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Choosing A Targeted Retirement Fund

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Just before the financial crash of 2008, one type of fund getting a lot of press was the targeted retirement fund. The idea cooled a bit during the recession, but the idea of these funds is starting to pick up in popularity again. While targeted retirement funds aren't for everyone, some investors find that they take a lot of the worry out of retirement planning, and provide peace of mind. Before you take the plunge, though, it helps to carefully consider your options.

First Things First: How Does A Targeted Retirement Fund Work?

The idea behind a targeted retirement fund is that all of the asset allocation stuff you would have to take care of on your own is done for you. Targeted retirement funds usually come with dates. If you want to retire in 2040, you would pick a fund with that target. You would invest a set amount of money in your fund each month, and, at first, the investments in the fund (which might even be investments in index funds) are more aggressive.

However, as you approach your target retirement date, the asset allocation shifts. Instead of investing heavily in stock funds, for example, the retirement fund might begin to shift toward investing in bond funds. The idea is that, as you near your retirement date, you should have a more conservative asset allocation, protecting you, to some degree from market crashes too near your retirement date. It you are into “set it and forget it”, a targeted retirement fund can be a boon.

And, of course, you can hold a targeted retirement fund in a tax advantaged retirement account. Hold your fund in an IRA or a 401k, and you will enjoy the tax benefits associated with your account, whether it is a Roth or a Traditional account.

Choosing A Targeted Retirement Fund

Before you decide on a fund, though, you have to do your research. Just because you don't want to mess with your retirement fund down the road doesn't mean you shouldn't do your due diligence now. Research your options. Morningstar provides information on a number of targeted retirement funds. Look for funds that:

  • Have low expenses. If the targeted fund invests in funds, then you want to watch out. The underlying funds will have expenses, and the targeted fund itself will add another layer of expense. Even so, it is possible to find a targeted retirement fund with low fees.
  • Offer the diversity you are looking for. Check into the underlying investments to see that you are properly diversified.
  • Provide the risk mix you want. In some cases, you might find that a fund is too aggressive, or too conservative, for your tastes. Look for a fund that is likely to fit with your idea of acceptable risk at various points during the target period.

A targeted retirement fund isn't for everyone. However, for someone who wants his or her retirement fund set on automatic, it can be a good idea to check into these funds. If you like index funds, you can choose a targeted fund that invests in index funds. There are also funds that include individual stocks, bonds and other investments. Figure out the kind of asset mix you want, and choose a fund that offers it — and that will re-balance in a way that you approve of as your retirement date draws near.

CapWest Mortgage: Discounts For Costco Customers, Good Rates For Good Credit

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My wife and I have been looking recently at possibly either buying a new home, or even building one if we were able to find the right lot.  Home prices are more reasonable now than they've been in a long time, and it sure is tempting to think about buying or building our dream home right now while the prices are so reasonable.

The thing is, however, so many are predicting that we still haven't hit the bottom of the real estate market, and in fact we may see a newer and lower bottom to the price floor.   While I think that idea has cooled us a bit on the idea of buying a new house right now, we're still looking, and keeping our eyes open for a mortgage company that we could use if we were to move. We're pretty sure we won't want to use Bank Of America again, for a variety of reasons. One mortgage company we're considering is CapWest Mortgage.

History Of CapWest Mortgage

Farmers Bank & Trust, is a small regional bank  founded in 1907 in a central Kansas town.  Their main business was with local farmers in the area.  Over the years they've grown and now have representation in several metropolitan areas in the Midwest, and across the country via the web. CapWest Mortgage, which this review is focused on is a subsidiary of Farmers Bank & Trust. From their site:

CapWest philosophies are paralleled with that of its parent, Farmers Bank & Trust, N.A., of Great Bend, Kansas; quality, honesty, integrity and ethics. A progressive national banking organization, Farmers Bank & Trust has strengthened customer confidence for over 97 years.

Since 1971, this family owned community bank has grown in assets from $4 million to more than $520 Million and maintains branch banking locations throughout the Central Kansas Region.

