The Retirement Advisor

No Social Security Cost of Living Adjustment for 2011

2010-10-28T11:52:00.000-07:00

Flat COLA for Social Security recipients for the second straight year.

There will be no fizz in Social Security checks for the new year. The Social Security Administration announced "There will be no increase in Social Security benefits payable in January 2011, nor will there be an increase in SSI payments."

COLA Computation

The last year in which a COLA became effective was 2008. Therefore the law requires that we use the average CPI-W for the third quarter of 2008 as the base from which we measure the increase (if any) in the average CPI-W. The base average is 215.495, as shown in the table below.
Also shown in the table below, the average CPI-W for the third quarter of 2010 is 214.136. Because there is no increase in the CPI-W from the third quarter of 2008 through the third quarter of 2010, there is no COLA for December 2010.

	2008	2010
	CPI-W for—
July	216.304	213.898
August	215.247	214.205
September	214.935	214.306
Third quarter total	646.486	642.409
Average (rounded to the nearest 0.001)	215.495	214.136

Remember that the price of oil peaked during the three months in 2008 when the COLA for 2009 was set at 5.8%.

Chart showing oil prices vs the S&P500.
click image to see a larger version

With oil prices the past three months about half their peak value, CPI is slowly catching up but still below the 2008 calculation. The good news for seniors is they benefited from a higher SS payment than they would have received if the 2009 COLA was set a few months later after the price of oil crashed to $35 at the end of 2008.

Here is a chart and current quote for crude oil prices.

CPI peaked in July 2008 at 219.964. This September the CPI recovered to 218.439, still slightly below its 2008 peak. CPI for 2008 was only up 0.1% but Social Security beneficiaries got a 5.8% adjustment because of the spike in oil prices. They were very, very lucky to get a 5.8% raise while the rest of the country got fewer hours or lost jobs during the recession.

This table Automatic Social Security Cost-Of-Living Adjustments by Year clearly shows the January 2009 adjustment of 5.8% was the largest since July 1982!

Since actual CPI was effectively lower than what Social Security recipients were getting paid for, taxpayers were very generous to retired people at a very good time... during this recession. My guess is the CPI will make a new high in the next few months and COLAs will show up again next year for 2012.

US Treasury Auction Schedule

2010-10-01T13:53:00.000-07:00

Below is the tentative US Treasury Auction Schedule for the remainder of October 2010.

Security Type	Auction Date	Settlement Date
13-Week BILL Thursday	October 04	October 07, 2010
26-Week BILL Thursday	October 04	October 07, 2010
4-Week BILL Monday	October 05	October 07, 2010
13-Week BILL Thursday	October 12	October 14, 2010
26-Week BILL Thursday	October 12	October 14, 2010
3-Year NOTE Thursday	October 12	October 15, 2010
10-Year NOTE R Thursday	October 13	October 15, 2010
30-Year BOND R Thursday	October 14	October 15, 2010
Holiday - Monday		,
4-Week BILL Tuesday	October 13	October 14, 2010
13-Week BILL Thursday	October 18	October 21, 2010
26-Week BILL Thursday	October 18	October 21, 2010
52-Week BILL Thursday	October 19	October 21, 2010
4-Week BILL Monday	October 19	October 21, 2010
13-Week BILL Thursday	October 25	October 28, 2010
26-Week BILL Thursday	October 25	October 28, 2010
5-Year TIPS R T Thursday	October 25	October 29, 2010

For current US Treasury rates, see

We update the "US Treasury Auction Schedule" each month in the newsletter. See below for details on how to subscribe or Click to Subscribe now

US Treasury Auction Schedule

2010-09-08T13:49:00.000-07:00

Below is the tentative US Treasury Auction Schedule for the remainder of September 2010.

Security Type	Auction Date	Settlement Date
4-Week BILL Tuesday	Sept. 08	Sept. 09, 2010
13-Week BILL Thursday	Sept. 13	Sept. 16, 2010
26-Week BILL Thursday	Sept. 13	Sept. 16, 2010
4-Week BILL Monday	Sept. 14	Sept. 16, 2010
13-Week BILL Thursday	Sept. 20	Sept. 23, 2010
26-Week BILL Thursday	Sept. 20	Sept. 23, 2010
52-Week BILL Thursday	Sept. 21	Sept. 23, 2010
4-Week BILL Monday	Sept. 21	Sept. 23, 2010
13-Week BILL Thursday	Sept. 27	Sept. 30, 2010
26-Week BILL Thursday	Sept. 27	Sept. 30, 2010
2-Year NOTE Thursday	Sept. 27	Sept. 30, 2010
5-Year NOTE Thursday	Sept. 28	Sept. 30, 2010
7-Year NOTE Thursday	Sept. 29	Sept. 30, 2010
4-Week BILL Monday	Sept. 28	Sept. 30, 2010

For current US Treasury rates, see

We update the "US Treasury Auction Schedule" each month in the newsletter. See below for details on how to subscribe or Click to Subscribe now

Conservative Retirement Portfolios

2010-08-27T07:27:00.000-07:00

Conservative Portfolios for People in or Approaching Retirement

A primary goal of The Retirement Advisor is to help our subscribers achieve their financial or retirement goals in a suitable time frame and reasonable fashion. Our Retirement Advisor Model Portfolios were constructed with that goal and one other important goal in mind: Simplicity. Studies have shown that the most effective way to save and invest for retirement is to construct and maintain a diversified portfolio of low-cost index funds matched to one’s retirement needs and risk tolerances. There is no need (and in fact, this may be detrimental to your financial health) to invest in the hottest technology fund, or buy actively managed mutual funds where annual expenses could be over five times as high as low-cost index funds.

The Retirement Advisor Portfolios	Dollar Value on 7/31/10	Change
Model Portfolio 1	$219,682	9.8%
Model Portfolio 2	$231,512	15.8%
Model Portfolio 3	$248,518	24.3%
DJIA 12,501.52 on 1/1/2007	$10,466	(16.3%)
S&P500 1,418.30 on 1/1/2007	$1,101.60	(22.3%)

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

Each month, subscribers to The Retirement Advisor will receive updates to three different Model Portfolios. These updates will include any portfolio changes based on our latest outlook of the economy, interest rates, and inflation, as well as portfolio rebalancing as different asset classes deviate from target weightings. In addition, the performance of individual funds will also be updated on a monthly basis.

