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by Kimberly Lankford
Ah, a new year. A new beginning. A promise to better your financial self. These steps will get you going in the right direction.
Organize your tax files. If you scramble for receipts every April, you're probably missing valuable deductions because you run out of time. So start digging up receipts now, and make folders to collect your W-2's and 1099s as they arrive. Also, find those mutual fund records, so you can pinpoint the basis of shares sold in 2003.
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FREE Retirement Planning eNewsletter |
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| Rebalance your portfolio. Do your investments even vaguely resemble the diversified portfolio you carefully designed years ago? If you've let your portfolio run free for a while, your allocations are probably very different from what you originally planned. Now's a good time to put your portfolio back in shape. It's less expensive to rebalance these days, because long-term capital gains are now taxed at 15% or less. Rebalancing your 401(k) and other retirement plans is even cheaper, because there are no tax ramifications.
Boost your 401(k) contributions. As noted in "Know Your Limits," on page 82, the new year brings higher limits on how much you can set aside.
Simplify your IRA contributions. Instead of waiting until next April 15 to write a $3,000 check, have $250 per month deposited directly into your IRA. (If you qualify, use a Roth rather than a traditional IRA.) Automatic deductions are an easy way to max out your contribution without noticing that the money is gone. If you use a mutual fund, it also helps to dollar-cost average--buy more shares when the cost is down and fewer when it's higher. If you're 50 or older, you can contribute $3,500 to your IRA, or just over $290 per month.
File financial-aid forms fast. Even though many college-aid applications aren't due for a couple of months, some money is awarded on a first-come, first-served basis. So send in the forms as soon as possible after January 1, and don't worry about filing your taxes first. Just do a quick run-through and estimate. But make your estimate a single number; a range could actually slow the application. You'll get a chance to revise things later if your estimate is off. Resolve to pay less interest. Force yourself to study year-end credit-card statements to see how much interest you paid in 2003 for the privilege of buying on time. Now, picture everything else you could have done with that money. Now's a good time to search for a lower-rate card. Surf for a better option on Cardweb.com or Bankrate.com, or simply ask your current card issuer to improve your deal.
Use your medical flex account. Don't wait for a big expense. Although your contributions are spread throughout the year, you can use a whole year's worth of money right away. Tap your account to cover deductibles, co-payments and other expenses that aren't covered by insurance, including out-of-pocket costs for glasses, prescription sunglasses, prescription drugs, contact lenses and dental work. You can now spend flex-plan money on some nonprescription drugs, too.
Make the most of your home. If your mortgage rate is over 7%, consider refinancing. Run the numbers through the calculator in the spending section of our Web site, Kiplinger.com, to see how long you need to live in the house to recoup the closing costs. Then use your savings to pay down high-interest debt, boost your retirement savings or pay ahead on your new mortgage.
Cut insurance costs. Homeowners rates are expected to rise by about 8% in 2004, but you may be able to offset that increase by raising your deductible. Going from $250 to $2,500 can lower your premium by up to 30%. Raising it from $500 to at least $1,000 can still cut a chunk of your costs and make you less likely to file small claims that could get you dropped by the insurer.
-- Reporter: AMY ESBENSHADE |
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U.S. Existing Home Sales Dip in October (Reuters)
Reuters - Sales of existing U.S. homes fell by
a less-than-expected 0.1 percent in October as low mortgage
rates offered support to buyers, a trade association report
showed on Tuesday.
Plaintiff Sought for Fannie Mae Lawsuit (AP)
AP - Ohio is seeking lead plaintiff status in a $40 million securities fraud lawsuit against mortgage buyer Fannie Mae.
Be Happy, and Put Retirement Fears to Rest (Reuters)
Reuters - If retirement fears were
color-coded, they would be somewhere between orange and red
right now.
