September 5, 2010

Yes, I Am Still Here...

Hello again everyone... I hope that your school year has started off well, and I know that everyone is happy to have a bit cooler temps, the start of football season, and your schedule back to "normal."

I obviously have taken some time off over the past few months, but I did not go away. I want to thank those that emailed and "checked" on me to see if I was fine. My favorite email came from a subscriber that was worried that I had passed away... She was very happy when I responded. I did get a chuckle though.

I have had a number of emails about the various happenings with the stock market, TRS, WEP/GPO, and more. I responded to all of them within a very short period of time, but I chose not to post a blog.

Over the next month, I will be doing some research on various topics, and if there is something you would like for me to cover for you, by all means please email me (

By the way, one item that was brought up in a recent email was the $250 deduction for "eligible educators" for qualified expenses. This item was originally passed in 2006 and expired in 2007. It was extended late in December 2008 to cover tax years 2008 and 2009, and it has expired again. While it is not a "done deal," I would imagine that it will be extended again when Congress and President Obama make the now annual changes to the AMT tax. While this is by no means a guarantee, it is hard to imagine a Congress and President not extending this benefit to educators.

I wish all of you well, and thanks for all of the emails.

March 27, 2010

Retiring at the End of This School Year?

If you are retiring at the end of this school year, you have been counting down to this moment for probably the last 30 years. You have been dreaming of the days where you would be free from your profession while collecting a nice pension. Relaxing, traveling, or starting a second career are all within your grasp... yet, take some time to make some final plans first. There are several decisions to make, and all of them can have lasting impacts on your life and retirement.

First and foremost, there is your Georgia TRS pension. The best thing to do is to make an appointment with TRS to discuss your benefits and options. By all means, please listen to the various options. Once you start on an option, you cannot simply go back and change your mind later. For instance, if your pension will be the backbone of your retirement and your spouse's retirement, please look at the various joint options. Do not think that since Plan A offers you the most money that it is the best option. Think of your spouse and family, and by all means, consult with an advisor.

Depending on whether or not you contributed to Social Security, you should also look to meet with them to discuss your potential benefits at full retirement age (FRA) or early retirement. Social Security really is one of the services that goes out of its way to help answer questions and project your benefits. You may have an opportunity to help yourself by working part-time in between your retirement and collecting benefits, or you may be somewhere around the maximum you will collect, but the main idea here is to have some projection and not be surprised later.

Your other retirement accounts like a 403(b), Roth 403(b), IRA, or Roth IRA also need to be reviewed. If you plan on taking distributions from these accounts, there are tax implications and diversification changes that need to be considered. There is a big difference between being 52 and 60 when discussing these possibilities, so research, an accountant, and an advisor are definitely important.

Also, your current retirement account provider may try to "sweeten the deal" and have you make changes to your accounts that could have an impact later. Research any offers and really try to ask questions about surrender charges, fees, liquidation rules, withdrawal guidelines, etc. These companies have been pretty notorious about not disclosing the hidden fees and explaining the ultimate changes that are being made to your account.

If you need a job to allow your finances to work, then start making those contacts now. I know of several retirees that took part-time jobs to supplement their pension. They found something they enjoyed, and they started doing it.

Finally, make plans. Make plans to do some of the things you couldn't before and enjoy your life. My last bit of advice though is to try to make sure that you have thought things through. If your plans will require some extra funds, then plan how you will be able to make it work.

Congratulations! You worked hard to get to this point so enjoy it.

March 12, 2010

The Issues Facing Us - National Level

Being a student of history, this past year has been one fraught with huge national issues for President Obama and 111th Congress. From tackling a financial crisis (that President Bush and the 110th Congress started battling) to healthcare and global warming to unemployment, it has not been an easy term.

The "mood" of the nation has changed somewhat over the past year as well. The promise of change and excitement of the first minority President has given way to more partisan politics from both sides. The Republicans stand to gain numerous seats in the House and Senate based on the current polls, so there is a "push" to get various bills through Congress and on the President's desk. No matter which party you are for, the stalemate in Congress has both good and bad consequences.

Honestly, there does need to be a reform of the healthcare and financial systems. On healthcare, costs are spiraling out of control for numerous reasons, and the drug companies, insurance companies, legal system, and uninsured are all to blame in some part. Does a fix exist? I personally fail to see how a government run healthcare system can be any more efficient due to the layers of bureaucracy that are sure to follow, but I also understand the notion that insurance companies are out to make a profit. As with various industries though, who is to say what margin is out of line?

On the financial front, there is much needed reform. Previous administrations and Congresses urged home ownership for all, and with that, safeguards were lowered to allow those with riskier credit to own homes. Home ownership boomed and was lauded by politicians, but it was eating away at the credit worthiness of consumers and banks. When it crashed, it took numerous industries and jobs along with it. Over regulation will stifle growth, but deregulation will sometimes exaggerate it. There needs to be a good mix to allow risks to be taken, but risks that are minimal and do not threaten the system as a whole.