We designed our three different model portfolios for individuals who are in retirement or who are pondering retirement, taking into account 1) their current stage in life, and 2) their risk tolerance (i.e. how much risks they can incur without losing sleep at night). In presenting our three different model portfolios, we have ordered them starting with the most aggressive portfolio to the most conservative.

We designed our first model portfolio, the Aggressive Growth and Income Model Portfolio 1, for someone approaching retirement who is interested in a “balanced” approach to investing, which combines a mixture of stocks and bonds. Its 50% stock market weighting gives it the potential to increase your standard of living over time when rebalanced at key time points.

We designed our second model portfolio, the Moderate Growth and Income Model Portfolio 2, for individuals in retirement who believe sleeping better at night with less stock market volatility is worth giving up some of the potential for gains in standard of living to get lower volatility.

We designed our third model portfolio, the Conservative Capital Preservation Model Portfolio 3, for investors who invest solely in fixed income securities without any stock market exposure.

Portfolio Performance By Year Through July 31, 2010
Model Portfolio	2010 YTD	2009	2008	2007	2007 to Now
#1: Aggressive	2.4%	19.7%	(18.2%)	9.5%	9.8%
#2: Moderate Risk	3.3%	13.2%	(8.7%)	8.5%	15.8%
#3: Conservative	4.8%	5.5%	3.7%	8.3%	24.3%

Start Sleeping Well Tonight!

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Hindenburg Omen - Definition and History

2010-08-25T13:43:00.000-07:00

There is a lot of talk on TV and in the press about the Hindenburg Omen.

From Hindenburg Omen The Hindenburg Omen is a technical analysis pattern that is said to portend a stock market crash. It is named after the Hindenburg disaster of May 6, 1937, during which the German zeppelin Hindenburg was destroyed.

In order for the Hindenburg Omen to be reached, all of the following must occur:

1. The daily number of NYSE new 52-week highs and the daily number of new 52-week lows are both greater than or equal to 2.8% of NYSE issues trading that day.
2. The NYSE’s 10-day moving average is rising, or the index has moved higher during the past 50 trading days.
3. The McClellan Oscillator is negative on the same day. This is the the difference between the advancing and declining equities on the NYSE.
4. New 52-week highs cannot be more than twice the new 52- week lows (though new 52-week lows may be more than double new highs).

The traditional definition requires each condition to occur on the same day. Once the signal has occurred, it is valid for 30 days, and any additional signals given during the 30-day period should be ignored. During the 30 days, the signal is activated whenever the McClellan Oscillator is negative, but deactivated whenever it is positive.

This is important:

The Hindenburg Omen has predicted every stock crash since 1987, BUT it also has a ton of false positives. Only about 25% of the time does it actually foretell a crash.

The criteria above for the omen has actually been met twice this month, once on August 12th, and another time last Friday the 20th.

The model portfolios in the Retirement Advisor already account for market events like these so we have made no changes.

The Retirement Advisor Portfolios	Dollar Value on 7/31/2010	Change
Model Portfolio 1	$219,682	9.8%
Model Portfolio 2	$231,512	15.8%
Model Portfolio 3	$248,518	24.3%
DJIA 12,501.52 on 1/1/2007	$10,466	(16.3%)
S&P500 1,418.30 on 1/1/2007	$1,101.60	(22.3%)

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

Start Sleeping Well Tonight!

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Website for More Information about us

Health Care Reform

2010-03-24T20:49:00.001-07:00

Regardless of your politics and where you stand on the new health insurance legislation, since it has passed here is how health insurance reform will expand coverage this year:

1. Children with pre-existing conditions can no longer be denied health insurance coverage.

2. Health care plans will allow young people to remain on their parents' insurance policy up until their 26th birthday.

3. Insurance companies will be banned from dropping people from coverage when they get sick, and they will be banned from implementing lifetime caps on coverage.

4. Restrictive annual limits on coverage will be banned for certain plans.

5. Adults who are uninsured because of pre-existing conditions will have access to affordable insurance through a temporary subsidized high-risk pool.

We will be covering how the new health plan impacts individuals approaching or in retirement in coming newsletters. We invite you to see how well The Retirement Advisor's Model Portfolios have done by examining our newsletter. Visit our web site where you can download a free issue with instructions on how to subscribe. Subscribers are able to obtain all of our back issues at no extra cost.

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Don't Delay Your Financial Health Any Longer!

Conservative Retirement Investment Portfolio

2010-03-13T15:32:00.001-08:00

Many investors are looking for a conservative retirement portfolio, whether for themselves, or perhaps a parent or relative.

A primary goal of The Retirement Advisor is to help our subscribers achieve their financial or retirement goals in a suitable timeframe and reasonable fashion. Our Retirement Advisor Model Portfolios were constructed with that goal and one other important goal in mind: Simplicity. Studies have shown that the most effective way to save and invest for retirement is to construct and maintain a diversified portfolio of low-cost index funds matched to one’s retirement needs and risk tolerances. There is no need (and in fact, this may be detrimental to your financial health) to invest in the hottest technology fund, or buy actively managed mutual funds where annual expenses could be over five times as high as low-cost index funds.

We designed our three different model portfolios for individuals who are in retirement or who are pondering retirement, taking into account 1) their current stage in life, and 2) their risk tolerance (i.e. how much risks they can incur without losing sleep at night). In presenting our three different model portfolios, we have ordered them starting with the most aggressive portfolio to the most conservative.

We designed our first model portfolio, the Aggressive Growth and Income Model Portfolio 1, for someone approaching retirement who is interested in a “balanced” approach to investing, which combines a mixture of stocks and bonds. Its 50% stock market weighting gives it the potential to increase your standard of living over time when rebalanced at key time points.

