percent of them have less than $25,000 earmarked for their later years. But so do half of workers age 35 to 44 and a third of workers age 45 to 55 and over.

    What is a very rough estimate of what you need? Well obviously factors like a pension, social security payments, age at retirement, home ownership, health insurance, marital status… make a huge difference in the total amount needed. But something in the neighborhood of 10-25 times your desired retirement income is in the ballpark of what most experts recommend. So if you want $50,000 in income you need $500,000 – $1,250,000. Obviously that is difficult to save over a short period of time. The key to retirement saving is consistent, long term commitment to saving.

    Related: Saving for Retirement – Start Young with 401k and Roth IRA – Retirement Delayed: Working Longer

  • Alternative Minimum Tax

    Congressional Budget Office on the Alternative Minimum Tax (AMT):

    Until 2000, less than 1 percent of taxpayers paid the AMT in any year. Under current law, however, the number of taxpayers affected by the AMT will grow from just over 1 million in 2001 to nearly 30 million in 2010 before falling back to about 23 million in 2014 after the expiration of the 2001 and 2003 tax cuts. Twenty percent of all taxpayers–and 40 percent of married couples–will owe AMT in 2010. AMT receipts in 2010 will total about $90 billion, roughly 7 percent of total individual income tax revenue.

    The Looming Challenge of the Alternative Minimum Tax, Alan D. Viard, Federal Reserve Bank of Dallas:

    While the AMT applied to 200,000 taxpayers in 1990, roughly 4 million will pay it this year, according to the Urban-Brookings Tax Policy Center. But that is only the beginning. Under current law, the AMT rolls will explode to 22 million in 2007. The AMT’s revenue yield follows a similar pattern, having risen from $2 billion in 1990 to $22 billion this year. It’s projected to nearly triple to $65 billion in 2007.

    Related: Families Face Alternative Minimum Tax, NPR – Brookings Institution article on the AMT – Preparation Softens Blow of Alternative Minimum Tax – IRS on the AMT

  • Credit Card Tips

    It is difficult to imagine trying to live without the convenience of credit cards. Yet many get into financial trouble in part due to their misuse of credit cards. By following a few simple rules you can avoid the missteps and use credit cards to improve you personal finances instead of falling into the credit card traps.

    First, don’t use your credit card for loans. Pay off your balance each month. Pretty obvious advice but way way too many people don’t follow it. If you use your credit card for a loans – 98% of the time that is a mistake and big risk to your personal financial future. Don’t do it. There is a reason pretty much all the advice from financial advisers on credit cards starts with this – it is the most important advice.

    Second, if you don’t follow the advise above pay off your loan as soon as possible. Payment the minimum payment is huge mistake. You should not be making any discretionary purchases if you are not paying down your credit card debt substantially each month.

    Continue reading credit card tips.

  • Mortgage Defaults: Latest Woe for Housing

    The main point of this article is the increasing evidence of problems due to loose underwriting for mortgages of the last few years. Mortgage defaults: Latest woe for housing:

    The rate of subprime borrowers who are more than a month late on a mortgage payment was 13.2 percent in the third quarter of 2006, the latest numbers available, up from a 10.5 percent delinquency rate in the third quarter of 2005.

    The overall mortgage delinquency rate was 4.7 percent in the third quarter, just slightly above the 4.4 percent rate of a year earlier, when it was a historic low.

    The problem of loose credit is real and important. But isn’t it really amazing how 4.4% is the historic low for mortgages over a month late? That seems really high too me. Obviously 13.2% for sub-prime loans shows how risky it is to take out such a loan. In my opinion, the delinquency rate for over 90 days late is a more important figure (but these numbers can serve as a leading indicator).

    Related: articles on investing – investment dictionary – How Not to Convert Equity

  • Kodak Debuts Printers With Inexpensive Cartridges

    Kodak Debuts Printers With Inexpensive Cartridges. I don’t know anything about the printers but normally companies charge exorbitant amounts for ink cartridges. They rely on the tendency of consumers to only look at the purchase price and ignore the much larger operating expenses.

    In rolling out its new Easyshare All-in-One Printers, Kodak said it will “save consumers up to 50 percent on everything they print.” The new Kodak cartridges will cost about US$10 for black ink and $15 for a five-color unit.