Unemployment stands at 9.7%, but there is no "quick fix." What most Americans do not realize is that it is the economic cycle that will drive unemployment. As the economy starts to grow, employers continue to be slow to hire new staff, but as the current staff gets overworked and starts to fall behind on productivity, employers will start hiring again. The same is true in downturns. Employers hold on to employees longer than they should thinking things will change until they finally have to lay people off. We are currently in the beginning of the growing economic cycle, but it could still be another six months before employers really start to rehire employees. Not great news, but it is better than still being in the downturn.

On the Social Security front, I continue to receive emails regarding WEP/GPO reform. Unfortunately, I can almost 100% guarantee that Congress will NOT tackle this issue prior to the elections in November which means it will be pushed on to the 112th Congress (starting next January). We all know that Social Security needs to be reformed, but with other pressing issues on President Obama's plate, I do not see a way that this issue moves to the forefront. Healthcare, financial reform, and the economy are too large to bring up another large issue - Social Security.

Finally, I had a good discussion with an old college professor a few weeks back. While I was in college and grad school, we would frequently discussed politics, so this was a trip down memory lane for me.

Anyway, one of the points that both of us came to was that when you have one party controlling both the Executive and Legislative branches, it is not always a good thing.

Numerous commentators have pointed to Obama as being very liberal, but if you will look at some of the things that he has said recently, you will notice he has started to try to move a bit more towards the middle. The current problem though is a super majority in the House headed by Speaker Nancy Pelosi, and a majority in Senate headed by Majority Leader Harry Reid. The House generally puts forward much more liberal bills that cannot pass through the Senate, so you run into a wall.

Our discussion focused more on former President Clinton and Newt Gingrich though. They were "adversaries," but they needed to come together to get items through Congress and to be signed by the President Clinton. Clinton and Gingrich could both stand their ground, but when push came to shove (like the budget) the two had to come together to make things work. I know it is a strange concept nowadays.

As we look at a potential change in the structure of Congress next term, will it actually be a positive? Would the need to make things more bipartisan help Obama and Congress? Time will tell, but history tells us it may be so.

Next up... State level issues...

January 25, 2010

2010 Investment Options for Your 403(b)

In early January 2009, I wrote:

"In 2002, the the S&P 500 lost 23.37%. At the beginning of 2003, the market continued to trend lower, and a funny thing happened, it turned around. By the end of the year, the S&P 500 had gained 26.39%.

I am not saying that 2009 will be a spectacular year and everything will be rosy, but if do your research and diversify your investments, you will at least be giving yourself a chance to participate."

If only I could predict the lottery numbers every week that well!

In the end, the S&P 500 gained 26.5% in 2009 which is almost exactly what it did in 2003. There are few similarities as to why the market turned around in 2003 and 2009, but it did.

Early in 2009, the market was just completely oversold. Everyone was so worried that every single company was going to go out of business that they quite literally sold everything (including bonds and preferred stocks). When the turnround came, it was strong.

Moving forward into 2010, it is definitely hard to see what areas of the market will stage the best performance, so since almost all of you seldom make changes to your portfolios, you must continue to diversify your portfolio - if nothing else, rebalance from last year!

Do not load up on international funds just because they had the best performance in 2009. International funds are somewhat more volatile because the international markets are more volatile, but there is also the currency trade which can help or hurt the fund's performance. If you wish to be more aggressive, adding a bit to your international holdings is a great way to accomplish this goal, but do not over do it!

On the bond side, just like in 2009, investment grade and inflation protected bonds (TIPS) look to be some of the best options. Government bonds should do poorly again in 2010 just like they did in 2009, and there is just about zero reason to be in them right now.

As I said last year, "As for the rest of the account, you really need to continue to research the funds that you have available. A good diversification model that would now include the investment grade and inflation protected bond funds would be excellent. Remember that if you only look at last year, you will be missing the point. Look at good and bad years, look at changes in the managers, etc."

If you look back through history, the second year of a recovery is generally not as spectacular as the first year, but it is usually still a good year. The goal here is to reap returns when we can and mitigate the losses in a bad year. Keep that in mind, and you will almost assuredly do better than those that try to time the market.

I wish everyone only the best in 2010, and I hope it is a very prosperous year for all of us!

January 17, 2010

Welcome to 2010!

Welcome to 2010! The new year has started much like the old year finished with a market steadily moving forward. Whether you believe the market is headed higher (a bull) or the market will go lower (a bear), how should you be playing the market and economy?

I have spent the last month or so researching the trends and patterns of 2009, and in some cases, I have gone back to previous economic downturns to try and find similarities to see how things moved forward. Yes, it is that history buff in me that leads me to research the past, but it is sometimes weird how the present really will look like the past.

Over the next few weeks, I'll be writing about investing options for 2010 (I had a similar post in 2009 that worked out very well - 2009 Investment Options for your 403(b)), the various issues facing President Obama and Congress, and then a post on planning for retirement for those retiring this year.

All in all, I hope that everyone had a great holidays and first two weeks of 2010. I look forward to a great 2010, and as always, if you have questions or comments, please by all means email me. It really is some of your own questions that give me ideas to discuss in future posts.

January 1, 2010

Happy New Year!

As we ring in the New Year, let's say goodbye to a 2009 that saw an economy out on a ledge at one point only to rebound and become a great investing year.

While there will always be ups and downs in the market and economy, may your health, happiness, and fortune always prosper. I hope 2010 is a great year for all of you.

All the best,