Mutual Fund Expense Ratios

Smart mutual fund investing includes buying low-cost funds. Morningstar has conducted numerous studies that all echo the same point: Low cost funds out perform high cost funds.

The argument is straightforward. Say in investor puts $10,000 in two funds for the same period of time and both portfolios delivered the exact same pre-expense performance: 7 percent per year for twenty five years. The only difference between the two funds is the expense: One has an annual expense ratio of 0.5 percent while the other costs 1.5 percent annually.

The difference in after-expense investment performance is striking. The lower cost fund would have returned $48,277 over the period while the higher cost fund would have returned $38,134.

Considering what most investors need to save for retirement, that roughly $10,000 difference in investment performance would be multiplied many times for most real-world portfolios.

Tracking Down and Collecting Unclaimed Life Insurance

THE most basic purpose of having a life insurance policy is to provide some assistance for loved ones when you die. Wealthier people sometimes use life insurance for estate planning, while most people expect the policies on which they have paid premiums for decades to help their heirs get by — or at the least cover funeral expenses.

Yet hundreds of millions of dollars in life insurance goes unclaimed each year for one simple reason: the beneficiaries do not know the money exists. Even in this wired age, if the insurance company cannot locate the beneficiary — or for that matter, even learn that the policyholder has died — that money will go unclaimed.

The money does not stay with the insurer indefinitely. It is eventually transferred to state unclaimed property divisions. And the states then post the information on Web sites or in local newspapers.

But that process can take years, and in the meantime, first the insurers and then the states profit from money owed to the beneficiaries.

Florida has about 9.9 million unclaimed accounts — including securities and other property, in addition to insurance — worth more than $1 billion. Of that, some $355 million is related to unclaimed insurance, said Alexis Lambert, a spokeswoman for the Florida Department of Financial Services.

http://www.nytimes.com/2011/02/26/your-money/life-and-disability-insurance/26wealth.html?_r=1&ref=your-money

Gray-Tech On Rise as Population Ages

By Patrick Seitz, INVESTOR'S BUSINESS DAILY

With the first baby boomers turning 65 this year, companies in the youth-centric consumer electronics business are turning more attention to older customers.

This gray-tech trend covers everything from video games for exercising older minds and bodies, such as Nintendo's BrainAge and Wii Fit, to Skype video conferencing for seniors to interact with their kids and grandkids.

In some cases, general-interest tech products will be marketed differently to senior citizens. In other cases, new products will be developed specifically with older people in mind.

Gray tech has moved beyond those telephones with ridiculously large buttons for seniors with poor eyesight. Today's seniors want many of the same cool tech products prized by younger consumers.

There's more focus on gray tech because it's a growing market with big spending power, analysts say.

Own 77% Of Assets

The 78 million baby boomers born between 1946 and 1964 make up 28% of the U.S. population and own 77% of all financial assets, says Mary Furlong, president of Mary Furlong & Associates, a marketing firm geared to helping clients target seniors and baby boomers. The number of Americans age 65 and older will double by 2030.

Communications and engagement technologies for older people will be a $20 billion business in North America by 2020, says Laurie Orlov, an industry analyst with Aging in Place Technology Watch.

"There is a perception that there is an older consumer ahead of us," Orlov said.

Some consumer electronics vendors are taking a "designed for all" approach to their products, which can be customized for older people and other users, Furlong says.

Apple's iPad is a good example of a mainstream product with huge potential for seniors, she says.

"The iPad is the top product for all people 50-plus," she said. "The user interface is so easy. And for anyone with vision issues, the text size can be changed quite easily."

Older consumers are finding the iPad much easier to use than a personal computer, she says. The iPad's touch-screen display and big icons beat using a computer mouse and having to find and click or double-click PC programs. Plus, a tablet can sit on your lap, she says.

"What's so magical about the iPad is that you can be 90 and find nine applications to use, or be a child and find a bunch of applications," Furlong said.

Baby boomers are comfortable using technology because they've used it in the workplace, she says. Many will continue working because they don't have enough money saved for retirement. So they'll need to keep up on the latest technologies to stay relevant.

Baby boomers in many cases are caring for their parents and will be the ones buying tech products for them, analysts say.

Clarity, a unit of Plantronics, sells most of its home phones for older people with hearing loss and to their baby boomer children.

A senior's hearing loss "is worse for the people around them" than for the senior, said Carsten Trads, president of Clarity. "They're the ones who have to listen to the television turned up so loud you could hear it from five blocks away."

Phone/Hearing Aid

Clarity phones have built-in digital hearing aids.

The older generation would rather buy a poorly made corded phone for $10 at Wal-Mart than pay $150 for one of Clarity's phones, Trads says. But their adult children see things differently.

"We've definitely seen an uptick in business," Trads said.

One of the most important services for seniors today is Skype video calling, Orlov says. With a webcam and the Skype software, seniors can visit with children and grandchildren who live far away.

Readeo, a Chicago-based company, offers a service that lets grandparents read children's books to their grandkids on video calls. The shared reading experience is called BookChat. It lets participants see, hear, read and interact as if they were in the same room.

"Children will sit still longer for having a book read to them than for a Skype visit," Orlov said. "We're talking 3- and 4-year-olds."

Like the iPad, Microsoft's Kinect sensor control for the Xbox 360 could be a mass market product with applications for seniors.

The Kinect sensor is mostly used to play Xbox games by waving, kicking, punching and jumping. But the sensor, which detects people and their body motions and voice commands, could be used to control the television in the future. Already, people can operate Netflix video streaming using Kinect.

"Kinect is a transformative user interface," Orlov said. "The move to gesture (interfaces) is a very exciting development."

Baby boomers also are spending more of their free time on technology-related hobbies, Furlong says. That includes social networking related to particular clubs and interests or online genealogy through services like Ancestry.com.

"Even something as silly as dating, one in three boomers are going to be alone at some point either through divorce or loss of a partner and they're going to be online dating in record numbers," she said.

Household cleaning-robot maker iRobot sees elderly consumers as a key opportunity ahead.

"It's a huge market for us," said iRobot CEO Colin Angle.

IRobot makes the Roomba robotic vacuum cleaner and the Scooba floor-washing robot. Both robots help people who are physically unable to clean their homes properly, including the elderly, Angle says.

The senior market is definitely a big opportunity for consumer electronics makers. But they don't have to target it specifically as long as they make their products easy to use and customizable.

"Consumer electronics companies still pretty much design for the young," Orlov said. "It's just that (all ages) like easy-to-use devices."

Disclosure: I own Apple and Microsoft.