So CapWest is the relative newcomer to the Farmers Bank and Trust family, but they've been quickly expanding over the past decade and offering their services beyond just the Kansas area.

Better Business Bureau Rankings

I did a little bit of research on CapWest Mortgage, their customer service, and their Better Business Bureau rankings.  While you can't always rely on the BBB rankings, it still can be one of many indicators showing whether or not a company has good customer service.   When checking out CapWest, they came through with flying colors with an A+ rating on a scale of A+ to F.  While I wouldn't stake my entire reputation on the BBB, it's at least one of many signals to check.

CapWest Rate Check

One of the most important things to consider when checking out a mortgage company – is figuring out what your rates will look like when using the company.

I came up with a hypothetical situation where I would be taking out a $300,000 mortgage on a home purchase price of $350,000 for my city here in Shakopee, MN.  Here are the rates it gave me (in April 2011), all with closing costs around $3100.

  • 30 Year Fixed Rate Mortgage: 4.750% Rate – 4.979% APR – $16821.44/month
  • 20 Year Fixed Rate Mortgage: 4.375% Rate – 4.474% APR – $1922.77/month
  • 15 Year Fixed Rate Mortgage: 3.875% Rate – 3.978% APR – $2245.32/month

Their rates are going to be right in the middle when comparing to other companies I've run quotes for today.  The only thing is – if you're a Costco customer, you may be paying less – so it could mean a better deal.  To find out more details about that and to run a quote, click on the link or banner below.

Get Up To The Minute CapWest Mortgage Rates Here

Costco Member Discounts

One thing that I saw when researching CapWest was the fact that they advertise as having “special rates for Costco members”.  We're not members yet, but a membership isn't that expensive – and if we could save some good money by becoming members, we'd definitely consider it.

So what are the Costco Discounts? That's where it gets a little hazy.  On the Costco.com site they talk about their approved mortgage lenders, which CapWest Mortgage is one of, and how they have capped lender fees and lower rates than might otherwise be available to non-members.

Lender Fees have been capped at $600 for an Executive members and $750 for all other members. In addition, the borrower will pay for what is typically called 3rd party fees, such as appraisal, title, and credit report. These fees vary based on the details of your loan. All out of pocket expenses, lender fees and closing costs will be discussed with you at the time of application.

So depending on just which fees are capped, and what out of pocket costs they keep lower, this could definitely save you quite a bit of money. My only suggestion is if you're seriously considering using them, give them a call and see what they can tell you the discount might be.

What Do I Think?

CapWest Mortgage has quickly popped onto my screen lately because of the buzz I've been seeing on other PF blogs, and via companies like Costco that now list them on their website as an approved lender.  From everything I've read on the Better Business Bureau site and other sources they have good customer service, and their rates are competitive. If you've got good credit (do you have good credit?) you'll probably be able to get some good rates, and if you become a member at Costco you can probably have your lender fees capped and get a lower rate.  All in all CapWest Mortgage is definitely worth checking out.

To find out more about CapWest or their mortgage discounts you can go to their site through the link below.

What Constitutes A Worthwhile Expenditure?

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My husband is finishing up his Ph.D. this month. His defense is scheduled, and everything should be wrapped up by the beginning of May. This means, of course, that he will be looking for a job. He has already applied for a few jobs, and has been looking for openings, but many potential employers (mostly universities) want to see that he already has the Ph.D. Even though reports are that the job market is improving, things are still tough out there. Which is why we're looking for advantages. One of these advantages is going to conferences.

Projects my husband has been involved in have been accepted for presentation and exhibition at various conferences, although he doesn't always present it himself. Conferences add something to your CV, and they offer chances to network. One of these conferences is taking place in less than two months, in Madison, Wisconsin. My husband isn't sure he wants to go, since it will cost about $600. He's already been accepted to present, but he's thinking that if he doesn't go, he can use that money to buy an iPad. Here's how our conversation on the subject went:

Him: “I want to buy a nice laptop and iPad more than going to that stuff.” (His current laptop actually belongs to the school and he has to give it back at the end of the month. He can't use mine for personal reasons because it has already been deducted as a business expense.)