    Kodak 4-in-1 Printer with Wi-Fi

    Related: Price Discrimination in the Internet Age

  • Nicolas Darvas

    Nicolas Darvas wrote a classic investment book – How I Made $2,000,000 in the Stock Market. In it he provides an honest and open look at his experience from his naive start to his eventual success. He lays out, in great detail, exactly what he did and how foolish some of his actions were. Then he explains how he came to find success by focusing on the price and volume action of stocks. While honing his investment strategy, in the 1950’s, he traveled the world working as a world class ballroom dancer and placed order via cable.

    As with other classic investing books age does not detract from this books value. The book is very similar in form to another classic: Reminiscences of a Stock Operator by Edwin Lefevre (about his experience in the early 1900s).

    Darvas’ method was a forerunner of the many technical analysis schemes used today. He is extensively referenced by William O’Neil (of Investor’s Business Daily fame) and other leading technicians. An extremely simplified overview of Darvas’ method: determine “boxes” (trading ranges) for a stock and buy on the breakout, to the upside, of the box. He used very close trailing stop loss orders to minimize losses. He sought to make large gains (let his winners run) and take losses quickly.

    More on Darvas’ investing ideas – other leading investors

  • Social Security Trust Fund

    The Washington Post really doesn’t like Social Security … by Brad Setser

    Best I can tell, Social Security is in the best financial shape of any federal program. It is in far better future shape than Medicare. And it is in way better shape than the portion of the government that isn’t financed by the payroll tax. That part of the government has a $434 billion deficit. Social Security, by contrast, has a $185b cash flow surplus. Social Security’s revenues exceed its expenditures – and will continue to do so for several years. Its financial assets are growing – they will top $2 trillion at the end of this year.

    This is not the way the story is normally told. Social Security is actually in good shape for at least 30 years. That doesn’t mean it is not a big problem after that but Brad Setser makes a good point that the huge increase in the rest of the debt has really made that problem seem minor. The main point? We need to fix the rest of the budget mess, and while I still think Social Security needs adjustment really that is not as important as fixing the rest of the spending money the government doesn’t have.

    Related: Estate Tax Repeal

  • What Do Unemployment Stats Mean?

    Economic statistics, like all data, needs to be defined. The way to collect data (economic data or any other type) is to operationally define the terms. Statistics don’t lie. Statistics can be faulty, when those collecting the data fail to use good operational definitions and the data quality is poor (without a definition people make guess…). People can also just make up false number. And people can try to mislead by stating statistics in a way that seem to indicate something that is not the most accurate way to view the whole situation.

    The way to cope with such problems is to understand statistics and data. The data can be wrong. So you have to access that possibility. And the data can mean something different than you assume (and often the data is not presented with the operation definitions). When that is the case be careful about your assumptions (with financial and economic data and other data too). But don’t decide to just ignore data because then you condemn yourself to ignorance of the many things which data shed light onto.

    In, What ‘Unemployment’ Really Means These Days, the unemployment data is explored. The post does a good job of showing how you can get different measures of the “unemployment rate” depending on how you define what you will measure. I happen to believe the existing measure is best but you need to understand that it doesn’t factor in underemployment and people giving up completely… I believe the best way to deal with those weaknesses is to have supplementary measures that enhance your understanding of the unemployment rate. And too view it as only one measure of economic health. Look also at median wages, health care coverage, hours worked, vacation time…
    (more…)

  • Real Free Credit Report

    From the official US Federal Trade Commission site:

    A recent amendment to the federal Fair Credit Reporting Act requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. But there’s only one online source authorized to do so. That’s annualcreditreport.com. Beware of other sites that may look and sound similar.

    Viewing your credit report is an important step to financial security. You should review your credit reports annually (at least) to correct and any errors. Also doing so can be a tool to help you spot identity theft. The credit report site also has a large frequently asked question section with answers to questions like: What is a credit score? How do I request a “fraud alert” be placed on my file? Should I order all my credit reports at one time or space them out over 12 months? (I would suggest spreading the requests out during the year myself).

  • Start Young with 401k and Roth IRA

    Putting away some money is vital, even if you are young and in debt by John Waggoner:

    Your company may also match your 401(k) contributions. Say you earned $50,000 a year and contributed 5% of pay to a 401(k). If your company matches 50 cents on the dollar and your money earns 5%, you’d have $3,847 after a year. In 10 years, you’d have about $56,000, if you got 3% raises yearly and earned 5% on your savings.

    Starting small – If you don’t have a 401(k) available, at least open a Roth IRA. You contribute after-tax money to a Roth, but you pay no taxes on your withdrawals at retirement.

    More on Roth IRA’s.