8 Bad Money Habits to Drop by Retirement

By Jill Krasny, Morningstar

Baby boomers have borne the brunt of the recession burden and blame, but their bad money habits may be the root of the problem.

As many of these boomers near retirement, they face a dire financial situation spurred by years of financial mistakes. Luckily, these mistakes are correctable. Morningstar MainStreet has tapped some financial experts to explain the most common money sins boomers commit so they can break the bad habit before retirement. Don’t say we didn’t warn you…

Not Saving for Retirement
MainStreet recently reported that one in six older Americans lives below the poverty line. This means millions, or 16% of seniors, lack the financial resources they need to get by and are being forced to take extreme measures such as cashing in assets, moving, returning to work or tapping the government for help.

Even if you’re not poor, don’t let a lack of planning hinder your financial future.

“These boomers think that it’s ‘after right now’ that it’s time to start saving,” says Stuart L. Ritter, a certified financial planner with T. Rowe Price, “but that’s a way to not have to make any changes.” Start saving now to spare yourself the heartache later.

Obsessing About Taxes
Ritter says one of the top misconceptions boomers have about individual retirement accounts is that taxes account for everything. And while they do matter to an extent, “a lot of people say that they want to pay less in taxes, when I’d personally like to pay significantly more. Hey, I want my boss to give me a massive salary increase so that I would pay more in taxes!” Ritter says.

Unfortunately, using taxes as the sole criterion for whether you use a Roth IRA or a traditional IRA can also mean higher long-term costs down the road, Ritter notes.

“Often, an upfront tax loss [with a Roth IRA] will give you more to spend in retirement,” but many will opt for the traditional IRA because it looks better on paper.

The ‘I’ll Just Work Longer’ Mentality
“I’ll start my diet tomorrow” is a common excuse heard long after New Year’s Eve, but are you taking the same approach to your savings by saying you’ll push off retirement to work longer?

If so, you’re only procrastinating, and that’s not an effective savings strategy, Ritter says. By planning your finances ahead of time, you won’t need to pseudo-commit yourself to work, which may or may not be a option, depending on your health (and the economy).

Betting on Your Inheritance
As TheStreet’s Joe Mont reported, the nation’s largest-ever intergenerational transfer of wealth is under way, and a nest egg of $11.6 trillion will be handed over to boomers from their elderly parents.

But you might not be one of these lucky inheritors, says Gabrielle Clemens, a certified divorce financial planner, and you’ll need to manage your assets on your own. “Many of these people, especially divorcees, are banking on their inheritance,” Clemens told MainStreet. But when tragedy strikes, Americans turn to three bad options: credit cards, the generosity of living family members and even bankruptcy. Keep your dignity intact and you won’t have to go down those rabbit holes.

Skipping Long-Term Care
“Having a plan for long-term care, whether that’s insurance, is something probably every boomer should consider,” Ritter says. Yet few boomers aged 46 to 64 actually do, according to a recent New York Life Insurance survey. While many boomers value long-term care and the role it played in their own parents’ lives, only 9% of 1,073 online respondents actually bought coverage for themselves because many (47%) felt they won’t ever need it or assume the government will foot the bill.

Still, as America’s health care costs ramp up and obesity and morbidity grow alongside it, older Americans face a decreased quality of life and need to be prepared.

Forgoing Employee Benefits
Are you working for one of those post-recession employers that still shows employees it cares? Wise up and sign on for the benefits being offered.

As TheStreet recently reported, “with the worst of the recession in the rearview mirror, benefits are getting a second look,” and some employers are finding cheap but effective ways to make employees feel special. That might mean adding a couple more days of paid vacation (not to mention holiday, sick and personal time) or throwing in retirement perks, from pensions to 401(k) plans. Sounds good to us--it should to you, too.

Not Using Your FSA
Too many boomers fall into the trap of thinking that if you don’t use it, you’ll lose it, Ritter says. While this is true with flexible spending accounts (FSAs, in which pretax income is set aside to pay for health or dependent care expenses), the tax benefit can outweigh the use-it-or-lose-it provision. “That’s all they’ll focus on and they’ll give up huge benefits that FSAs provides.”

Think about it this way: Without an FSA, $100 of salary taxed at 30% to 40% means you’ll lose $30 to $40. “But here’s the counterintuitive thing,” Ritter adds, “if at the end of the year you didn’t use the $100, you’ve still got $30 and loose change and you’ll come out ahead.”

Besides, with an FSA there are deals to be had. “Every optometrist has a sign saying ‘use your FSA at end of the year,’” Ritter notes.

Taking Social Security Too Soon
Remember the phrase “Good things come to those who wait”? According to Ritter, “taking your Social Security too early isn’t part of a solid financial plan either.” That’s because for every year you stave off the temptation to take those funds, you’ll get a 7% to 8% payout increase guaranteed and adjusted for inflation up to age 70. Many boomers do it because they can, but they’re really only hurting themselves in the long run.

Six Ways to Get Income in Retirement

By William Baldwin

Do you need a steady stream of revenue from your savings? Join the crowd: several million postwar babies now converting their 401(k) balances and brokerage accounts into cash for retirement.

There are right ways and wrong ways. I’ll show you six right ways. The right ones: automatic withdrawal plans, high-coupon Treasurys, high yielding stocks, junk bonds, annuities and master limited partnerships.

As for wrong ones, there are lots to choose from. I’ll illustrate the problem with just two bad ideas for retirement. One is an expensive fund. The other is the ever-popular “covered call” scheme.

Before I deliver the specifics on income generation, I need to explain the theory. The theory is likely to surprise or depress you.

Surprise: Income, as conventionally defined, is a bad thing. It means more tax bills.

Depressing fact: Income, as conventionally defined, is no proof of what you can safely spend from a portfolio without eroding your capital. You can easily find a junk bond fund yielding 7%, but if you spend that whole amount you are certain to get poorer over time. Inflation and bad debt losses will deplete your wealth.

That doesn’t mean you shouldn’t own junk bonds. Maybe you should be depleting capital—if your health is poor and you intend to leave nothing to the kids. But you should know that this is what you are doing.

Bet your stockbroker didn’t describe the high-yield bond fund he’s recommending as a “capital erosion investment.”

You think you need income? No you don’t. You need cash. It’s a very different thing. You can get cash by selling securities or redeeming fund shares. Nine times out of ten, raising $1,000 by selling something is going to be cheaper at tax time than getting $1,000 in the form of a dividend or fund distribution.

There was a time when it made sense to avoid selling. Your grandparents put stocks and bonds in a strongbox and got cash only from the dividends and the coupons. Selling was expensive because brokerage commissions were stiff and mutual funds carried sales loads.

