Wednesday, October 31, 2012

6 Ways to Screw Up Your Retirement Plan


Contributing to an employer-sponsored retirement plan is an important step toward a secure future, but like any other financial asset, it takes oversight as well as common sense to reap its benefits.

Avoid these six critical mistakes to improve your chances of having a successful retirement.

Mistake No. 1: opting out - One of the biggest mistakes is to decide not to participate.

Do not opt out if your company offers automatic enrollment. It will also automatically select an investment option for you -- often a target-date fund. Once you're in the plan, take time to acquaint yourself with all its investment options so you can determine if the preselected fund is the best choice or if there's one that better meets your goals, time horizon and risk tolerance.

Mistake No. 2: borrowing from your plan - Your company retirement plan is not a piggy bank. Treating it like one has very expensive consequences.  It could cost you as much as 40 cents on the dollar -- and that is money you never recover.

Mistake No. 3: cashing out in a job change - Cashing out at 59 ½ years of age or younger carries a 10 percent penalty.  Of course, this would be in addition to the taxes you would owe.

This also doesn't take into account the returns you forfeit by not staying invested. Even small amounts cashed out when you're young can prevent you from amassing a large nest egg. For example, if you had kept $5,000 in your retirement account 20 years ago instead of cashing it out, that amount could have grown to nearly $14,590 today, assuming a 5.5 percent annualized return.

While the last 10 years or so have been a challenge for investors, the stock market's historical returns have rewarded them.

Mistake No. 4: leaving the account in limbo - Just leaving your retirement account with a former employer is also a bad option.  It's better to take your 401(k) with you and mix it in with your new employer's plan -- or roll it into an individual retirement account of some type so you can manage it a bit better. If you do an IRA rollover, make sure it's a trustee-to-trustee transfer.

Mistake No. 5: too much company stock - Financial advisers caution you should have no more than 10 percent of your retirement account in your employer's company stock. If you're concentrated in a single security, you get hit with a double whammy if your company hits hard times and you lose your job.

Having company stock in a 401(k) plan is good for the company in a few ways, but it's a bad idea for the nonowner employees in many ways.  If you're thinking, 'What about the Facebook or Google employees who are now millionaires because of their stock?' don't confuse luck with skill. On the streets of this nation, there are many former employees of Enron, PanAm, WorldCom and others who also believed in their company's stock.

Mistake No. 6: ignoring the big picture - Your employer-sponsored retirement plan is just one leg of the proverbial three-legged stool of a retirement plan. The term "retirement plan" should refer not just to tax-qualified plans such as IRAs and 401(k)s, but also other sources of income such as Social Security, company pensions, part-time work and other money saved up -- your overall plan for how you're going to get through the remainder of your life.



The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Tuesday, October 30, 2012

8 Exceptions to the 10% Penalty for an Early IRA Withdrawal


If you are age 59 1/2 or older, you can take an IRA withdrawal without any penalties at all.  But if you’re younger than age 59 1/2 you’ll have to pony up for an IRA penalty – unless of course you meet one of the exceptions below.

IRS publication 590 lists these exceptions to the 10% penalty for an early IRA withdrawal:

1. You take an early IRA withdrawal and you have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.  If you have a lot of medical debt, you may be able to take out IRA money without that 10% penalty.  Remember, medical expenses must be higher than 7.5% of your adjusted gross income.

2. You can take an early IRA withdrawal for medical insurance.  As long as your IRA distribution is not more than you paid for medical insurance you will not have to pay a 10% penalty if the following applies:
  • You lost your job
  • You received unemployment for 12 consecutive weeks because you lost your job
  • You receive the IRA distributions during the year you received unemployment or the following year
  • You receive distributions no later than 60 days after you’ve been re-employed

3. You can take an early IRA withdrawal if you are disabled.  Be sure to file a special tax form with your 1040 that lets the IRS know that you are disabled!