We designed our second model portfolio, the Moderate Growth and Income Model Portfolio 2, for individuals in retirement who believe sleeping better at night with less stock market volatility is worth giving up some of the potential for gains in standard of living to get lower volatility.

We designed our third model portfolio, the Conservative Capital Preservation Model Portfolio 3, for investors who invest solely in fixed income securities without any stock market exposure.

We invite you to see just how well The Retirement Advisor has done by examining the newsletter. Visit our web site where you can download a free issue with instructions on how to subscribe. Subscribers are able to obtain all of our back issues at no extra cost.

Click to Subscribe Now

Don't Delay Your Financial Health Any Longer!

California General Obligation Bond New Offerings List

2010-03-09T08:02:00.000-08:00

The public offering of $2,000,000,000 (two BILLION Dollars) CALIFORNIA STATE VARIOUS PURPOSE GENERAL OBLIGATION BONDS has been priced and the retail order period has begun. To be eligible for an allocation of bonds, you must place an order at your broker by 8PM EST tonight!

All GOs listed below are call protected California General Obligation Bond New Offerings with Moody's and S&P ratings of BAA1 and A-, respectively.

Expected Order Period: TUES., 3/9 TIL 8:00 P.M., E.S.T; 3/10

Settlement Date: 03/18/2010

Expected Coupon	Maturity Date	Rating		Expected Yield	Call Protected	Est Taxable Equivalent Yield*
Expected Coupon	Maturity Date	Moody's	S&P	Expected Yield	Call Protected	Est Taxable Equivalent Yield*
2.000	03/01/2012	BAA1	A-	1.200	Yes	1.846
5.000	03/01/2012	BAA1	A-	1.200	Yes	1.846
3.000	03/01/2014	BAA1	A-	2.080	Yes	3.200
5.000	03/01/2014	BAA1	A-	2.080	Yes	3.200
3.000	03/01/2015	BAA1	A-	2.600	Yes	4.000
5.000	03/01/2015	BAA1	A-	2.600	Yes	4.000
3.500	03/01/2016	BAA1	A-	3.180	Yes	4.892
5.000	03/01/2016	BAA1	A-	3.180	Yes	4.892
3.500	03/01/2017	BAA1	A-	3.600	Yes	5.538
5.000	03/01/2017	BAA1	A-	3.600	Yes	5.538
3.875	03/01/2018	BAA1	A-	3.960	Yes	6.092
5.000	03/01/2018	BAA1	A-	3.960	Yes	6.092
4.125	03/01/2019	BAA1	A-	4.240	Yes	6.523
5.000	03/01/2019	BAA1	A-	4.240	Yes	6.523

*Assumes investor is subject to the maximum federal tax rate of 35%. Yield is based on offering price. Yield is subject to change based on market conditions.

Retirement Portfolios

2010-02-23T20:11:00.000-08:00

THE RETIREMENT ADVISOR

In the fall of 2007, as the stock market was reaching its all-time record high, many individuals approaching retirement were misled on the risks of investing. They were sold a bill of goods that promised double-digit returns. They were told that yields on fixed-income securities would stay high. During that year, we started The Retirement Advisor — a totally unique investment letter that was designed for people approaching or in retirement that wanted a reliable and trustworthy newsletter to help them plan for their retirement.

The Retirement Advisor publishes three conservative model portfolios that were able to weather the bear market by using fundamental investment strategies seeking returns after inflation that enable subscribers to meet their retirement objectives. The Retirement Advisor is different from other newsletters in that it isn’t a vehicle to try and lure investors with claims of outrageous unrealistic returns. Nor is the newsletter used as a front to try and collect assets to manage money for a fee.

People subscribe to The Retirement Advisor because they want to take control of their retirement planning and they want an unbiased opinion from a source that is not trying to sell them products that earn the sellers a commission. They want a source that will educate them on various retirement strategies and help them achieve their financial goals.

We invite you to see just how well The Retirement Advisor has done by examining the newsletter. Visit our web site where you can download a free issue with instructions on how to subscribe. Subscribers are able to obtain all of our back issues at no extra cost.

Click to Subscribe Now

Don't Delay Your Financial Health Any Longer!

CASH FOR APPLIANCES UPDATE

2010-02-16T16:46:00.000-08:00

Last month we provided an overview of the Cash for Appliances program. In just the past few weeks, several states have started their programs, including Nebraska, Indiana, Illinois and Pennsylvania. More and more states are going online and starting their programs. By all accounts, it is a hit with consumers who are flocking to replace their old appliances with new energy-efficient ones.

Some states offer rebates that are separate from the Cash for Appliances rebates for recycling old appliances. This means that you can get a rebate when you buy the new appliance and a second rebate if your old appliance is recycled properly.

To find out what your state is offering, check out the Department of Energy’s list of approved programs and details where you can simply click on the state where you live:

http://tinyurl.com/y9qxouw

We covered the Cash for Appliance Program in our January Retirement Advisor Newsletter. To learn how to subscribe to The Retirement Advisor Newsletter, visit our web site where you can download a free issue with instructions on how to subscribe. Subscribers are able to obtain all of our back issues at no extra cost.

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Don't Delay Your Financial Health Any Longer!

Higher Inflation Ahead According to ECRI

2010-02-05T12:41:00.000-08:00

The Economic Cycle Research Institute, ECRI - a New York-based independent forecasting group, in a series of six press releases last night and this morining, updated their outlook for global inflation. (More about ECRI). Below is a summary of ECRI's international Future Inflation Gauges (FIG) for February 5, 2010.

United States: FUTURE INFLATION GAUGE KEEPS CLIMBING

ECRI’s U.S. Future Inflation Gauge (USFIG) continued to increase in January. The value of the USFIG lies in its ability to measure underlying inflationary pressures and thereby predict turning points in the U.S. inflation cycle.
The USFIG rose to 102.0 (1992=100) in January from 99.0 in December, as did its smoothed annualized growth rate to 37.6% from 33.8%. The gauge was pushed up in January by inflationary moves in most of its components.
With the USFIG now advancing for ten straight months, underlying inflation pressures are
in a sustained cyclical upswing, promising higher inflation in the coming months.