The financial world is very different today. No-load funds are ubiquitous and online brokerage commissions are $9 or less (a lot less, if you take advantage of freebies and new-account offers).

So here are the six recipes for producing cash to cover your living expenses.

Automatic withdrawal plans

The first thing is: Ignore “yield” and “distribution” and “income.” Invest for total return, which is the sum of income and price appreciation. Then find some way to convert a portion of your assets every month into deposits into your checking account.

If your savings come to $100,000 or less, get a no-load fund operator to do this conversion for you.

I think that a balanced portfolio (mixing stocks and bonds in equal amounts) can deliver a total return of 6.5% before inflation and 3.5% after, over a long period of years. (Don’t ask me to foretell what the market will do over the next year or next three.)

So, you can probably take out $3,500 a year from a $100,000 pot to cover income taxes and living expenses, and have the capital last indefinitely. Increment the withdrawals for inflation. If the CPI is up 1%, take out $3,535 next year.

Take out more if you need to, but know that you are probably depleting assets. This is a fine way to live if you have children that have volunteered to pick up your nursing home bills.

If you have $1 million or more, you should do your withdrawing à la carte. Buy 50 different stocks, Treasury bonds and exchange-traded funds. Get the $35,000 a year out by periodically selling losers. Then your income stream will have a zero, or perhaps a negative, tax bill.

You don’t want to be selling at what may turn out to be bottoms, so get back in with some of your money. You might exit $150,000 of loss positions over the course of the year, while repurchasing $115,000 of them. You can get back into similar positions (Chevron for Exxon Mobil, the Vanguard Megacap ETF for the SPDR S&P 500) right away, and into identical positions after 31 days. You objective is not getting caught by the “wash sale” rule limiting capital loss deductions.

Does your $1 million have to go into stocks paying dividends? Not at all. If you are in a high tax bracket you would be better off with growth stocks paying next to nothing. Mix in what I call silent dividend stocks, which are shares of mature companies that distribute their profits by buying in shares.

Through 2012, dividend taxes are fairly modest. After that, they are probably going to be pretty nasty.

Pay attention to liquidity. Individual corporate and municipal bonds are not liquid, meaning that you get hosed when you buy and sell them rapidly. Hold these bonds through ETFs. No-load funds, stocks in big companies, ETFs and Treasurys are liquid.

If you have between $100,000 and $1 million, the right way to draw out cash depends on your patience for online trading and tax paperwork.

High-coupon Treasurys

A ten-year T note yields not quite 4%. What if you want to spend more than that? And don’t want to pay mutual fund fees to hold Treasurys for you? You could buy a Treasury with an abnormally high coupon. It will, of course, be trading at a premium price, and the premium you pay will erode over time. But if you know what’s going on, this is a perfectly good way to create an automatic cash withdrawal feature.

Example: You have $200,000 in your IRA, you are 80, and the IRS demands that you withdraw $10,000 a year. Buy the Treasury with an 8.5% coupon that matures in February 2020.

You will only be able to afford $143,000 (par value) of the bond, which means that, come 2020, $57,000 of your capital will have evaporated. But this Treasury will generate the cash you need. At 8.5%, a $143,000 position will have $12,000 a year in coupon payments.

High yielding stocks

I think the stock market will deliver a real return of 5% a year over time. This is with dividends included and inflation subtracted.

My preferred method of extracting this 5% is to own a diversified portfolio of individual stocks and to sell selectively (see “Automatic withdrawal plans” above). But if you must, you could buy a collection of stocks that happen to have gigantic dividends.

You’ll probably wind up with electric utilities that are under constant assault from rate regulators, some ragtag phone companies that aren’t doing a good job of covering their dividends, drug companies confronting patent expirations and cigarette vendors. Examples: AT&T, Altria, Pfizer.

Quite a contrast to the Googles and Apples of the glamour stock universe. But in expected total return, the high yielders are pretty close to the low yielders. So if you love dividends and can tuck the fat yielders away in a tax sheltered account, take this route.

Junk bonds

As noted, you shouldn’t be buying these one at a time. There’s a reasonably priced ETF that holds them: JNK (expenses: 0.4%). There are also some fine no-load funds available.

You might get a “yield” of 7%, from which you should deduct an expected capital loss (from companies going bust) of 1% a year, for a total return—before inflation and taxes—of maybe 6%. Higher yields come with higher capital losses.

Junk is a fine option for an IRA, since it will generate cash for those required minimum distributions without forcing you to put in constant sales orders. But don’t put more than 25% of your bond money in junk. And know that you are eroding capital.

Annuities

If you want to leave the world penniless, buy immediate annuities from an assortment of top-rated insurance companies. The product automatically converts capital into spendable cash and guarantees that you won’t outlive your savings. But you have to take steps to cover the cost of living.

Master limited partnerships

These holdings make sense for the taxable accounts of high-bracket investors. Most MLPs are invested in energy assets, so don’t overdo this sector if you own a lot of oil company shares. The peculiar tax treatment is such that MLPs make particular sense for older investors who expect to leave the shares to heirs.

Yields are in the vicinity of 5% and at the outset are largely sheltered from taxation by depreciation writeoffs. Over time, I would expect both the share prices and the distributions to keep up with the cost of living. In other words, your real total return is going to be that 5% or maybe a little more—the same as the real total return you are likely to get on stocks.

http://blogs.forbes.com/baldwin/2011/02/13/six-ways-to-get-income-in-retirement/?partner=msnbc

So you haven't saved anything for retirement

By William P. Barrett

OK, you're in your 50s and still have a job — maybe even a decent one — but the amount of savings you've put away for retirement is squat. Zippo. Nada. Is there any way you can avoid an impoverished old age or working until you drop?

The answer, fortunately, is yes. Even those getting a tardy start in thinking about retirement can take advantage of tax breaks and other moves to make up significant ground. This may require substantial changes in one's lifestyle now, but they're almost certain to be less painful than what might be required in 10 or 20 years if you don't start now.

The most important first step to take is to start saving. Now. Even if you haven't yet worked out any kind of a plan; that can come later. But you're still going to need the money.

We're not talking about the kind of piddling savings that comes from giving up your twice-a-week Starbucks Venti Latte. Instead, you need to start saving a good 10 percent of gross income or even more. There essentially are two ways to save. One is to pay down high-interest-rate debt that isn't already tax-deductible — especially credit cards. If you're paying 20 percent on credit card debt, in effect you get an immediate 20 percent return for every dollar you pay off.