4. If you are the beneficiary of a deceased IRA owner, you can take an IRA withdrawal.

5. Your IRA withdrawal consists of receiving distributions in the form of an annuity.  Basically what the IRS means here is that you must take “substantially equal period payments”  – in other words a set amount per year for either a) five years or b) til 59 1/2, whichever is longer.

6. Your IRA withdrawal is not more than your qualified higher education expenses.  Alright, so you’d like to use your IRA money for college savings.  Your IRA withdrawal (as long as it is not more than your tuition) can be taken penalty free.

7. Your IRA withdrawal is used to buy, build, or rebuild a first home.  First home.  That’s the key here.  Not your second, third or fourth – it’s your first home and you are buying, building or rebuilding – then you can take an IRA withdrawal penalty free.

8. Your IRA withdrawal is a qualified reservist distribution.  A qualified reservist distribution is met if:
  • You were ordered or called to active duty after September 11, 2001
  • You were ordered or called to active duty for a period of more than 179 days or for an indefinite period because you are a member of a  reserve component
  • The distribution is from an IRA, 401k or 403b plan
  • The IRA withdrawal is made no earlier than the date of the order or call to active duty and no later than the close of the active duty period

These exceptions have some qualifiers on them so it’s important to look at the IRS publication to make sure you fit into one of these categories before you take the money out.

Also, don’t fall into the trap thinking that these exceptions are for taxes!  You still have to pay taxes on any withdrawal you take out.  The exception is for the penalty only.


The Bottom Line - Consult with your tax professional for assistance with determining possible waiver of penalties.

Source:   IRS Publication 590


The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Exceptions To The 60-Day Retirement Account Rollover Rule

An individual who receives a distribution from a retirement account can avoid applicable taxes and penalties on the amount if he or she rolls it over to an eligible retirement account within 60 days of receipt. There are, however, a few exceptions to this rule. Knowing them can help you avoid paying taxes on rollover-eligible distributions that do not satisfy the 60-day rule, and ensure continued tax-deferred growth on your retirement assets.

Exception for First-Time Homebuyers - Taxable distributions of up to $10,000 from your IRAs are not subject to the 10% additional tax (early-distribution penalty) if the IRA owner or a qualified family member is a first-time homebuyer and, within 120 days of receipt, the IRA owner uses the amount to pay for qualifying acquisition or rebuilding costs for his or her own or qualifying family member's principal residence. If the amount is not used because of a cancellation or delay in the purchase or construction of the residence, the amount may be rolled over to the IRA within 120 days instead of the usual 60 days.

Automatic Waiver for Hardship - An individual may deliver distributed money to a financial institution and intend the amount be deposited to his or her retirement account as a rollover contribution. Sometimes, because of an error, the amount is not credited to the retirement account within the 60-day period. To be sure your instructions are followed, check your account statement for accuracy, and contact your financial institution immediately if you detect any errors. If this happens to you, you receive an automatic extension of the 60-day period, providing all of the following requirements are met:

  • The assets were delivered to your financial institution within 60 days after you had received the distribution.
  • You followed the procedural requirements for rollover contributions that were established by your financial institution.
  • The amount was not deposited to your retirement account because of an error made by the financial institution.
  • The assets are deposited to your retirement account within one year after you received the distribution.
  • The transaction clearly would have been a valid rollover contribution had the financial institution followed your instructions at the time of receipt.
Non-Automatic Waiver Application - If you are unable to complete your rollover contribution because of certain circumstances beyond your reasonable control, you can submit an application to the IRS for a waiver or extension of the 60-day rule. When reviewing your application, the IRS determines whether you meet certain requirements by considering the following:

  • Whether any mistakes were made by your financial institution, other than those described under this article's section "Automatic Waiver for Hardship" above.
  • Whether the inability to complete the rollover was the result of death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or a postal error.
  • How the distributed amount was used. For instance, if you received a check for the distributed amount, the IRS will want to know whether the check was cashed.
  • How long it has been since the distribution occurred.
  • In order to be considered for the waiver, you must submit an application for a private letter ruling (PLR) to the IRS and pay the applicable fee.
After reviewing your application, the IRS will issue a PLR to you indicating whether your application is approved. If it is, it will include the time limit within which the rollover contribution must be completed. If your application is not approved and you already deposited the amount to your retirement account, you may need to remove the amount as a return of excess contribution.