Me: “We've already budgeted in a laptop for you. We've been saving up for it.”

Him: “It would be nice to have an iPad. I doubt I'll get a job by going to the conference.”

Me: “Well, a presentation at ISSRM looks better on your resume than an iPad.”

Him: “True.”

Me: “If we're going to spend $600 on something, I'd rather have it be something that could potentially advance your career, rather than something we're pretty sure won't.”

Does Your Spending Help You Reach Your Goals?

When deciding whether an expenditure is worthwhile, I like to consider whether or not it will help our family reach a goal. It's true that one of our goals is to have a tablet computer with a low-end data plan so that we can access the Internet from anywhere, comparing prices while shopping, or looking for restaurants while traveling. However, this goal has a lower priority than helping my husband get a job.

At the conference, he will have the chance to meet other people and network. This could, potentially, help him find a job. On top of that, the date of the presentation shows that he was doing something after finishing his degree. In a world where you are practically unemployable if you have been out of school and jobless for more than six months, an international conference presentation can buy you a little time. In my mind, the chance that something will help my husband's career is more important than a fun gadget. After our conversation, my husband admitted that my argument had merit. So he's going to Wisconsin.

When you are making similar decisions, it's important to weigh the pros and cons. Consider what is more likely to help you in the long term. Consider your financial priorities and goals, and choose to use your money in a way that helps you move forward on the path to financial freedom.

What process do you go through when trying to make spending decisions?  Tell us about it in the comments!

How To Avoid The Capital Gains Tax

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Investments are difficult enough without losing huge portions of your investments to taxes, and capital gains are no exception to taxes. Capital gains are the profits that come from investing in capital assets, such as stocks, bonds, or real estate. If the profit exceeds the purchase price, which is what we all hope for, then the difference between the higher selling price and the lower purchase price is considered a financial gain for the investor, which is subsequently taxed. However, there are a few ways to get around paying large amounts of your investments. These are all legal, commonly used, and designed for investors to maximize their investment gain, without losing hard-earned funds to taxation.

“The government always wants its portion, but donating is one of the ways around tax requirements,” said Charles Bulger from RetirementCalculator.com. If you bought stocks in the past for 2,000 and the stock is now worth 10,000, you can donate the shares to charity for a tax deduction of 10,000 without having to declare the 8,000 profit as a taxable gain in capital. This is a common device used by investors called a charitable gift trust, which is offered by brokerage firms. You are allowed to donate a block of appreciated stock over a period of years, and the stock is sold by the trust, not the investor. No capital gains tax is applied.

If you’ve made some gains in your stock and you’re in a higher tax bracket, the appreciated stock is going to get hit with some hefty taxes at a higher rate. To bypass this tax, you can transfer the stock to a family member who ranks in a lower tax bracket. The gain would be placed on their tax return and, if the tax rate is low enough, they could end up having to pay much less than you would have. There are some drawbacks to this type of gift. Over 13,000 will eat into your lifetime gift and estate exclusion. Talk with your broker about this option, and see if it would work to your benefit.

This option is for those who are not relying on investment for financial support. If you want to bypass paying any gain taxes, consider your stocks, bonds, and other investments as one portion of your will. Death is one extenuating circumstance around taxation. It sounds morbid, but it’s one way of keeping the government out of your investments. Your heirs never have to pay income tax on the appreciated value between the time of purchase and your death, which your investments in their entirety to the next generation.

These are just a few of the many ways you can get around paying huge sums to the government. Forbes also has an article that goes into other ways that consumers can get around this form of taxation. As always, you should consult your broker and discuss in greater detail the usefulness of these types of actions. Looking into some of these options can save you a lot of money, and can help keep government hands out of your hard earned cash.