The other way, of course, is to put funds away. This is where the tax code comes in. Take full advantage of your company's 401(k) plan in which contributions are excluded from your current year's income. It's nice but not crucial if the employer matches part of the contributions. In a 25 percent bracket, a $10,000 contribution by you reduces your taxes by $2,500. Federal law allows workers who will be 50 by the end of the year to salt away up to $22,000 of their own contributions, pre-tax, for 2010. Investments in such retirement funds grow tax-deferred until they are withdrawn, at which time they are taxed at ordinary rates. While tax rates may go up overall, your own rate is likely to be lower in retirement, particularly given the late start you're getting on savings.

If your employer doesn't have a 401(k), open an individual retirement account at a mutual fund company or brokerage. Those who don't have any employer pension plan can put away up to $6,000 pre-tax a year. If you do have a current employer pension plan, no matter how crummy, then you can only deduct the full contribution if your modified adjusted gross income is $89,000 or less for a couple, or $55,000 or less for a single. But you can make a $6,000 per person nondeductible contribution to a Roth IRA with modified adjusted gross income of up to $166,000 per couple and up to $105,000 for a single. (A Roth grows tax free, and all withdrawals in retirement are tax free.)

You can also fund tax-advantaged retirement savings with income from a second job or side business — a good thing to build up now, since you'll want to continue earning something in retirement. Say you're making $5,000 a year selling hand-made jewelry on eBay. You may be able to put it all away pretax in a Simple IRA or other special savings plan for the self-employer. For details, click here.

How should you invest your retirement funds? Most 401(k) plans have a number of mutual-fund options, and money in an IRA can be invested almost anywhere. As your nest egg grows larger, you'll want to look more closely at what percent you want to invest in equities — preferably low-cost index mutual funds.

Perhaps the biggest problem in starting a retirement plan later in life is the loss of a prior significant period of time over which earlier investments could have compounded and grown. At a 5 percent rate, an investment doubles in 15 years; at 4 percent, in 18 years. But even if you're in your 50s, you can still take advantage of the magic of compounded returns. That's because — actuarially, anyway — your retirement is likely to run upwards of 20 years. That's a long-enough period for investments you put away today to bear fruit.

As you get the savings going, you should figure out where you stand financially and what you'll need. Even if you aren't the sort to track every nickel spent on Intuit's Quicken, it's not hard to draw up a family net worth statement listing all assets and liabilities, and an income statement showing income and expenses over the last year. Data on your latest tax return can help.

There are all kinds of rules of thumb about what level of your current net income you'll need to sustain yourself in retirement, generally ranging from 60 percent to 80 percent to even more. But if you're new to retirement savings, don't be paralyzed because you won't reach those goals. Simply do the best you can and keep in mind that you're not starting from zero.

For example, even if your current employer doesn't offer a traditional defined benefit pension plan — one that pays a set amount each month — you may well have earned a monthly stipend from a previous job. This is a good time to paw through your old files and find records of any pensions from ex-employers you may be entitled to.

Even more significant is Social Security, which replaces 42 percent of the salary of a median wage earner who retires at the "full" or "normal" retirement age — 66 for those who were born between 1943 and 1954. Replacement rates are higher than that for low-wage workers and lower for high earners. Plus, the replacement rate is higher for one earner couples, when spousal benefits are factored in.

Every dollar that comes from Social Security is one less dollar you otherwise have to provide for. You can get online an official estimate of your benefits from Social Security. Given the federal deficit, younger folks might rightly worry they won't get what they're promised from Social Security. But those 55 and over are unlikely to be nicked too much by any Social Security changes, unless they have a fairly high income.

You can start drawing early retirement benefits from Social Security at age 62, but it pays to wait, especially if you continue working past that age, and is crucial if you've begun saving late. Delaying the start of Social Security benefits until age 70 can boost the monthly payout by as much as 80 percent. For more on how to get the biggest Social Security payout, click here.

Here comes the tough-love part. If you seem to have no money left over at the end of the month to put away one way or the other and you don't want to get a second job or work longer, you're going to have to reduce your style of living. It's as simple as that. Sure, there's a lot of nickel-and-dime stuff many people can do — eat out less, buy used cars and so on. But you'll have to tackle the big stuff. Consider downsizing to a smaller, cheaper and less-expensive-to-operate house or even renting an apartment. (The first $500,000 of any gains on a principal residence sold by a couple is tax free, meaning more to invest now.) Even more dramatically, ponder relocating in retirement to an area with a significantly lower cost of living. Tell the grown children still living at home they're going to have to start fending for themselves.

It doesn't take a lot to start building that nest egg. In a tax-deferred account and figuring a 4 percent annual return (compounded monthly), putting away just $500 a month would produce $74,000 in 10 years. That may not seem like much. But at current rates, for a couple that would be 68 years old then, that sum would buy an immediate annuity paying out $433 a month until both spouses are dead.

http://www.msnbc.msn.com/id/41769050/ns/business-your_retirement/

Should You Buy Term Life Insurance?

Someone mentions the words term life insurance, and you immediately zone out. But supercheap grabs everyone’s attention, and premiums for term life are just that, despite a modest uptick this year. So who needs an insurance policy that pays out only if the person who owns it dies within a certain number of years? Generally, someone with debt that ends after a set period, such as a mortgage or tuition payments, or dependents (kids, an unemployed spouse).

Term life is cheaper than universal and whole-life policies, because those types last longer and double as investment vehicles. But premiums are expected to continue creeping up, so buying a term policy now will likely save you money in the long run. Some tips:

Lock in the Rate

The only way buyers can keep benefiting from today’s low rates is to get a policy with “guaranteed level premiums,” where the rates don’t change from year to year. It’s like getting a fixed rate on a mortgage.

Get the Right Term Length

Term policies range from five to 35 years. Longer policies have higher premiums, but buyers shouldn’t skimp on coverage just to save money. Future health problems could make it much more expensive or even impossible to buy another policy. A $1 million 20-year term policy costs about $670 a year for a healthy 40-year-old man. (Ten years ago, it was $860.) It’s the price of a few hot dogs a week.

Consider a Convertible Policy

Many term life policies can be changed to a universal or whole-life one. This helps people who want to extend their coverage to offset estate taxes—allowing heirs to pay the taxes with the money they receive from the policy—or to continue to provide for their dependents. Buyers should get the longest conversion period possible to avoid having to pay more if their health deteriorates.

Read more: Should You Buy Term Life Insurance? - Personal Finance - Insurance - SmartMoney.com http://www.smartmoney.com/personal-finance/insurance/should-you-buy-term-life-insurance/#ixzz1EcnhI91C

Inflation-fighting stocks

You don’t have to go far to see higher prices in the U.S. Just stop at the gas station or the grocery store. And while the government’s core inflation figure released Thursday is tame, up just 1% in the 12 months through January, the fact that Americans are doling out considerably more for basic energy and food disturbs many stock investors.