Ensuring Correct Reporting -  If a cancellation or delay in the purchase or construction of a first home is the reason you didn't use the distributed amount within 120 days for first-home costs, you were eligible for the automatic waiver within one year of the distribution, or your application for extension to the IRS was approved, you must report the amount of the exception on your tax return as nontaxable to exclude the amount from your income and avoid the penalty. This is done by including the amount on the applicable line of your tax return.

If you have failed to roll over the amount within the 60-day period and don't qualify for these exceptions, you must include any taxable amount of the distribution as income, and pay the applicable taxes.

The Bottom Line - Consult with your tax professional for assistance with determining the taxable portion of your distribution and including the amount on your tax return. Your tax or legal professional should also be able to help you with determining your waiver eligibility and the application process.

Source:   Investopedia


The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Monday, October 29, 2012

Alphabet Soup of Advice

Financial advisers use a confusing array of acronyms. What do they mean?

For investors who decide to enlist the aid of a financial adviser, the next step is often the hardest: wading through the alphabet soup of acronyms and professional designations financial pros use.

To help clear things up, here is a guide to some of the most commonly seen strings of initials, and what they signify.

RIA (Registered Investment Adviser) - This is an advisory firm that has registered with the Securities and Exchange Commission or state securities regulators. The investment adviser representatives who work at these firms may or may not have one of the specialized credentials listed below. Unlike brokers, who generally are paid a commission on the securities they sell,  registered investment advisers typically charge a flat rate or asset-based fee and are bound by a fiduciary duty, meaning they must put clients' interests first when giving advice. Brokers are required only to ensure that their investment recommendations are suitable for the client, based on factors such as age and risk tolerance.

CFA (Chartered Financial Analyst) - This pro is an investment specialist, trained to value stocks, bonds and alternative investments and build portfolios. This certification requires work experience, extensive study and the passage of three exams.

While some brokers are CFAs, the designation is more likely to be held by advisers who provide wealth-management services to high net-worth clients, as they typically have complicated portfolios in need of this kind of expertise.

Tom Robinson, managing director of education at the CFA Institute, says the issuing body recommends, but doesn't require, that advisers spend 20 hours a year on continuing education. CFAs must annually attest that they have adhered to a code of ethics that includes putting clients' interests first.

CFP (Certified Financial Planner) - Financial pros using this designation have training in comprehensive financial planning. They typically take a holistic approach when providing advice, helping clients with everything from budgeting to investments, retirement and estate planning.
Investment advisers, brokers and insurance agents may hold this designation, but it requires them to adhere to a fiduciary standard when providing financial-planning services.

In addition to the required courses, exam and work experience, CFPs must submit to a background check and renew their certification every two years, which requires 30 hours of continuing education. The requirements are "designed to give the public assurance of a competent and ethical financial planner," says Kevin Keller, chief executive of the Certified Financial Planner Board of Standards Inc.

ChFC (Chartered Financial Consultant) - Similar to a CFP, a ChFC has training in overall financial planning.

If an investor is looking for "someone who understands the basics of how to construct a financial plan, either of those marks would represent someone with that basic knowledge," says Keith Hickerson, senior strategy consultant at the American College, which confers the ChFC designation and provides education for the CFP.

Financial pros seeking a ChFC complete the same course work as required for the CFP, plus two electives in topics like executive compensation or macroeconomics. They also must pass 18 hours of exams. Brokers and advisers can hold this credential.