Eurozone (Germany, France, Italy & Spain)
EUROZONE FUTURE INFLATION GAUGE SLIPS

Inflation in the Eurozone has begun to perk up, as anticipated by the upturn in the EZFIG. Clearly, with the EZFIG remaining close to November’s 11-month high, underlying inflationary pressures in the Eurozone have begun to resurface.

Germany: GERMAN FUTURE INFLATION GAUGE EDGES DOWN

German inflationary pressures dipped in December.
German inflation remains in a cyclical upswing and well above its cycle low, in line with the upturn in the GFIG. With the GFIG staying near November’s nine-month high, German inflationary pressures are still in a cyclical uptrend.

France: FRENCH INFLATION PRESSURES MOUNT

French inflation pressures rose in December.
The FFIG has risen from the all-time low seen in June 2009 to its highest reading in over a year. Thus, French inflation is likely to rise further in the coming months.

Italy: ITALIAN INFLATION PRESSURES DIP

Italian inflation pressures eased in December.
Italian inflation rose further from its mid-2009 low, as anticipated by the upturn in the IFIG. Meanwhile, despite its latest down tick, the IFIG remains near earlier highs. Thus, Italian inflation is likely to remain in an uptrend.

Spain: SPANISH INFLATIONARY PRESSURES INCREASE A BIT

Spanish inflationary pressures edged up in December.
Despite its recent dip, the ESFIG remains in a cyclical upturn and well above its cycle low. Thus, Spanish inflation is likely to increase in the months ahead.

Japan: JAPANESE FUTURE INFLATION GAUGE RISES AGAIN

ECRI’s Japanese Future Inflation Gauge (JFIG) advanced further in December.
Japanese consumer prices have begun to stabilize following their deflationary decline.
This was anticipated by the earlier upturn in the JFIG, which has now risen for five consecutive months to a 13-month high. Thus, the threat of persistent Japanese deflation continues to recede.

Korea: SLIGHT RISE IN KOREAN INFLATIONARY PRESSURES

Korean inflationary pressures increased marginally in December.
With the KFIG rising to a 14-month high in its latest reading, Korean inflation will increase in the months ahead.

Canada: DOWNTICK IN CANADIAN INFLATION PRESSURES

ECRI’s Canadian Future Inflation Gauge (CFIG) edged down in December.
Despite its latest dip, the CFIG remains well above March’s 26-year low, and close to October’s 15-month high. Thus, Canadian inflation pressures remain in a cyclical uptrend.

United Kingdom: U.K. FUTURE INFLATION GAUGE UNCHANGED

U.K. inflation pressures were unchanged in December, according to ECRI’s United Kingdom Future Inflation Gauge (UKFIG).
Despite its recent downtick, the UKFIG remains well above June’s all-time low and close to October’s one-year high. Thus, U.K. inflation pressures continue to be in a mild uptrend.

Disclosure: I own TIPS, TIPS mutual funds and Series I-Bonds. I also own and cover them in my newsletters.

More information:

I Bond Rates

Expected Inflation - TIPS Spread

More about ECRI
July 31, 2009: ECRI Predicts End of Home Price Downturn
July 21, 2009: ECRI Predicts The End of the Recession is Imminent
April 3, 2009: Upturn in ECRI's WLI Growth Rate Says US Business Cycle Recovery Ahead

Best CD Rate Survey by Term

2010-02-02T12:45:00.000-08:00

The top rate for a certificate of deposit (CD) this week is at Pentagon Federal Credit Union (fondly known as PenFed CU) where you can get a 7-year certificate that currently pays 3.75% APY.

For shorter terms, State Bank of India has a 1-year CD with a 1.76% annual percentage rate.

The one year US Treasury rate is currently 0.30%.

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 Rates Survey - Current US Treasury Rates
(All rates here current as of 2/1/10)

Term	Highest Rate (APY)	Where? (Click link for Full Rate Sheets)
Vanguard Daily	0.03%	Vanguard Prime Money Market Fund
Vanguard Tax Exempt	0.10%	Vanguard Tax Exempt Money Market Fund
6 Month CD	1.36%	Ascencia Internet Bank
1 Year CD	1.76%	State Bank of India
18 - Month CD	1.86%	Aurora Bank
2 Year CD	2.20%	Discover Bank
3 Year CD	2.60%	Nationwide Bank
4 Year CD	3.03%	National Bank of Kansas City
5 Year CD	3.35%	iGObanking.com
7 Year CD	3.75%	Pentagon Federal CU
10 Year CD	3.70%	Discover Bank

Vanguard Money Market Rates shown for Reference

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

How to Help Earthquake Recovery in Haiti

2010-01-16T08:25:00.000-08:00

Please Support the Earthquake Recovery in Haiti through the Clinton Bush Haiti Fund.

www.clintonbushhaitifund.org

On January 12, a magnitude 7.0 earthquake struck Haiti just outside the capital city of Port-au-Prince. The devastation – in lives lost, property destroyed, and families displaced – is immense.

At the request of President Obama, we are partnering to help the Haitian people reclaim their country and rebuild their lives.

Our immediate priority is to save lives. The critical needs in Haiti are great, but they are also simple: food, water, shelter, and first-aid supplies. The best way concerned citizens can help is to donate funds that will go directly to supplying these material needs.

Through the Clinton Bush Haiti Fund, we will work to provide immediate relief and long-term support to earthquake survivors. We will channel the collective goodwill around the globe to help the people of Haiti rebuild their cities, their neighborhoods, and their families.

We ask each of you to give what you can to help ensure the people of Haiti can build back stronger and better than ever.

Both of us have personally witnessed the tremendous generosity and goodwill of the American people and of our friends around the world to help in times of great need. There is no greater rallying cry for our common humanity than witnessing our neighbors in distress. And, like any good neighbor, we have an obligation and desire to come to their aid.

Thank you for taking the time to visit, and we hope you will donate to this worthwhile cause. The people of Haiti now need our assistance more than ever.