Yet stocks can be a strong inflation-fighter. Focusing on companies that can best withstand inflationary pressures could be a wise strategy. “Equities outperform when inflation expectations rise,” Merrill Lynch analysts observed.

Industrials, technology and oil & gas (energy) are the top three contributors to the Dow’s strong gain so far this year, with industrials taking the lead. These cyclical businesses not coincidentally boast low levels of long-term debt and high demand for their products, which allows them formidable pricing power.

“Technology, energy and industrials are now coming into their own,” said Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research Services.

The energy sector is perhaps the inflation hedge that comes closest to gold. Higher oil prices benefit global energy companies such as Chevron Corp. and Exxon Mobil Corp.

http://www.marketwatch.com/story/stocks-that-gold-bugs-can-love-2011-02-18?pagenumber=1

6 Spending Tips From Frugal Billionaires

Carlos Slim, the Mexican telecom tycoon and billionaire with well-known frugal tendencies, has a net worth of $60.6 billion according to Forbes. Assuming no changes in his net worth, he could spend $1,150 a minute for the next 100 years before he ran out of money. To put this in perspective, he could spend in 13 minutes what a minimum-wage earner brings home after an entire year of the daily grind.

Granted, the world's billionaires (all 1,011 of them) are in the enviable position of having, quite literally, more money than they can possibly spend, yet some are still living well below their means, and save money in surprising places. Even non-billionaires (currently 6,864,605,142 of us) can partake in these seven spending tips from frugal billionaires.

Keep Your Home Simple
Billionaires can afford to live in the most exclusive mansions imaginable - and many do, including Bill Gates' sprawling 66,000 square foot, $147.5 million dollar mansion in Medina, Washington - yet frugal billionaires like Warren Buffett choose to keep it simple. Buffet still lives in the five-bedroom house in Omaha that he purchased in 1957 for $31,500. Likewise, Carlos Slim has lived in the same house for more than 40 years.

Use Self-Powered or Public Transportation
Thrifty billionaires including John Caudwell, David Cheriton and Chuck Feeney prefer to walk, bike or use public transportation when getting around town. Certainly these wealthy individuals could afford to take a helicopter to their lunch meetings, or ride in chauffeur-driven Bentleys, but they choose to get a little exercise and take advantage of public transportation instead. Good for the bank account and great for the environment.

Buy Your Clothes off the Rack
While some people, regardless of their net value place a huge emphasis on wearing designer clothes and shoes, some frugal billionaires decide it's simply not worth the effort, or expense. You can find David Cheriton, the Stanford professor who matched Google founders Sergey Brin and Larry Page to the venture capitalists at Kleiner, Perkins, Caufield & Byers (resulting in a large reward of Google stock), wearing jeans and a t-shirt.

Ingvar Kamprad, the founder of the furniture company Ikea, avoids wearing suits, and John Caudwell, mobile phone mogul, buys his clothes off the rack instead of spending his wealth on designer clothes.

Keep your Scissors Sharp
The average haircut costs about $45, but people can and do spend up to $800 per cut and style. Multiply that by 8.6 (to account for a cut every six weeks) and it adds up to $7,200 per year, not including tips. These billionaires can certainly afford the most stylish haircuts, but many cannot be bothered by the time it takes or the high price tag for the posh salons. Billionaires like John Caudwell and David Cheriton opt for cutting their own hair at home.

Drive a Regular Car
While billionaires like Larry Ellison (co-founder and CEO of Oracle Corporation) enjoy spending millions on cars, boats and planes, others remain low key with their vehicles of choice. Jim Walton (of the Wal-Mart clan) drives a 15-year-old pickup truck. Azim Premji, an Indian business tycoon, reportedly drives a Toyota Corolla. And Ingvar Kamprad of Ikea drives a 10-year-old Volvo. The idea is to buy a dependable car, and drive it into the ground. No need for a different car each day of the week for these frugal billionaires.

Skip Luxury Items
It may surprise some of us, but the world's wealthiest person, Carlos Slim (the one who could spend more than a thousand dollars a minute and not run out of money for one hundred years) does not own a yacht or a plane. (Reducing the amount you spend is the easiest way to make your money grow.

Many other billionaires have chosen to skip these luxury items. Warren Buffet also avoids these lavish material items, stating "Most toys are just a pain in the neck."

What We Can Learn
Some of the world's billionaires have frugal tendencies. Perhaps this thrifty nature even helped them make some of their money. Regardless, they have chosen to avoid some unnecessary spending (at least on their scale) and the 6,864,605,142 non-billionaires out there can follow suit, eliminating excessive, keep-up-with-the-Jones style spending. No matter what a person's income bracket is, most can usually find a way to cut back on frivolous spending, just like a few frugal billionaires.

http://financialedge.investopedia.com/financial-edge/0810/7-Spending-Tips-From-Frugal-Billionaires.aspx?partner=msnmoney

Want to retire with a million bucks?

If you're just entering the workforce, retirement probably seems like a lifetime away. A million dollars by retirement? That's someone else's dream, right? It doesn't have to be. Here we provide a millionaire's retirement plan. For these calculations, assume an average annual return of 8%, adjusted for inflation at 3% -- a reasonable estimate of average market returns.

Age 25: A GOOD BEGINNING

You're 25 and landed that first job on your career ladder -- congratulations! Before you start living up to your new paycheck's standards, budget your retirement savings. If you have a 401k plan that matches your contributions, use it! These matching are like a guaranteed return on investment. If you don't have a matching 401k, look for a mutual fund through an investment firm with low fees; many now offer target funds, which allocate your investment risk with your targeted retirement year in mind -- great for a beginning investor.

Choose a Roth IRA if you can; you don't get to deduct your contributions from your taxes, but you'll enjoy tax-free withdrawals at 65. Plan to start by saving about $200 a month to reach your millionaire goal; increasing this monthly amount by annually as your salary increases will only speed up your saving.

Age 35: ROLLING ALONG

If you've been following the plan, by now you will have saved about $45,000 and grown into a career with a bigger paycheck. Often, family commitments such as children and a mortgage will seem more pressing than saving for your golden years, but don't make the mistake of slowing down your retirement savings. Now is the time to ramp up your contributions to about $400 a month -- remember that a matching 401k will help you in attaining this amount.

If you have kids and worry about saving for their college, look at it this way: The best way to help them in the future is by ensuring you're financially sound in retirement.