CLU (Chartered Life Underwriter) - This is an insurance specialist educated in topics such as risk management and estate planning. The eight college-level courses required to earn this designation encompass subjects such as life-insurance law.

A CLU may be a financial adviser or an insurance salesperson. This credential, which also is conferred by the American College, requires the passage of 16 hours of exams and has the same work experience and continuing-education requirements as the ChFC. The ethical standards also are the same—and they don't require the holder to maintain a fiduciary relationship with clients.

CPA/PFS (Certified Public Accountant/ Personal Financial Specialist) - This is an accountant trained in the nontax parts of financial planning, such as investing.

He or she must first earn the CPA license, which generally requires 150 hours of education and passage of a 14-hour exam, before earning a PFS credential. "When you are working with a PFS, you know they are a CPA first," says Andrea Millar, senior technical manager for the American Institute of CPAs personal financial-planning division.

Before hiring any financial adviser, investors should do their homework. The groups that grant these credentials have websites where investors can verify whether an adviser using its marks is in good standing.

Source:  Caitlin Nish, Wall Street Journal


The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Thursday, October 25, 2012

Budgeting As A Single Parent

Raising children is one of the hardest jobs on the planet, and more than 13 million American parents do it solo, according to 2006 census data. Raising a child to adulthood costs $226,920 on average, according to figures released by the Department of Agriculture in 2010. So what can you expect and plan for if you and your significant other part ways and you are tasked with raising your child alone? For many, some of the biggest adjustments include going back to work, securing an effective childcare plan and being the sole breadwinner of the household. However, there are some other challenges as well.

Budgeting - As a single parent, one of the first items on your checklist should be budgeting. You'll need to sit down and make a monthly budget that consists of fixed costs, variable costs and one-time annual costs, and then compare this budget to your projected income. Fixed costs could include monthly bills for TV, cable, Internet, utilities and insurance. Variable costs may include expenditures such as groceries and money spent dining out and traveling. One-time annual costs include real estate taxes, registration renewals, holiday presents and other items that tend to pop up once a year. Fixed costs are set and usually unavoidable. However, some annual and variable costs can be trimmed down if the budget calls for it.

Newly single parents should also factor in expenses such as childcare, transportation for their children, costs of maintaining a home, rent/mortgage and education. Child support payments and alimony might be additional income sources that help to cover some of these unexpected new expenses.

Special Tax Items - There are several tax credits and deductions that are available for lower-income parents with children. Tax credits are typically more valuable than a deduction, because a credit will offset your tax bill dollar-for-dollar, whereas a deduction will help reduce your taxable income. Here are some of the tax advantages available to single parents:
  • The Child Tax Credit was extended throughout tax years 2011 and 2012, which allows all tax filers to claim a maximum $1,000 credit per child (single parent with MAGI under $75,000).
  • Child Support payments are not taxable income to the recipient and are not deductible for the payer.
  • Alimony counts as taxable income for the recipient and as a tax deduction for the payer.
  • One parent can claim the child as a dependent and receive the additional exemption on his or her tax return.
  • The Child and Dependent Care Tax credit offers up to $1,050 back. Families that earn less than $15,000 can claim a credit for 35% of qualifying expenses up to $3,000 for one child and up to $6,000 for two or more children. If your earned income is more than $43,000, you are still are allowed 20% of eligible costs.
  • Lower income earners, those under $36,920 for 2012 with one qualifying child, can qualify for the Earned Income Credit (EIC). It offers higher education related tax credits and deductions for tuition and fees.
Update and Review Your Financials - Life-changing events such as divorce, childbirth, marriage and loss of a loved one all call for a review of your financials. You should start with your estate documents by ensuring that you have updated your will to reflect your exact wishes for your belongings. Next, follow your state-specific requirements for naming guardians for your children. Life insurance is an essential need for both parents, and most attorneys will include this as part of the divorce decree.