Investors Divided on Desirability of Gold (AP)
AP - A sickly dollar lifted gold to a fresh 16-year high this week, just as a newly launched exchange-traded fund offered individual investors a new way to own the gleaming asset. But Wall Street experts, less than unanimous about its prospects, are divided about what sort of role gold should play in your portfolio.
ING sells Life of Georgia for $257M (TheDeal.com)
TheDeal.com - The sale to Jackson National Life Insurance is the latest move by the Dutch company to shed noncore assets.
Rates on 30-Year, 15-Year Mortgages Dip (AP)
AP - Rates on 30-year and 15-year mortgages dipped this week, a development that should help keep the housing market humming.
Economy Expands Despite Rising Oil Prices (Reuters)
Reuters - Surging energy costs drove up U.S.
consumer prices a hefty and larger-than-expected 0.6 percent in
October, while industrial output and housing starts rebounded
strongly from the prior month.
Mortgage Rates for Single-Family Homes (AP)
AP - Mortgage Rates for Single-Family Homes
Portuguese PM defends income tax-cutting 2005 draft budget (AFP)
AFP - Portuguese Prime Minister Pedro Santana Lopes defended his government's budget for 2005 on the eve of its vote in parliament, arguing it will maintain budgetary rigor even as it cuts income taxes and raises pensions and civil servant salaries.
Housing Starts Surge 6.4 Pct. in October (Reuters)
Reuters - U.S. housing starts jumped a
larger-than-expected 6.4 percent in October to the busiest pace
since December as buyers took advantage of low mortgage rates,
a government report showed on Wednesday.
Ex-Finance Exec Convicted of Wiretapping (AP)
AP - The former chairman of consumer finance giant Takefuji Corp. was convicted of ordering the wiretapping of the home phone of a journalist who had written articles critical of the company, an official said Wednesday.
Small-Cap Funds Have Surprised Investors (AP)
AP - Small-cap stocks have enjoyed a stellar run the last several years, a trend some analysts believe will continue in the months ahead. But mutual fund investors should consider their options carefully before chasing this asset's sizzling performance, as there's little doubt the cycle is starting to wane.
Mortgage Applications Rise Last Week (Reuters)
Reuters - New applications for U.S. home loans
rose last week as refinancing activity accelerated amid
relatively flat 30-year mortgage rates, an industry group said
on Wednesday.
Fannie Mae Warns of Possible $9B Loss (AP)
AP - Shares of Fannie Mae slipped Tuesday as the mortgage giant's outside auditor KPMG refused to sign off on its third-quarter earnings report, causing the company to miss a regulatory deadline for filing it.
Funds: What's Ahead for Fund Investors? (Reuters)
Reuters - This decade has been a tough
one for fund investors. The average stock fund has lost almost
6 percent annually since the beginning of 2000, a return that
encompasses huge losses from 2000 through 2002 and big gains in
2003.
Tax to Encourage Savings Holds Promise (Reuters)
Reuters - The looming political battle over
how to reform the tangled U.S. income tax code could get ugly.
But one option, a tax aimed at boosting savings, holds promise.
Fact and Comment (Forbes.com)
Forbes.com - President Bush has made it clear that he wants a thorough overhaul of both Social Security and the federal income tax code. The President shouldn't settle for half measures.
Abbey National Shares Trade for Last Time (AP)
AP - Shares in Abbey National PLC, Britain's sixth-biggest bank and second-biggest mortgage lender, traded for the last time Friday ahead of the completion of its $15.6 billion acquisition by Santander Central Hispano SA, Spain's biggest bank.
Lucent to Receive $816 Million Tax Refund (AP)
AP - Lucent Technologies Inc. will receive an $816 million tax refund after the Congressional Joint Committee on Taxation approved the company's tentative agreement with the Internal Revenue Service.
Online Trading Tips (The Motley Fool)
The Motley Fool - Those nice folks at the Securities and Exchange Commission (SEC), charged with (among other things) looking out for the interests of individual investors, never stop trying to help us out. Their sec.gov website, for example, offers a bunch of tips for those of us who trade stocks online.