Age 45: HOLDING STEADY

You're at midcareer, and things are looking good in your retirement portfolio. Your savings have grown to about $160,000 -- not bad, but it still isn't quite time to slow down. Increase your retirement contributions to about $450 a month or more, and you'll be rolling your way to millionaire status by 65.

Age 55: CLOSE TO THE FINISH LINE

By age 55, your retirement portfolio should be at $400,000 or so. You can start to see the finish line, but begin to wonder about risk. If you've been investing in a target fund, your portfolio has been adjusting its allocation for you; otherwise, look at adjusting some of your investments to reflect a lower risk tolerance. And remember: Your income at, say, age 70 won't be withdrawn for another 15 years -- plenty of time to ride out market fluctuations.

At age 55, expect to really ramp up your retirement contributions, to roughly $600 a month, and more if you can manage it. The more you save, the sooner you can leave the nine-to-five behind.

Age 65: PRUDENT ASSET MANAGEMENT

You're at the finish line: a millionaire at 65! Since you have no way to add to your savings now that you're out of the workplace, prudent asset management is vital. Keep a close eye on your portfolio so you can make your nest egg last. Protect yourself against inflation as well as market risk, and you'll be enjoying your golden years without financial worries.

THE BOTTOM LINE

With steady savings and smart financial habits, you can retire a millionaire -- maybe even before you're 65.

http://money.msn.com/retirement-plan/want-to-retire-with-a-million-bucks-investopedia.aspx?GT1=33013

Leaving IRA Assets to Your Loved Ones

By Christine Benz at Morningstar

To help reduce headaches for your heirs and make sure your assets are distributed in accordance with your real wishes, it pays to give due attention to your IRAs' beneficiary designations from the get-go.

Here are some of the key dos and don'ts to bear in mind as you do so.

Do
Check with your estate-planning attorney before naming your IRA beneficiaries.
What's on your beneficiary designation form trumps what's in your will, so it pays to ensure that your named IRA beneficiaries sync up with both the letter and spirit of what's spelled out in your estate-planning documents. A qualified estate-planning attorney should also be able to direct you toward the most tax-efficient uses of your IRA assets and give a red flag to ill-conceived designations, such as naming a minor child or estate the beneficiary of an IRA.

Consider making a charity the beneficiary of your IRA.
Not only will the charity receive the assets tax-free, but your estate will also be eligible for a charitable deduction. By contrast, if you name children or other heirs as the beneficiary of the IRA, they'll pay taxes when they take withdrawals from the account.

Mull a conversion of your traditional IRA assets to Roth if you don't expect to need the money during your lifetime.
For wealthier individuals who don't expect to need their IRA assets in retirement, converting from a traditional IRA to a Roth can make sense on a couple of different fronts. First, if you convert all or part of your IRA assets to Roth, you'll no longer have to take required minimum distributions from that account, which will allow those assets to compound tax-free for your heirs. And when your heirs inherit the money, they won't owe any income tax on their withdrawals. Nonspouse beneficiaries will have to take Required Minimum Distributions (RMDs), but they can stretch them over their own life spans.

Coach your spouse on how to handle your IRA assets after you're gone.
Generally speaking, it's going to be most tax-efficient for a spouse to roll inherited IRA assets into his or her own account upon the first spouse's death, thereby stretching out the tax-savings benefits of the vehicle. Younger spouses who expect that they made need the money before they turn 59 1/2 should think twice before rolling the inherited IRA assets into their own IRAs, however, because they'll pay an early-distribution penalty on any assets they withdraw before that age.

Don't
Fail to name beneficiaries for your IRA assets.
What happens if an IRA has no beneficiary designation at all? It depends. Some firms pass remaining IRA assets to a surviving spouse and, if there is no surviving spouse, to the deceased person's estate. Other firms pass the assets directly to the estate. Does that seem a bit too open-ended for your taste? Then name a beneficiary.

Name your estate as the beneficiary of your IRA assets.
Naming your estate as the beneficiary of your IRA is usually less desirable than naming an individual or charity. That's because those who inherit assets from your estate would be required to take distributions from the IRA account within a short period of time--either by the end of the fifth year following the account owner's death, if the deceased had not begun taking RMDs, or in line with the deceased person's own RMDs if he or she had already begun taking them. By contrast, if individuals are named as beneficiaries on your IRA forms, they'll have more flexibility to stretch out the tax-savings benefits.

Neglect to update your IRA beneficiary designations if you have a major life change.
Every estate-planning attorney has a favorite cautionary tale of an estate plan gone awry: The person whose ex-wife inherited all of his assets because he hadn't updated his estate-planning documents to reflect his change in marital status, for example. Don't let that be you. Plan to review your beneficiary designations on a regular schedule, ideally as part of an annual review of your finances. Major life events, such as a marriage, a divorce, the birth of a child, or the death of a loved one may require that you make changes to your designations.

Forget to update your IRA beneficiary designations if you've moved your IRA from one financial-services provider to another.
In a similar vein, you'll also want to review your beneficiary designations if you have recently switched the brokerage firm or mutual fund company where you hold your IRA accounts. You'll usually have to name your beneficiaries on your application form; they won't carry over from one provider to the next.

Name a minor child as the beneficiary of your IRA.
Children under the age of majority--age 18 or 21, depending on the state in which you live--cannot be named as beneficiaries of life insurance policies, retirement plans, or annuities. If you'd like to leave IRA assets to a minor, check with an estate-planning attorney about setting up a trust or a uniform transfers/gifts to minors--UTMA/UGMA--account.

Gold: The Risks and Rewards

If you follow the markets, you know that America's biggest obsession these days is with a shiny old friend. Gold's price, though it's tapered lately, has flirted with near-record highs, prompting everyone from hedge fund managers to barbers to talk about the yellow stuff. It's not just talk, either. Americans increasingly want their own personal hoard, and they're buying up coins, bars and bullion at a breakneck pace and storing it in bank vaults, hidden safes or other places perceived as safer than a shoe box. Over the past year, Americans have bought more than 100 tons of gold, spending an average of $81 million a week on the stuff. That doesn't include the billions more spent on exchange-traded funds that track the price of gold.

Gold is intriguing behavioral-finance experts and infuriating investing pros. Those who are buying believe the nation's rising debt and the crises abroad could send the price even higher. At the same time, investors who have been bitten by two stock market crashes and a real estate bubble worry that gold could lose its luster just as fast. It all leaves gold with a unique status in the public imagination—equally fascinating and repulsive.