Next, you'll want to review your existing retirement plans, and other financial accounts for which you can name a beneficiary.

Future Planning for Children - Since it will take some time to get used to being a single parent, it's often wise to establish an emergency fund, which typically includes enough liquid cash to cover six to nine months of expenses.  Also consider establishing a 529 College Savings Plan.

The Bottom Line - Single parenthood offers many challenges, most of which you may not be fully prepared for. By planning and budgeting wisely, you can not only raise your children more comfortably but also help them develop positive, life-lasting spending habits as well.

Source:  Investopedia

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Wednesday, October 24, 2012

Beware Of Company Stock In Your 401(k)

Many firms that seek to increase employee motivation and tenure are able to do so by rewarding their workers with shares of company stock. This method of compensation can benefit both employees and employers in many respects; employees can get an extra measure of compensation that takes them beyond their regular paychecks, while employers can allow the open market to shoulder at least a portion of the cost. Many firms encourage their employees to purchase stock inside their 401(k) or other qualified plans as well. But while this strategy does have a few advantages, it can also pose some substantial risks to employees, and these risks are not always explained adequately.

The ERISA Loophole - The Employee Retirement Income Security Act was created in an effort to create secure retirement for American workers. When Congress introduced this act in the early seventies, most major corporations and employers in America were all for it - on one condition. They told Congress that if they were not allowed to put their own stock in the company plan, then they would not offer any of the qualified plans created by the Act in any capacity.  Needless to say, Congress quickly caved to their demands and allowed a "loophole" that permitted the purchase of "qualifying employer securities" inside an "eligible individual account" in qualified plans.

The National Center for Employee Ownership published a Statistical Profile of Employee Ownership in February of 2012 showing that there are about 800 401(k) plans and nearly 11,000 Employee Stock Option Plans (ESOPs) that invest either mostly or exclusively in company stock. Although the economic turbulence of the past several years has curtailed the purchase of company shares inside retirement plans, this practice has clearly continued.

Methods of Stock Purchase - 401(k) plans and ESOPs are the two most common types of qualified plans in which company shares can be found. ESOPs are popular with closely-held businesses that use the plan as a means of transferring ownership. Some employers strongly encourage their workers to invest all of their contributions into company shares, while others will either refuse to match any contributions that are not used to buy company stock or else match employee contributions directly with company shares.

Advantages of Purchasing Company Stock in Qualified Plans - Employers encourage the purchase of company stock in their retirement plans for several reasons. As mentioned, they can benefit from improved employee motivation and longevity by aligning their employees' financial interests with the company. They can also shore up their power base among the shareholders at large by placing more shares in the hands of workers who are likely to support at least the majority of the decisions made by the board of directors. Perhaps most importantly, they can also save money by making their matching contributions in the form of company shares instead of cash.

Employees can benefit by making tax-deductible purchases of company stock in their plans without having to enroll in a separate plan of any kind, such as an employee stock purchase plan or stock option plan.

When You Don't Diversify - Any competent financial planner will tell his or her clients to avoid putting most or all of their eggs into one basket. Employees who funnel most or all of their retirement plan contributions into company stock can end up being seriously overweighted with this holding in their portfolios. The employees at Enron, Worldcom, United Airlines and other firms that went bankrupt learned the consequences of this the hard way. Workers who invest in company stock need to realistically consider the possibility that their employers could go bankrupt at some point, and then assess the impact that this would have on their investment and retirement portfolios. It can certainly be tempting to load up on company shares in many cases, especially if the company is doing well and the stock has outperformed the market over time. But factors such as governmental regulation, market forces and economic conditions can drastically alter the solvency of a company in some cases. An employee who has half of his or her liquid assets tied up in a company that goes bankrupt may have to work another five or 10 years to make up for this loss.