President Obama Signs Repeal Of 1099 Tax Reporting Provision Of Health Care Plan

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A while back when President Obama and congress passed the health care reform law, there was widespread criticism from some small business groups and lobbies because of some stringent new 1099 tax reporting requirements that was a part of the law.  Basically that portion of the new law aimed to increase government revenue by having small business and freelancers (like myself) report more transactions to the government via 1099 reporting.

In the past small businesses and freelancers would have to report to the government any time they purchased $600 worth of services from an outside vendor.  The new requirement, that was to go into effect in 2012, would also make it a requirement that small businesses and freelancers file a 1099 for every company that they purchase $600 worth of goods from as well.   While that may not sound like a huge deal, many recognized that the costs to comply with this order for many small businesses would be a job killer, and in some cases, a business killer.  At the very least it would mean a lot of time and money wasted by businesses reporting on what could potentially be hundreds of transactions that could possibly put any vendor over the $600 threshold.

Because it was agreed that this part of the new law wasn't a good thing, Congress and the President worked to come up with a repeal of the 1099 reporting requirement.

1099 Reporting Requirement Repealed

Before the election last fall the talk of how to repeal the 1099 reporting requirement of the health care law started.  While it didn't get passed last year before the election, this month the Senate and House were able to come to a solution.  They passed a measure that would repeal the 1099 reporting requirement, and relieve small business from at least one more pressure they don't need in this tough environment.

President Barack Obama signed a bill repealing a tax-compliance mandate in last year’s health- care law, giving a victory to business groups that led a campaign against the requirement.

The repealed provision, under which companies would have had to report more transactions to the Internal Revenue Service, was included in the law as a revenue-raising measure. It was to have taken effect in 2012.

“Small business owners are the engine of our economy and because Democrats and Republicans worked together, we can ensure they spend their time and resources creating jobs and growing their business, not filling out more paperwork,” Obama said today in a statement released by the White House.

To cover the cost of the forgone revenue from the repeal, the legislation Obama signed today includes provisions that will curtail health-insurance tax credits in the health-care law.

How Will They Pay For The Decrease In Revenue?

The new 1099 reporting requirement was expected to increase revenue by 21.9 billion dollars, which would help pay for the new health care law.

So where are they going to find that money now that the 1099 reporting portion of the law has been repealed?   Though President Obama says he isn't happy about it, they will be minimizing who will be eligible for certain health care tax credits under the new law.   (Of course they would never consider cutting back on certain spending provisions in the law!)

The new law changes the portion of the health-care law that deals with the health insurance tax credits that low- and middle-income Americans will get.

Eligibility for the tax credits, which are paid directly to health insurers, is determined each year by examining income from a prior year. At the end of each year, there is a reconciliation through which the government can seek repayment of credits from people whose incomes rose.

The new law changes the calculation and will require more people to return overpayments. Democrats maintained that this portion of the legislation represented a tax increase for people who happened to receive a year-end bonus.

So the government has realized that certain provisions of this law might put an undue strain on small business, and have now repealed those measures.  Now if only they would see just how much of a strain the rest of the law will put on our health care system in general – and repeal that as well!   (</end rant>).

What do you think of the 1099 reporting requirement repeal?  Are you happy about it like I am?   Do you think that they should have left it in place? Give us your thoughts in the comments!

 

30 Tax Organization Tips For Faster Filing

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You’re scrambling around your home office, looking for the paperwork you so desperately need to file your taxes. W-2s, 1099s, expense reports – it’s all blurring together and you’re asking yourself, “Where is that last piece of paper I need?”

Getting organized for tax time shouldn’t be something you cram into the evenings leading up to April 15. Instead, it should be a yearlong process. Tax time can be overwhelming enough without having to dig through piles of paperwork and the mess on your desk to find just what you’re looking for.

That’s why we’ve put together a list of things to get you ready. You’ll find essential steps for getting organized, tips to help you get ready for next year, and more.

Read on, my friends…

6 Reasons Being Organized For Tax Season Can Eliminate Stress

Come January, your mailbox becomes filled with all the documents you’ll need for filing your taxes – not to mention all the piles of receipts you have filed away. Here’s why being organized sooner (rather than later) will save you time – and stress.