The U.S. government's continuously growing deficit, however, has persuaded many investors to look beyond the goldbug stigma and see gold as a hedge against deficits and surging inflation.

When all is said and done, is gold really a glittering investment? The recent price rise seems stratospheric, and gold's current price is close to the highest anyone under the age of 30 has ever seen, but it was higher, on an inflation-adjusted basis, in 1980. For gold to reach an all-time, never-before-seen-in-human-history value, the price would have to top $2,000 an ounce. Such a prospect probably would have been dismissed as lunacy a decade ago, but these days predictions as high as $10,000 an ounce are getting at least a bit of respect from professional investors. Gold tends to do well during major geopolitical crises: Its value soared after the Sept. 11, 2001, attacks and has seen smaller spikes after particularly bleak news from Iraq, the Middle East and North Korea.

Gold's value also is tied to the U.S. dollar: The weaker the greenback is, the higher gold's price will be. Gold's proponents feel the nation's huge deficit (expected to reach $1.5 trillion this year), combined with the Federal Reserve's policy of keeping interest rates extremely low, will cause the dollar to plummet over time.Demand for gold has continued to surge in Asia, particularly India, China and even Thailand. Last summer, Thai citizens bought nearly as much gold for investment as Americans did.

The metal has some practical value (about 400 tons a year is used in electronics, dental work and other manufacturing). But many experts say its price really moves based on people's perception of world events, inflation and currencies, not because of its beauty or even its scarcity. It doesn't pay interest or a dividend. And for all the talk that it's the only "real" currency, there aren't many convenience stores that will let anyone pay for a gallon of milk with a gold bar.

Read more: The Power of Gold: The Risks and Rewards - SmartMoney.com http://www.smartmoney.com/investing/economy/the-power-of-gold-the-risks-and-rewards-1297268390724/#ixzz1E4ZqYjfB

Money Show Investors Conference - The Economy

Some bullets from multiple presentations. These are a consensus from the experts:

• U.S. recession recovery is on firm footing.
• Expect a half-speed economic recovery with inflation less than 4% through 2014.
• U.S. economy is projected to grow 2-4% this year.
• There is significantly more optimism this year.
• Market experts predict the S&P 500 will increase 10 percent this year.
• Bull markets typically run for 2-4 years and this one is in year 2 with no hint of fading yet.
• Gold will trade in the $1200-1500 range.
• Unemployment will continue to range between 8-9% this year.
• Full housing recovery is not expected this year.
• Consumer confidence is at its highest level in some time.
• But many investors remain on the sidelines.

Money Show Investors Conference - Mobile Technology

Some bullets from Saturday's presentation:

• The mobile internet is exploding. There will be 10 billion mobile devices by 2015.
• 80,000 iPads are being sold daily.
• More than 16 million iPhones sold in the last three months of 2010.
• By the end of 2010, 300,000 Android phones were being activated every day.
  
• 55 million tablet sales are projected too.
• By Christmas 2011, 1 in 2 Americans will have a smartphone accessible to the internet.
• In places like the MidEast, Africa, Latin America and Eastern Europe, there is more access to cell phones than electricity.

The Odds of Picking the Next Apple

By Carl Richards

The odds of you picking the next hot performing stock like Google or Apple are insanely low. Yet popular stories about the next “big” investment tempt us to believe that this time we’re on to something far enough ahead of time to ride the investment up.

Why do stories about Google and Apple make it so hard to behave? Because they’ve delivered results that make the most cautious of investors secretly wish they’d jumped on board.

“From August of 2004 to December of 2010, Google’s (GOOG) price increased from $100 to $600 per share. And Apple (AAPL), from the end of 2000 to the end of 2010 returned 43.35X. Those are returns that put dollar signs in any investor’s eyes.”

Who doesn’t want an investment that performs like Google or Apple? The problem, and it’s a big one, is that we tend to look to the past when we’re seeking answers about the future.

One anaylst describes this situation perfectly. “Trying to pick a stock’s future growth path based on past growth is like trying to guess if a coin will come up heads or tails when you know that the last toss was a heads. The previous toss tells you nothing.”

Every so often I’ll get a phone call from a client. He has the next big stock, and to him it makes perfect sense to dump his plan, ignore his goals and bet the future on, well, a tip from his brother-in-law.

We grow up for a time believing that superheroes and magic are real. We root for underdogs even though we know beating the favorite will take a miracle. So does it really seem all that crazy to believe that the stars will align and that one financial decision will change our lives forever?

The problem is that when you chase after a particular stock, you lose sight of the things you actually can control. You lose sight of your goals and plans, for instance.

For 99.99% of us, chasing after the Googles and the Apples of the world will lead to the investing version of dating rejection. Meanwhile, the odds of you achieving financial success by behaving correctly are insanely high. So do you really want to toss a coin and make such a big bet on the next big thing?

http://bucks.blogs.nytimes.com/2011/02/07/the-odds-of-picking-the-next-apple/?partner=rss&emc=rss

Savers’ impatience hinders retirement goals

BOSTON (MarketWatch) — Few would argue that we have a retirement crisis in America. What people might debate is how we solve the problem.

Slowly but surely, however, researchers are producing work that offers much-needed insight into how we can reduce the severity of the problem. Case in point: A working paper just published by the National Bureau of Economic Research, on two explanations for why consumers have trouble with financial decisions.

“One is that people are financially illiterate since they lack understanding of simple economic concepts and cannot carry out computations, such as computing compound interest, which could cause them to make suboptimal financial decisions,” wrote Olivia Mitchell, the director of the Pension Research Council, and Justine Hastings, an economics professor at Yale University, in their paper, “How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors.”

“A second is that impatience or present-bias might explain suboptimal financial decisions. That is, some people persistently choose immediate gratification instead of taking advantage of larger long-term payoffs.”

In other words, people generally don’t much know, if anything, about money. And two, consumers — even when they are financially literate — sometimes can’t help themselves from making bad decisions. It’s the way we are wired. The lizard part of our brain overrules the more rational part when it comes to things financial. The lizard part of the brain says that the joy of spending (or not saving) today is greater than the pleasure of having a nest egg later on.

“Impatience or present bias seems to be an inability to plan for long-term consequences,” said Stephen P. Utkus, a principal with the Vanguard Center for Retirement Research. “It may be a learned trait from family and peers, or it may be inherited. There is some evidence from neuroeconomics that impatience may be related to certain brain structures.

Others agree. “We have a natural tendency to avoid things that make us feel uncomfortable, said Bill McClain, a principal with Mercer. “If you feel like your retirement situation is hopeless and you don’t understand it, you will put it off.”