The Bottom Line - Although there are some very real reasons why purchasing at least some company stock inside a retirement plan can be a good idea, employees should always start by obtaining some unbiased research on their stock. A series of meetings with a qualified financial planner can also help an employee to determine his or her risk tolerance and investment objectives and provide insight as to how much company stock he or she should own, if any.

Source:  Investopedia

 
The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Gen X Now Worries Most About Retirement

A survey released this week shows that Americans aged 35 to 44 are now the most worried about financing their retirement, a stark turnaround from 2009, when people in that age group were among the least worried about money for retirement.

The survey, from Pew Social and Demographic Trends, appears to reflect the lasting impact of the long economic downturn: In general, people of all ages are more pessimistic about retirement than they were three years ago.

About 38 percent of the more than 2,500 people Pew surveyed said they are not that confident they have enough income and assets for retirement. That’s up from 25 percent in 2009, when the nation's economy officially came out of recession.

The Pew report found that 49 percent of those 35 to 44 were either not too or not at all confident that they would have enough money to live on in retirement, compared with just 20 percent who had that concern in 2009.

The Pew researchers said one reason the Gen-Xers may be feeling doubtful about retirement is that they are less likely to have retirement accounts. The percentage of people ages 35 to 44 who have a retirement account has fallen 9 percentage points between 2001 and 2010, to 52 percent, according to Pew's analysis of government data.

Gen X also may be feeling gloomy because they’ve lost so much wealth in recent years.

A Census Bureau study released a few months ago found that those in the 35-44 bracket experienced the biggest percent decline in median household net worth between 2005 and 2010.

Median net worth for those households declined 59 percent during that period, from $80,521 in 2005 to $33,200 in 2010. The figures are adjusted for 2010 dollars.

The Census Bureau report also found that 45- to 54-year-olds saw the biggest hit in terms of actual dollars lost during between 2005 and 2010.

People in that age group also are feeling much more pessimistic about retirement than they were three years ago, the Pew researchers found.

About 43 percent of 45- to 54-year-olds said they are feeling less than confident about their chances of having enough to live on in retirement, compared with 33 percent who felt that way three years ago.

The most optimistic group were people over age 65, but even they have grown more antsy. About 28 percent of people who fall in the traditional retirement age window said they were not very confident of having enough retirement savings to live in, compared with 19 percent who felt that way three years ago.

Source:  Allison Linn, NBC News

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Overcome The Retirement "Gender Gap"


Many people won't save enough money for a comfortable retirement, but women have an even higher risk than men of coming up short when they stop working.

There are three key factors that have the greatest influence on retirement savings: income levels, risk tolerance and life expectancy. In each of these categories, women may hold the losing hand.

Income Falls Short - According to 2010 U.S. Census Bureau data, women earned $36,931 on average, while men earned $47,715. Women earn less than men because of time spent out of the workforce. Women frequently take time away to have children, raise families and increasingly, to care for aging parents.

At the same time, however, women are often paid less for the work they do, regardless of how long they're employed. According to the Women's Institute for a Secure Retirement (WISER), on average women earn around $0.77 for every $1 earned by men. That's roughly a $300,000 loss over a career's lifetime!

Because retirement benefits are based on accumulated earnings during a working career, this "gender wage gap" quickly turns into a retirement wage gap. As such, WISER points out, women with pensions receive about 58% of the average male retirment income, or $13,603 annually compared to $23,500 each year for a man.

The impact of this gap is multiplied by the fact that women typically live longer than men. Add on the possibility of divorce or widowhood, in which women may lose out on a portion or all of their spouse's pension benefits, and women clearly head into retirement with far less wealth than men.

Risk Tolerance Is Low - When it comes to choosing how to invest retirement savings, every individual must decide which risk-return relationship is comfortable, but also ensures their financial goals are reached. A common mistake is to invest retirement assets too conservatively, thereby sacrificing long-term growth.

