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Saturday, January 24, 2009

FINANCIAL PREPAREDNESS CHECKLIST

FINANCIAL PREPAREDNESS CHECKLIST

At The Retirement Advisor, we recommend that investors approaching or in retirement keep a financial preparedness checklist.

#1 ENSURE YOU HAVE ADEQUATE LIQUID ASSETS

Most financial advisors recommend that people have anywhere from 1-3 months of savings in cash available for emergencies. We believe that for someone who is young and carefree, that should be enough. After all, with youth there comes mobility and the capacity to start over quickly. For individuals approaching or in retirement, we believe you should consider maintaining cash reserves that would provide you living expenses of 3-9 months. The liquidity of this cash will provide you financial and emotional security. If there is a natural disaster (hurricane, earthquake, tornado, flood, etc.) a man-made crises (terrorist attack, computer virus, etc.), or simply an unexpected calamity in your life (illness, accident, etc.), knowing that you have cash available to you will be one less thing you need to worry about and make it much easier for you to get through the difficult times.

The good news is that in today’s world, there is a lot more competition for your investment dollar. Thus, if you shop around, you can maintain cash reserves and get yields that approach what you might get with a certificate of deposit.

I am aware of two online savings accounts where you can currently earn 4% on your savings. The first is Dollar Savings Direct, which is a division of Emigrant Bank. Here is a link to their web site:

http://tinyurl.com/5lkdwj

The other is EverBank which guarantees 4.08% on its savings account for 3 months. Here is a link to that url:

http://tinyurl.com/6fnxfd

You can also try a high yield checking account. I will provide a summary of those in an upcoming newsletter.

#2 REVIEW YOUR INSURANCE POLICIES

After living through several hurricanes, one of the disconcerting truths to emerge is that most consumers are not familiar with what their insurance policies cover. A corollary to this is that many people have not taken the time to update their insurance. For example, homeowners often stick with the same coverage for the house on the day they purchased it, without ever updating it based on improvements made or other change in circumstances. The biggest insurance polices are home, flood, car, health and life. Take the time to read these policies and if you do not understand a provision, call your insurance company and have them explain it to you. While you are doing this, it might not hurt to shop around. According to J.D. Power and Associates, 33% of people who shop around for car insurance quotes end up switching companies. Thus, in addition to being on top of what your policy covers, you might save some money in the process. Also, make a list or take pictures or a video of your home contents and put it in a safe deposit box. This documentation will aid in getting claims filled quickly.

On a personal note, I have USAA for my auto, home and life insurance and would recommend them to others. (http://www.USAA.com) In August of this year, USAA increased its membership eligibility to include military retirees, regardless of when they retired and after they join, their spouses and children. I was able to join because my father was in the military. Captain Korn!

#3 ACCOUNT FOR ALL OF YOUR DEBTS AND ASSETS

Over the years, you may have accumulated many assets. You should create a list of everything substantial that you own, including stocks, CDs, mutual funds, real estate, jewelry, cars, etc. Likewise, you should account for all of your debt outstanding. You can then create your own personal financial balance sheet that will be of invaluable assistance in your financial planning, as well as estate planning. You can download a free excel worksheet to do that at the following url:

http://tinyurl.com/7l496h

#4 ORGANIZE RECORDS, PHOTOS AND VIDEOS

Everyone knows that they should maintain records of important documents, but have you made the effort to organize them and protect them against a disaster? For your financial well-being, you should keep all of your insurance policies, titles, marriage/birth/death certificates and account numbers for your financial institutions (banks, brokerage and investment houses). Consider keeping these records secured in plastic, and if possible, make a copy and put it in a safe deposit box, or a different location than your primary residence. Missing paperwork after a disaster can actually create more stress than the event itself. And lest you forget, when all is said and done, your photos and videos of family and friends are even more important. Unlike financial records that can eventually be recreated, photos and videos may never be recovered. Those reflect your life and taking the time now to ensure that they are protected against a disaster will pay off later on.