President William J. Clinton
President George W. Bush

To contribute, visit the secure online donation page or mail a check to:

The Clinton Bush Haiti Fund
c/o William J. Clinton Foundation
Donations Department
610 President Clinton Avenue
Little Rock, AR 72201

OR

The Clinton Bush Haiti Fund
c/o Communities Foundation of Texas
5500 Caruth Haven Lane
Dallas, TX 75225

For additional information please see The Clinton Bush Haiti Fund FAQs.

How to Invest Retirement Assets

2010-01-15T09:18:00.001-08:00

We are often asked how to distribute assets between accounts that usually include

Taxable accounts at brokerages
401K and SEP plans at work
ROTH IRAs
Regular IRAs

There is no "right answer" but some things to consider are:

Taxes on dividends and long-term capital gains are lower than regular income so you should have equities you expect to hold for a long time in taxable accounts.

The tax rates are highest for short term trading and regular income such as distributions from CDs, Money Market Funds and corporate bonds. These are good items for deferred accounts and ROTH IRAs.

Some securities, like US Treasury Bonds, Notes and Bills, may be exempt from State Income Tax (the rules are so complex with AMT I hate to say "always" so check your tax accountant to see how this applies for you.) These may be better in your taxable account than your IRAs.

Index funds, which are all we recommend in our Retirement Advisor model portfolios, are very tax efficient so they are good for taxable accounts if you don't trade in and out often. It often makes sense to have the model portfolio equity funds duplicated in your retirement accounts to help you rebalance without paying short term capital gains, but this adds complexity some may wish to avoid.

Managed mutual funds are often not very tax efficient so they are good for tax deferred accounts. For example, I have a few managed mutual funds in my personal "IRA Rollover" account I have kept from the 1990s when I worked at HP. I don't recommend them in either of my newsletters, but I like them for diversification and kept them as part of my "core and explore" approach to investing. They have done very well through the last two bear market cycles so I will keep them as long as they continue to beat or match the markets. If they start only matching the markets, then I will simplify my portfolio and add the money to the index funds we recommend in the Retirement Advisor.

Happy New Year!

Cash for Appliance Program Texas

2010-01-10T21:42:00.000-08:00

The State of Texas will implement a mail-in rebate program to help residents replace older, inefficient appliances with new, ENERGY STAR® qualified and ultra-efficient appliances. The program is tentatively scheduled to begin in April 2010 to coincide with Earth Day activities, and will continue until funds are expended.

Eligible products include

Refrigerators
Freezers
Clothes washers
Dishwashers
Room air conditioners
Gas condensing water heaters
Gas storage water heaters
Gas tankless water heaters
Electric heat pump water heaters
Solar water heaters
Central air conditioners
Air source heat pumps

Customers may reserve their rebates online before the program begins, and are required to provide proof of haul-away of replaced appliances. Consumers can also obtain a bonus rebate by providing proof that their old appliances were recycled through a State Energy Conservation Office partner retailer or recycling center.

Energy Efficient Appliance Rebate Program FAQs

Will Texas participate in the Energy Efficient Appliance Rebate Program being funding by the American Recovery and Reinvestment Act?

Yes, Texas will participate in the program.

How much funding will Texas receive?

Texas expects to receive $23,341,000.

Who is eligible for a rebate?

Consumers who purchase residential Energy Star appliances to replace older, functional appliances will be eligible.

When will this program take effect?

The mail-in rebate program will apply to eligible appliances purchased between April 16 and April 25, 2010. The 10-day period will coincide with Earth Day. Offering the program next spring will give retailers time to stock up on appliances, give the state time to select a vendor to administer the rebates, and allow ample time to inform consumers about details of the rebate program..

Will consumers be able to take advantage of this program retroactively?

No, the energy efficiency appliance rebate program will only apply to purchases made once the program officially begins.

How will consumers know when the program has begun?

The State Energy Conservation Office is working on creating a rapid notification plan to ensure consumers are aware of this opportunity. This plan will likely include retailers and other interested parties. Also, information on the program and its implementation will be posted on the State Energy Conservation Office stimulus site, http://www.secostimulus.org as soon as it becomes available. In addition, those interested in the program can sign up for our Appliance Rebate e-mail list to be informed as soon as rebates are available.

Will replaced appliances have to be recycled?

Texas plans to include recycling opportunities of old appliances in the program design. Once finalized, details will be provided online.

Can the appliance rebate for heat pumps be used in conjunction with the federal tax credit that currently exists for the purchase of this type of appliance?

To qualify for a Federal tax credit, a heat pump must meet the energy efficiency criteria listed on this page:

http://www.energystar.gov/index.cfm?c=tax_credits.tx_index

It appears that the qualifying requirements are slightly higher to receive the Federal tax credit than to receive the Texas appliance rebate. It's possible that some products could qualify for the Texas rebate, but not the Federal tax credit. However, any unit that meets both sets of criteria would be eligible for both the rebate and the Federal tax credit.

We covered the Cash for Appliance Program in our January Retirement Advisor Newsletter. To learn how to subscribe to The Retirement Advisor Newsletter, visit our web site where you can download a free issue with instructions on how to subscribe. Subscribers are able to obtain all of our back issues at no extra cost.

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Cash for Applicance Program - New York

2010-01-09T12:45:00.000-08:00

NEW YORK'S GREAT APPLIANCE SWAP-OUT

In February 2010, New York State residents can participate in the Great Appliance Swap-Out, a program designed to provide a boost to New York's economy while providing an incentive for consumers to reduce their energy consumption. Under the program, residents will be able to receive a cash rebate for replacing older appliance(s) with a new ENERGY STAR®-qualified appliance. This program, funded through the American Recovery and Reinvestment Act (ARRA), will also provide added incentives for consumers who recycle their old appliances to help reduce the impact on landfills.

Under New York State's proposed plan, consumers can receive rebates for purchasing eligible appliances individually or in a bundle of three specific appliances. Only appliances with an ENERGY STARÂ® label denoting higher efficiency are eligible for a rebate. Consumers may receive a larger rebate by purchasing three eligible appliances that meet standards issued by the Consortium of Energy Efficiency (CEE) that are higher than ENERGY STAR standards.