Investment history and theory have proved that higher returns are attained by taking on more risk. For women, being overly cautious with an investment strategy for retirement will only magnify the problems they already face as a result of lower lifetime incomes and longer life spans.

It's All in Your Mind -  Psychological factors play a very important role in how women deal with money and investments. A review conducted by James Byrnes, David Miller and William Schafer (1999) of 150 psychological studies of risk-taking by men and women found that women generally perceive more risk, and are more risk-averse in situations ranging from health to the environment, public policy or finance.

The reasons for this risk-gender discrepancy are complex. Some studies suppose that women's greater responsibility in childbearing and reproduction leads to risk-aversion (J. LaBorde Witt, Journal of Women and Aging, 1994). Others point to the way women are raised. Regardless, most women can recount feelings of fear and intimidation when it comes to dealing with money and investments.

An analysis by John Watson and Mark McNaughton in the Financial Analysts Journal in July 2007 quantified the impact that risk-aversion has on women's projected retirement benefits. Controlling for age, income and education, the study concluded that women choose more conservative investment strategies, and that this is the primary reason why women can expect to have less retirement savings than men. The effect is compounded because women make less, retire earlier and live longer than men.

What's Next? - Women require more financial education to help them determine the appropriate risk, return and retirement strategies to meet their goals. A growing number of financial advisors, banks and organizations have recognized this knowledge-gender gap and are creating education programs aimed specifically at women.

The Bottom Line - It's time for all women to take charge of their retirement savings. Seek out a financial advisor, investor education materials and other resources that target the unique circumstances women face. Ask questions. Don't wait.

Source:  Investopedia

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Sunday, October 21, 2012

Taxes go up in 2013 for 163 million workers

Come January, 163 million workers can expect to feel the pinch of a big tax increase regardless of who wins the election.

A temporary reduction in Social Security payroll taxes is due to expire at the end of the year and hardly anyone in Washington is pushing to extend it. Neither President Obama nor Presidential candidate Romney has proposed an extension, and it probably wouldn't get through Congress anyway, with lawmakers in both parties down on the idea.

This will cost a typical worker about $1,000 a year, and two-earner family with six-figure incomes as much as $4,500.

Social Security is funded by a 12.4 percent tax on wages up to $110,100, rising to $113,700 in 2013. Half is paid by employers and the other half is paid by workers. For 2011 and 2012, Congress and Obama cut the share paid by workers from 6.2 percent to 4.2 percent.

A worker making $50,000 saved $1,000 a year, or a little more than $19 a week. A worker making $100,000 saved $2,000 a year.

Source:  Associated Press

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Friday, October 19, 2012

The $300,000 blunder

Stepchildren might not have the same legal standing as biological children if beneficiary forms don't make that clear.

In a recent case, the 5th U.S. Circuit Court of Appeals ruled that a retirement plan administrator didn't abuse her discretion in concluding that stepsons weren't “children” under the terms of their stepfather's employer retirement plan. As a result, when John Hunter, a plan participant, died with no beneficiary, his stepchildren were disinherited and other family members got the money — $300,000 under the plan's default-beneficiary rules.

He retired from Marathon Oil Co. and participated in the company's qualified retirement plan. The plan allowed Mr. Hunter to name a primary and secondary beneficiary.

He named his wife, Joyce Hunter, as primary beneficiary but didn't name a contingent beneficiary. After she died in 2004, he didn't update his plan beneficiary form.

Mr. Hunter died in 2005.

Because he died without a living primary or contingent beneficiary, his plan defaulted to one of five beneficiaries in the following order: his surviving spouse, surviving children, surviving parents, brothers and sisters, and his estate.

Because Mr. Hunter's wife was already deceased, the plan's next default beneficiary was his surviving children. He didn't have any biological or legally adopted children, but he did have two stepsons, Stephen and Michael Herring.

Under the terms of the plan, because Mr. Hunter's wife had predeceased him, he had no biological or legally adopted children, and he had no surviving parents, the plan distributed the funds to the next category of default beneficiaries — his six brothers and sisters.