And of course in the digital age, it didn’t take long for a company to come up with an online safe deposit box. I can’t vouch for this site, but I read about it in the Wall Street Journal on a recent plane ride and wrote it down so I could share with you all. The name of the site says it all:

http://www.keepyousafe.com/


#5 LONG TERM CARE/LIVING WILL

People are living longer and longer. The reality of the situation, however, is that when people live to ripe old ages, they may have long-term health care needs. There is insurance for such needs available, although it can be expensive and so buyers need to do their research. However, that is something you can plan for now. A more serious and difficult issue for many people is whether to have a living will usually covers specific directives as to the course of treatment that is to be taken by caregivers, or, in particular, in some cases forbidding treatment and sometimes also food and water, should the principal be unable to give informed consent due to incapacity.

Each state has its own approach and laws governing living wills, so best to check with a lawyer. Time Magazine had a good article on Living Will Resources at this url:

http://tinyurl.com/5wwjn

#6 THE AFTERLIFE

While we may not know what awaits us after our demise, we can plan for what will remain after we are gone. If you do not decide while you are alive how you want your assets divided up, then someone else will decide for you. There are many choices to make such as whether you are going to donate to a specific charity, how much you are going to leave your children and whether you are going to fund a grandchild’s education. Making these decisions now also has the added benefit of you being able to tell the recipients of your decisions and enjoying the moment with them. Finally, many of these decisions have tax consequences associated with them and by planning now; you can optimize your estate so that it makes the financial sense to you while simultaneously benefiting the ones you care about.

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Friday, January 23, 2009

Best CD Rates at Pentagon Federal CU - 4.50%

PenFed CU Tops our Best CD Rates Survey this week

The top rates for CDs this week are at Pentagon Federal Credit Union (fondly known as PenFed CU) for 5 and 7-year certificates of deposit that currently pay 4.50%.

For shorter term, Flagstar Bank, has a 1-year CD with a 3.25% annual percentage rate.

For online savings, HSBC Bank is paying 2.60%.

With rates so low, banks will try to sell you their annuity products. Make sure you read our article: Beware of Annuities

The table below shows the best CD rates for other terms. If that table is hard to read, then try Very Best CD Rates.

"Highest CD Rate Survey + Current US Treasury Rates"
Term
Date
Highest
Rate (APY)
Where?
(Click link for Full Rate Sheets)
Daily Savings
1/23/09 1.81%
Vanguard Prime Money Market Fund
Tax Exempt
1/23/09 0.68%
Vanguard Tax Exempt Money Market Fund
Online Savings 1/23/09 2.60%
HSBC Bank
3-Month Treasury
1/23/09 0.09%
US Treasury Rates at a glance
6 Months 1/23/09 2.95%
Ascencia Internet Bank
6-Month Treasury
1/23/090.28%
US Treasury Rates at a glance
9 Months 1/23/09 2.76%
Nexity Bank (Birmingham, AL)
1 Year
1/23/09 3.25%
Flagstar Bank
1 Year Treasury 1/23/09 0.41%
US Treasury Rates at a glance
18 Months 1/23/09 3.00%
UmbrellaBank
2 Years
1/23/09 3.25% iGObanking.com
2 Year Treasury 1/23/09 0.77%
US Treasury Rates at a glance
3 Years 1/23/09 3.35% Discover Bank
3-Yr Treasury
1/23/091.12%
US Treasury Rates at a glance
4 Years
1/23/09
4.25% PenFed Credit Union
5 Years
1/23/09 4.50% Pentagon Federal CU & 3.80 @ Discover Bank
5 Yr Treasury
1/23/091.61%
US Treasury Rates at a glance
7 Years 1/23/09 4.50% Pentagon Federal CU & 4.00 @ Discover Bank
10 Yr Treasury
1/23/09 2.63%
US Treasury Rates at a glance
10 Years 1/23/09 4.00%
Discover Bank
30 Yr Treasury 1/23/09 3.32%
US Treasury Rates at a glance

With rates so low, banks will try to sell you their annuity products. Make sure you read the article: Beware of Annuities

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The Retirement Advisor Model Portfolios all began with $200,000 on 1/1/2007