As proposed, customers purchasing appliances would qualify for a rebate of $75 ($105 with documented recycling) for ENERGY STAR qualified refrigerators, $75 ($100 with documented recycling) for clothes washers and $50 ($75 with documented recycling) for freezers. Rebates are available for dishwashers when they are purchased as part of a three-appliance package (refrigerator, dishwasher, clothes washer), which may qualify for a $500 rebate ($555 with documented recycling).

Refer to http://www.nyserda.org/economicrecovery/appliance.asp for more information on this program.

We covered the Cash for Appliance Program in our January Retirement Advisor Newsletter. To learn how to subscribe to The Retirement Advisor Newsletter, visit our web site where you can download a free issue with instructions on how to subscribe. Subscribers are able to obtain all of our back issues at no extra cost.

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Cash for Appliances: California Program Rules

2010-01-04T06:46:00.000-08:00

California has been allocated $35.2 million in federal American Recovery and Reinvestment Act (ARRA) funds to participate in the State Energy Efficient Appliance Rebate Program (SEEARP). The California Energy Commission will administer the SEEARP that will provide rebates to consumers for purchasing ENERGY STAR®-qualified home appliances during the rebate period.

The rebate program will:

* Save energy by replacing inefficient appliances with more efficient ones.
* Make rebates for efficient appliances available to residential consumers.
* Leverage the ARRA funds with existing rebate programs and partnerships.

The California Appliance Rebate program roll out is expected in early spring 2010. The Energy Commission has submitted its proposed Appliance Rebate Program design to the U.S. Department of Energy on October 14, 2009.

Three residential appliance categories were selected to be eligible to receive rebates:

clothes washers (proposed rebate $100)
refrigerators (proposed rebate $75)
room air conditioners (proposed rebate $50)

These rebates are in addition to existing rebates offered by California's utilities or appliance manufacturers. The Energy Commission used the list of "pre-screened" appliances from the DOE. To qualify, the appliances must be ENERGY STAR-listed and certified to the Energy Commission as meeting all state and federal appliance efficiency standards.

To get e-mail updates about California's appliance programs, you can enter your name and e-mail address in the box on the right hand side of California's website called "Energy Efficient Appliance Rebate Program and ENERGY STAR® Recovery Funding" at

http://www.energy.ca.gov/recovery/energystar.html

Current Consumer Rebates & Incentives

California has consumer rebates and incentives available now. Details are their Flex Your Power website.

Tax Tips: Year-End Donations

2009-12-26T08:00:00.000-08:00

Retirement Advisor Tax Tip: Year-End Donations

Many people make deductions during the holiday season before the year ends. Remember the following:

1. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2009 count for 2009. This is true even if the credit card bill isn’t paid until 2010. Also, checks count for 2009 as long as they are mailed in 2009 and clear, shortly thereafter.

2. Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.

3. For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.

4. The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C , or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

5. If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return. For additional information on charitable giving go this url:

Publication 526 (pdf)

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December 2009 Retirement Advisor Newsletter

Tax Tips: Charitable Contributions for IRA Owners

2009-12-24T07:54:00.000-08:00

Retirement Advisor Tax Tip: Special Charitable Contributions for Certain IRA Owners

This provision, currently scheduled to expire at the end of 2009, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option, created in 2006, is available for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible. To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the transfer. Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.

Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. See the following url for more information:

Publication 590 Are Distributions Taxable?

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December 2009 Retirement Advisor Newsletter

Tax Tips: New Car Tax Break for 2009

2009-12-21T07:42:00.000-08:00

Retirement Advisor Tax Tip: New Car Tax Break for 2009

If you are considering buying a new car, you have until Dec. 31 to take advantage of a tax break that may not be around in 2010.

Taxpayers who buy a qualifying new motor vehicle this year can deduct the state or local sales or excise taxes they paid on the first $49,500 of the purchase price.

Qualifying motor vehicles include new passenger automobiles, light trucks, motorcycles, and motor homes.

Individuals who itemize and those who take the standard deduction can benefit from this tax break. In states without a sales tax, other taxes or fees can qualify if they are assessed on the purchase of the vehicle and are based on the vehicle’s sales price or as a per unit fee. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.

To learn more, consult this IRS publication:

Sales Tax Deduction for Vehicle Purchases

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December 2009 Retirement Advisor Newsletter

High Interest Checking Account

2009-11-14T19:34:00.000-08:00

At the Retirement Advisor, we include a section in each of our newsletters that covers various ways our subscribers can earn more money on their cash. Whether it is certificates of deposits, Treasuries, or savings accounts, we research offerings available nationwide to enable our subscribers to earn more money but always with preserving principle in mind.

For people earning very little yield on their checking account, we recommend considering a move to one of the new offerings available. High yield checking accounts are a new development in the financial markets and are gaining popularity as people start to feel more comfortable banking online.

EARN 4%

If you have some cash laying around, there is an opportunity to earn 4% on your cash through a high yield checking account being offered by South Division Credit Union called Freedom Green Checking. Membership to this credit union is open to Children (Kid’s Club), Student’s (Student’s First Checking and Savings), and Adults (Full line of products and services). This credit union is a nationwide family community that accepts members from any U.S. neighborhood of family and friends with a household United States Postal Service Zip code from 01000 – 99999.

This checking account will pay you 4.01% on balances up to $25,000 which covers most people’s checking accounts except if you are the DON. The checking account refunds ATM fees nationwide up to $25 per cycle. It does carry certain requirements such as:

1. You must make 12 VISA debit signature purchases.
2. At least one direct deposit or ACH into your account each month of $250 minimum.
3. One Matrix21 bill pay (online banking)
4. You must Receive electronic statements
5. There is a $50 minimum to open and $300 required after 6 mo or you are charged a small fee of $6.