The stepsons later challenged the distribution, arguing that they were Mr. Hunter's “children” and should have received the $300,000. They cited their close relationship with him, the fact that he left his estate to them and the fact that he referred to them as his “beloved sons” in his will.

If Mr. Hunter named them as contingent beneficiaries, the stepsons could have inherited the retirement plan assets.The failure to name a contingent beneficiary could have been fixed if the retirement plan beneficiary form simply had been updated.

When there is no beneficiary named on the plan beneficiary form, the retirement plan documents dictate who gets the money by default.

Source:  Ed Slott, Investmentnews.com

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Thursday, October 18, 2012

Vanguard Chief: Forget trading, start investing


Jack Bogle, founder of the Vanguard Group and author of “The Clash of the Cultures: Investment Versus Speculation,” says that investors should not be shaken by the economy, the election or the fiscal cliff and should, instead, stay focused on buying good businesses for the long haul, regardless of market conditions.

“Get out of the casino, own Corporate America and hold it forever,” Bogle said during “The Big Interview” on MoneyLife with Chuck Jaffe. “No trading, no nothing. You don’t need to trade; you don’t need to worry about the market. To protect yourself from the bumps the stock market will scare you with – even though it shouldn’t scare you because there have been bumps in the market since the beginning of time – have a bond position to go along with your stock position, and have your bond position [the proportion of your assets in bonds]  … have something to do with your age.”

Bogle said that the financial-services industry gets much of the blame for creating the idea that there are ways to beat the market or to avoid the bumps – or even the major market meltdowns – but noted that individual investors share the blame.

Bogle pointed out that the distinction between investment and speculation is more clear than most investors expect, and said that many people who consider themselves investors but act like speculators. He noted that both sides have elements of buying-and-holding securities.

“The stock market is a mysterious and often misleading thing. It creates no value, zero value, for investors. In fact … it shifts value from investors to participants in the system, brokers, investment bankers, money managers and things like that,” Bogle said. “Value is created not by stock prices, but by stock intrinsic values, by corporations that have staggering amounts of capital … they put that money to work, they earn a return on it in a competitive world. … That’s what investing is about, owning companies.

Source:   Chuck Jaffe, Moneywatch

 The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association

Why Are Gasoline Prices Suddenly Falling?



A dramatic spiral for gasoline prices in some key battleground states comes just three weeks before the U.S. presidential elections.

Ohio voters have watched prices at the gas pump drop by nearly 20 cents on average in the past week. At the same time, retail gas prices have plunged more than 10 cents in Wisconsin and Illinois.

Even in California, where the average gas price in the state reached the highest level on record on October 9, prices are now lower by about a dime. Nationally, on average, gasoline prices have fallen 5 cents since last Wednesday to $3.76 a gallon.

If the steep slide in pump prices — as well as the decline in the futures market — is any indication of what is to come, voters in several states may see gasoline prices closer to the $3 mark by Election Day than recent highs around $4 a gallon, some analysts say.

A series of U.S. refinery glitches and tight supplies in some regions caused gasoline prices to surge earlier this month to the highest prices since the spring. But the switch to a less expensive winter grade of gasoline, weak refinery demand and increase of supplies in certain areas caused gasoline prices to start coming down. An unexpected increase in U.S. gasoline supplies in the past week could cause pump prices to fall even further.

The U.S. Energy Information Adminstration reported domestic gasoline supplies rose in the past week, when many analysts had forecast a decline. Meanwhile, gasoline demand over the past four weeks continued to decline compared to a year ago.

In the end, supply and demand is causing prices to moderate once again.


The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.



The Jacksonville Business Journal has ranked D2 Capital Management in 
the top 25 of Certified Financial Planners in Jacksonville

D2 Capital Management is a Member of the Southside Businessmen's Club and the Beaches Business Association