H&R Block Faces Fraud Over Enron Bonds (Reuters)
Reuters - H&R Block Inc.'s financial
advisors unit on Monday was charged with fraud by securities
regulators for misrepresenting the risks of Enron Corp.
bonds and calling them safe, even as the energy
trader had begun its collapse into bankruptcy.
H&R Block Faces Fraud Charge Over Enron (Reuters)
Reuters - Financial services regulator NASD said
on Monday it has charged H&R Block Financial Advisors Inc.
with fraud related to the sale of Enron Corp.
bonds immediately preceding Enron's bankruptcy in
2001.
Vornado shops at Sears (TheDeal.com)
TheDeal.com - The REIT bought a 4.3% stake worth $330 million in the retailer, which has significant real estate holdings.
ECB holds minimum bid "refi" rate steady at 2.00 pct (AFP)
AFP - The European Central Bank held the minimum bid rate for its regular refinancing operations steady at 2.00 percent, a spokesman for the bank said.
Beware of 40-Year Mortgages (The Motley Fool)
The Motley Fool - The exciting world of mortgages offers much more than just your standard 30-year or 15-year loans. There are such beasts as 40-year fixed-rate mortgages, for example. These have been around for a long time but are now on the verge of becoming more widespread.
Poland raises PKO stake on offer (TheDeal.com)
TheDeal.com - The state will now sell 38.5% of the bank's shares, following heavy demand from individual investors.
SocGen in talks to buy Hanseatic (TheDeal.com)
TheDeal.com - The French bank hopes to get 75% of the German consumer credit specialist from Otto.
ING to Pay $370 Million for Allianz Unit (Reuters)
Reuters - Dutch financial services group ING
will pay about $370 million for the Canadian non-life insurance
business of German insurer Allianz, to be funded by floating
part of its ING Canada unit.
Bench-Pressed (Forbes.com)
Forbes.com - Benchmarks are a big part of how investors make decisions. Each quarter investors pore over the results from individual stocks, mutual funds and other types of portfolios--and then compare them to an index, a broad basket of stocks in their category. If a stock or fund trails the benchmark's performance for only a quarter, a distressing number of investors sell. Bad idea.
More Types of Mortgages (The Motley Fool)
The Motley Fool - Within the broader mortgage categories of fixed and adjustable-rate, there are plenty of variations, such as COFI, Hybrid, and Balloon loans, several of which combine aspects of the two main types. Let's take a look.
Aetna Posts $1.29 Billion in Earnings (Reuters)
Reuters - Aetna Inc. on Thursday posted a
steep rise in quarterly profit as the health insurer boosted
its forecast for the rest of this year and gave a 2005 profit
estimate above analysts' views, pushing shares up 5 percent.
The Day Of The REIT Dawns In Asia (BusinessWeek Online)
BusinessWeek Online - When a consortium of Hong Kong businessmen led by tycoon Li Kashing decided to cash in their investment in a sprawling Singapore retail-office complex called Suntec City Development, there were plenty of interested parties and one firm bidder: Ergo, a unit of German insurance giant Munich Re. But the owners rejected them all and decided to take a different route. In December, they will turn Suntec into a real estate investment trust, selling shares to the investing public for whatever the market will bear. They expect the REIT, which will yield about 7% a year, to list at $1. ...
Abbey says recovery hit by takeover distraction (AFP)
AFP - British bank Abbey National said that its share of Britain's mortgage-lending market slipped in the third quarter, blaming the drop on distraction due to its looming takeover by Spain's Banco Santander Central Hispano (SCH).
Do You Need Disability Insurance? (The Motley Fool)
The Motley Fool - Just like life insurance, disability insurance is protection for your future income. In the case of disability insurance, though, the event covered is your inability to earn a living wage as a result of poor health or injury.
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