This credit union’s rating for safety and soundness are very good with 4 starts (an “excellent” rating) from BauerFinancial and 4 stars (a “sound” rating) at Bankrate.com. These ratings are based on financial data as of the end of the second quarter. The credit union is privately insured by the ESI and federal insured by the National Credit Union Association (Charter #65550). You can review the NCUA rating at this url:

http://tinyurl.com/yawym8a

In today’s rate environment, getting 4.01% is rare. If you are interested, you can learn more about the Freedom Green Checking account at this url:

http://tinyurl.com/yew7qpb

* * *

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US Treasury Auction Schedule - Upcoming Offerings

2009-11-06T06:31:00.000-08:00

Auction Schedule for US Treasury Securities: One way the US government finances its debt is by the sale of marketable Treasury Bills, Notes, Bonds, and Treasury Inflation-Protected Securities (TIPS - more info) to the public. Individual investors, through the US Treasury (www.treasurydirect.gov) or their bank and brokerage accounts, have the opportunity to participate in U.S. Treasury note, bill, bond and TIPS auctions without commissions for new issues.

In every issue of The Retirement Advisor Newsletter we cover upcoming US Treasury Auctions with a more complete auction calendar. We also give our estimate for rates for 3 month bills to 30-year bonds plus 5-, 10- and 20-year TIPS.

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Upcoming Auctions

Security Term / Type	CUSIP Number	Auction Date	Issue Date	Maturity Date
3-YEAR NOTE	912828LX6	11-09-2009	11-16-2009	11-15-2012
10-YEAR NOTE	912828LY4	11-10-2009	11-16-2009	11-15-2019
30-YEAR BOND	912810QD3	11-12-2009	11-16-2009	11-15-2039
91-DAY BILL	912795T27	11-09-2009	11-12-2009	02-11-2010
182-DAY BILL	912795UQ2	11-09-2009	11-12-2009	05-13-2010

note 1: tentative subject to official announcement

Marketable securities can be bought, sold or transferred after they are originally issued.
Treasury uses an auction process to sell marketable securities and determine their rate or yield.
The value of Treasury marketable securities fluctuates with changes in interest rates and market demand.
Marketable securities held in your account can be sold at current market prices through brokers and many financial institutions.

Current Rates

TERM	COUPON	MATURITY DATE	CURRENT PRICE/YIELD
3-Month	0.000	02/04/2010	0.04 / .04
6-Month	0.000	05/06/2010	0.15 / .15
12-Month	0.000	10/21/2010	0.3 / .30
2-Year	1.000	10/31/2011	100-09+ / .85
3-Year	1.375	10/15/2012	100-01½ / 1.36
5-Year	2.375	10/31/2014	100-12½ / 2.29
7-Year	3.125	10/31/2016	100-24½ / 3.00
10-Year	3.625	08/15/2019	101-03+ / 3.49
30-Year	4.500	08/15/2039	101-23+ / 4.39

13-WEEK TREASURY BILL (Historical Quotes for: ^IRX)	5-YEAR TREASURY NOTE (Historical Quotes for: ^FVX)

10-YEAR TREASURY NOTE
(Historical Quotes for: ^TNX)

Broker Links:

e-Trade: 866-420-0007
Fidelity: 800-544-5372
Schwab: 877-563-7818
Vanguard: 800-669-0514 8AM-6:30PM ET

For more details, see:

US Treasury Auction Schedule

2009-10-23T07:36:00.000-07:00

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Upcoming Auctions

Security Term	CUSIP Number	Auction Date	Issue Date	Maturity Date
91-day Bill	912795S77	10-26-2009	10-29-2009	01-28-2010
182-day Bill	912795UP4	10-26-2009	10-29-2009	04-29-2010
2-yr Note	912828LT5	10-27-2009	11-02-2009	10-31-2011
4.5-yr TIPS	912828KM1	10-26-2009	10-30-2009	04-15-2014
5-yr Note	912828LS7	10-28-2009	11-02-2009	10-31-2014
7-yr Note	912828LU2	10-29-2009	11-02-2009	10-31-2016
29-day Bill	912795Q53	10-27-2009	10-29-2009	note 1
91-day Bill	912795S85	11-02-2009	11-05-2009	note 1
182-day Bill	912795U41	11-02-2009	11-05-2009	note 1

note 1: tentative subject to official announcement

Marketable securities can be bought, sold or transferred after they are originally issued.
Treasury uses an auction process to sell marketable securities and determine their rate or yield.
The value of Treasury marketable securities fluctuates with changes in interest rates and market demand.
Marketable securities held in your account can be sold at current market prices through brokers and many financial institutions.

13-WEEK TREASURY BILL (Historical Quotes for: ^IRX)	5-YEAR TREASURY NOTE (Historical Quotes for: ^FVX)

10-YEAR TREASURY NOTE
(Historical Quotes for: ^TNX)

Broker Links:

e-Trade: 866-420-0007
Fidelity: 800-544-5372
Schwab: 877-563-7818
Vanguard: 800-669-0514 8AM-6:30PM ET

For more details, see:

Managing Your Retirement Portfolio - Rebalancing

2009-10-10T10:39:00.000-07:00

At the Retirement Advisor, we are ultimately concerned with helping our subscribers maximize their portfolio returns while minimizing risk. We regularly cover topics to educate our subscribers on how to best manage their portfolios. One such topic is portfolio rebalancing.

Buy Low and Sell High With Rebalancing

Portfolio rebalancing brings your different asset classes back to your target asset allocation after a significant change in one or all. Rebalancing means you sell some of what has done well (sell high) to buy some more of what has lagged (buy low.)

In a volatile market, you can get added return over buy and hold from rebalancing but the main reason we rebalance is to control risk. Let’s use a simple, balanced, two-asset class, $100,000 portfolio made of the total stock market and money market funds from Vanguard (VTSMX & VMMXX) to illustrate.

You start with $100,000:

• $50,000 in VTSMX and $50,000 in VMMXX

Let’s assume the stock market gains 100% over the next ten years (average annual return of 7.2% per year) while the money fund gains 5% per year.

After ten years without rebalancing you have $163,814:

• $100,000 in VTSMX and $63,814 in VMMXX

You rebalance to control risks from bear markets. If the market were drop 50%, as it did in the 2000 to 2002 bear market, then after two more years you would have roughly
$120,355, a total decline of 27%:

• $50,000 in VTSMX and $70,355 in VMMXX

If you have 20 years before you retire for the higher returns of the stock market to make this loss up for you, then you simply wait. But if you are retired, that 27% is a painful decline.