  • If you don’t have organized files, you’ll run the risk of misplacing documents and receipts that are essential for your taxes.
  • You won’t get stressed by running to your tax preparer or post office in the days leading up to April 15.
  • If you’re not organized and leave that up to your accountant, they may charge extra fees for the time it took them to get your paperwork in line.
  • Thinking long-term, you should keep your tax records for four to seven years. Having these well organized throughout the year will help if an audit ever occurs.
  • It’s also recommended you keep your W-2 forms until retirement. Having these filed nicely will also help down the road.
  • It will make next year’s return easier. Having your old returns on hand will give you a great starting point when considering your credits, deductions, etc.

16 Essential Steps for Getting Organized

By early February, you should’ve gotten all of the paperwork you’ll need to file your taxes. Now, it’s time to get organized:

  • Make a tax appointment – Call your tax preparer to schedule an appointment. Late February or early March is best, as they get busier as April 15 approaches.  (too late for that this year!)
  • Purchase an expandable file folder or box to keep your paperwork – Ideally, a device with partitions (so you can separate by category) is ideal. In the future, buy one of these at the beginning of the year. Whenever tax documents are sent to you, put them in the folder right away so they’ll all be in one place.
  • Categorize – Categorize your folder into sections like: W2’s and pay stubs, 1099s, medical expenses, mortgage interest statements, real estate taxes paid, tax-deductible contributions, and business expenses.
  • Eliminate clutter – The first step to finding the documents you need is to eliminate what you don’t need. Go through your files and get rid of expired warranties, year-old bank statements, and anything else that’s no longer needed.
  • Gather all tax-related documents – This includes things like:
    • W2’s
    • 1099’s
    • Checking and savings account interest statements
    • Real estate tax statements
    • Mortgage interest statements
    • Investment statements
    • Receipts for charitable donations
    • Pay stubs
    • Retirement plan statements
    • Record of any tips (this is most common for bar and wait staff)
  • Gather all expenses – Hopefully, you’ve kept good track of these throughout the year. Gather all receipts that are considered business expenses, including:
    • Advertising and promotion
    • Professional dues and subscriptions
    • Licenses and permits
    • Utility, Internet, and cable bills
    • Meals and entertainment
    • Professional fees (tax preparation, business coaching, etc.)
    • Interest statements
    • Auto-related expenses
    • Computer equipment
    • Business-related books and magazine subscriptions
    • Travel expenses

8 Commonly Forgotten (Yet Extremely Useful) Items

There are also several pieces of documentation that you may not even think of, but they’ll actually be helpful when determining your deductions. Look around your home office and gather the following:

  • Rental property documents – Find any records that detail the purchase, improvements, or maintenance of rental property.
  • Insurance policies – These can help determine how much you should be reimbursed for a casualty or theft, business losses, or medical expenses.
  • Family records – Have records like marriage certificates and birth certificates handy in case your filing status or dependency information has changed.
  • Capital asset records – This includes things like jewelry, stocks, bonds, antique collections, and more.
  • Medical bills – This will give paper proof of any deductible medical expenses.
  • Energy-efficient purchases – Anything installed on your property that is considered energy-efficient may be eligible for a credit.
  • Theft or loss documents – If the unfortunate event of theft or loss occurred, collect information regarding when the item was missing, your proof of ownership, and the value of the property before and after loss.
  • Gambling winnings – These are fully taxable, along with the market value of prizes, and should be reported using Form 1040. Be sure to include the type of gambling activity, the date, address of the establishment, and the names of anyone who was with you.

Using even a few of the above steps to get organized before filing your taxes will relieve much unneeded stress, saving you time and energy.

What tips can you give us for getting ready for filing?

Pamela King promotes tax literacy and tax payer empowerment through research and education. She preaches the “KISS-AF” gospel – Keep it Super Simple and Free. If you can use the 1040ez form and e-file then you should do it!