So what lessons can be learned from the latest paper on the subject? What can consumers, lawmakers, plan sponsors, plan providers, and other interested parties do to solve the retirement crisis? The answer lies in part with more education and more automatic features in

In a world where a growing number of people are being asked to save on their own for retirement, where defined-benefit plans don’t exist, and Social Security will pay out just 70% percent of the projected benefit, it’s time to make financial education a mandatory part of the school curriculum, starting in kindergarten and straight through 12th grade.

To be fair, there is debate on this issue. “Financial literacy is correlated with wealth, though it appears to be a weaker predictor of sensitivity to framing in investment decisions,” wrote Mitchell.

Other experts agree that more financial education is necessary but they also say it’s not the end-all be-all. “Financial literacy, while important and lacking, is necessary but not sufficient,” said Michael Falcon, head of retirement at J.P. Morgan Asset Management. “We have some behavior biases that are so strong that they make us make bad decisions.”

And for many people, or at least those who are not predisposed to saving, the only way to overcome those biases is to make sure we continue to add auto-everything to retirement plans, auto-enrollment, auto-escalation, and auto-rebalancing. “It is the most effective means that we have for driving retirement behavior,” said Falcon.

With auto-enrollment, for instance, experts said participants can use inertia to their benefit. “Once you enroll in a workplace retirement plan, you’re likely to stay enrolled,” said Jamie Kalamarides, the senior vice president of retirement strategies and solutions at Prudential Retirement. “Participants should view the arrival of their monthly statement as a positive reminder of the investment they’re making in their future.”

Others, meanwhile, say Mitchell’s paper reinforces the notion that behavior is both innate and learned. “Education and literacy on a particular issue is important,” said Utkus. “The paper reminds us that the world isn't simply ‘all behavioral’ — people also need better training and education to make good decisions. You can't solve every financial or health problem through defaults or framing.”

Still, until the day comes when everyone is financially literate, auto-features will need to become more rather than less common. Yes, there are some people who for whatever reason don’t yield to the impatience and can figure out, people who, as Falcon put it, are “dialed into” saving for retirement and doing the right thing.

Said Mitchell: “The forward-looking plan for and then implement a wide range of investments in themselves and their future.”

But for the vast majority of Americans, Mitchell said, “Our results imply that it may be useful to facilitate decision making, particularly among the less-educated, as well as to facilitate people committing to and carrying out long-term financial decisions.”

In other words, Mitchell said plan sponsors and policymakers “seeking to enhance employee participation in, and contributions to, retirement saving programs would do well to invest in product simplification and better marketing, clearly describing to their workers the costs and benefits of different funds as well as the importance of fees in this decision.

“And to the extent that parents, teachers, doctors, and other leaders can teach the young to curb their impatience, this could have important and very positive long-term effects on a wide range of outcomes over the lifetime.”

http://www.marketwatch.com/story/savers-impatience-hinders-retirement-goals-2011-02-07?siteid=nwhpf

529 College Savings Plans

A tax-advantaged method of saving for future college expenses that is authorized by Section 529 of the Internal Revenue Code. The plan allows an account holder to establish a college savings account for a beneficiary and use the money to pay for tuition, room and board, mandatory fees and required books and computers. The money contributed to the account can be invested in stock or bond mutual funds or in money market funds, and the earnings are not subject to federal tax (or state tax, in most cases) as long as the money is used only for qualified college expenses. The plans are open to both adults and children.

529 Plans are offered by many states and it is not a requirement that you be that state's resident in order to use their plan. 529 Plans are typically administered by a major investment company like Vanguard, Fidelity, and BlackRock. Florida's home-grown plan is this one:

http://www.myfloridaprepaid.com/compare-plans/florida-college-investment-plan.aspx

Investing for income

For more than a decade, in many corners of Wall Street, income investors were considered out of touch. As tech stocks boomed and housing went through the roof, the idea of conservative, dividend-yielding stocks and old-fashioned annuities seemed like relics from another age. They were things Grandma put her money in, living off annuity checks and dividends from AT&T.

Turns out Grandma might have had it right after all.

Fast-forward to today, when a roiling stock market is making investors on Wall Street and Main Street queasy. Suddenly a stable portfolio that pays out decent income even in a flat market looks like a pretty attractive haven. In addition to dividend-producing investments and annuities, these assets include things like equity-income funds, real estate investment trusts, or firms structured as master limited partnerships.

Investment analysts note that dividend-paying stocks and funds are a potential sweet spot for long-term investors right now, since, dividend payers and growers should outperform as the cyclical bull market and expansion mature. Dividend stocks may face some short-term headwinds, though, since more conservative investments tend to lag in big market rallies.

Investing for income is especially savvy in an environment of sluggish economic growth. The economy grew 2.9% during 2010, a moderate pace widely considered disappointing for this stage in an economic recovery.

Even the most optimistic economists and politicians are predicting very slow growth, so doesn’t it make sense to get paid while you wait?

There’s nothing wrong with taking a 5-6% dividend and reinvesting it in your portfolio. And for retirees, of course, dividend income means they won’t have to liquidate their mutual funds just to have money to live.

Investors are seeing the appeal: Equity-income funds took in $18.4 billion during the last three months of 2010. And performance data suggests they’re on to something. Reports show that since 1972, companies that initiated and increased their dividends outpaced their non-paying brethren in total returns (including reinvested dividends) by a robust 8% a year.

Of course, investing for income comes with its own caveats. Don’t automatically load up on the highest-yielding stocks you can find, for one. That may be an indicator that a company is in dire straits, and has had to crank up dividends to attract investors. Instead, look to combine a healthy yield with strong long-term financial prospects.

Also, keep in mind that a company’s yield isn’t written in stone. During the worst of the financial meltdown, year-over-year dividend growth was the worst since 1939. Of course companies don’t like to cut their dividends, since it’s a sign of financial trouble and upsets millions of income-oriented investors. But when survival is at stake, dividends can, and do, get chopped.

https://news.fidelity.com/news/article.jhtml?guid=/FidelityNewsPage/pages/fidelity-income-investing&topic=investing-mutual-funds

You Do it for Love

Some Technology Tidbits

From today's Wall Street Journal

"...This week, the organization that oversees Internet addresses is expected to dole out its last batch of existing Internet protocol addresses, a step akin to telephone companies running out of numbers to customers..."

"...Companies are signaling they're more comfortable spending money on technology now that sales and profits are expanding..."

"...Global tablet-computer shipments more than doubled...with Apple Inc.'s iPad dominating the market but tablets using Google Inc.'s Android winning share..."

"...Google says more than 300,000 Android devices (mobile phones) are activated every day..."