Compare that 27% portfolio decline to a portfolio that grew to $163,814 with regular rebalancing such that it started the two year bear market with

• $81,902 in VTSMX and $81,902 in VMMXX

After the two year bear market, this would become $131,248 a decline of “only” 20% vs. 27% without rebalancing:

• $40,951 in VTSMX and $90,297 in VMMXX

Rebalancing forces you to sell some of your winners to buy more of your losers. In our case, we sold some of the more risky stocks to increase our lower risk cash. For
many of our subscribers, even a 20% portfolio loss is too painful so we offer model portfolios two and three with thirty and zero percent allocated to equities, respectively.

Finally, bonds can do well when stocks do poorly so your total portfolio loss is usually less than shown in our example that used a money fund with constant returns. For this reason, we use bond funds in our model portfolios.

* * *

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The Retirement Advisor Portfolios	Dollar Value on 9/30/09	Change
Model Portfolio 1	$208,276	4.1%
Model Portfolio 2	$219,741	9.9%
Model Portfolio 3	$235,541	17.8%
DJIA 12,501.52 on 1/1/2007	$9,712	(24.0%)
S&P500 1,418.30 on 1/1/2007	$1,057.08	(28.0%)

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

CD Rates at Largest US Banks

2009-10-02T06:43:00.000-07:00

This table, updated today, shows the best CD rates for the five largest banks operating in the United States. These banks are Bank of America, JP Morgan Chase, Citibank, Wells Fargo Bank, and HSBC Bank North America.

CD rates (APY) at the largest US banks (Current Data) for a $10,000 deposit.

Bank	CD Rates - APY in % as of 10/02/09 for $10,000
	6- Mo	1-Yr	18-Mo	2-Yrs	3-Yrs	5-Yrs
Bank of America (BAC)	0.50	1.45	1.00	2.01	2.30	3.01
JP Morgan Chase (JPM)	0.75	1.25	1.50	2.00	2.25	3.00
Citibank (C)	0.75	1.49	1.73	1.98	2.23	3.44
Wells Fargo Bank (WFC)	0.35	0.50	0.90 16-mo	1.40 21-mo	1.90 27-mo	NA
HSBC Bank North America - Branch & Telephone Rates	0.25	0.55	0.55 15-mo	0.75	0.75	1.01
HSBC Online Rates	1.10	1.85	1.85 15-mo	1.60
US Treasury Rates	0.13	0.34	NA	0.86	1.35	2.20

To see the table in full size with the current rates, click the

Best CD Rate Survey of the Top US Banks

Notes:

Bank of America or BofA (BAC stock quotes and charts) was "Nations Bank" before it bought Bank of America and took the name. BofA also bought Merrill Lynch officially as of January 1, 2009.
JP Morgan Chase (JPM stock quote and charts) bought Washington Mutual, fondly known as "WaMu"
Citibank (C stock quote and charts) is also known as Citigroup & Citicorp
Wells Fargo Bank (WFC stock quotes and charts) bought Wachovia Bank- that bought World Savings Bank)
HSBC Bank North America is the American subsidiary of UK-based HSBC Holdings plc. The Hong Kong and Shanghai Banking Corporation, also a subsidiary of HSBC Holdings, acquired a 51% shareholding in Marine Midland Bank of New York in 1980 and extended to full ownership in 1987. The banks continued to operate under the Marine Midland name until 1998, when the branch offices were rebranded as HSBC Bank USA.

CD Rates at Largest US Banks

2009-09-10T08:01:00.000-07:00

This table shows the CD rates for the largest banks operating in the United States. These banks are Bank of America, JP Morgan Chase, Citibank, Wells Fargo Bank, and HSBC Bank North America.

CD rates (APY) at the largest US banks (Current Data) for a $10,000 deposit.

Bank	CD Rates - APY in % as of 9/9/09 for $10,000
	6- Mo	1-Yr	18-Mo	2-Yrs	3-Yrs	5-Yrs
Bank of America (BAC)	0.55	0.95	1.00	2.15	2.30	3.01
JP Morgan Chase (JPM) Bought WaMu -Washington Mutual	0.75	1.25	1.50	2.15	2.25	3.00
Citibank (C) aka Citigroup & Citicorp	0.80	1.49	1.98	1.73	2.23	3.44
Wells Fargo Bank (WFC) Bought Wachovia - World Savings	0.30	0.60	1.40 19-mo	2.00 25-mo	NA	NA
HSBC Bank North America - Branch & Telephone Rates	0.45	0.55	0.55 15-mo	0.75	0.75	1.01
HSBC Online Rates	1.25	2.00	2.00 15-mo	1.60
US Treasury Rate	0.20	0.39	NA	0.94	1.51	2.41

To see the table in full size with the current rates, click the

Best CD Rate Survey of the Top US Banks

Notes:

Bank of America or BofA (BAC stock quotes and charts) was "Nations Bank" before it bought Bank of America and took the name. BofA also bought Merrill Lynch officially as of January 1, 2009.
JP Morgan Chase (JPM stock quote and charts) bought Washington Mutual, fondly known as "WaMu"
Citibank (C stock quote and charts) is also known as Citigroup & Citicorp
Wells Fargo Bank (WFC stock quotes and charts) bought Wachovia Bank- that bought World Savings Bank)
HSBC Bank North America is the American subsidiary of UK-based HSBC Holdings plc. The Hongkong and Shanghai Banking Corporation, also a subsidiary of HSBC Holdings, acquired a 51% shareholding in Marine Midland Bank of New York in 1980 and extended to full ownership in 1987. The banks continued to operate under the Marine Midland name until 1998, when the branch offices were rebranded as HSBC Bank USA.

Current Taxable Equivalent Yield for Municipal Bonds

2009-09-05T09:44:00.000-07:00

With US Treasury rates (US Treasury Rates as of Sept 5) so low, investors often look to municipal bonds for higher yield.

Term	Current Yield	28% Taxable Equivalent Yield (note 1)
2-Year	0.83%	1.15%
5-Year	1.86%	2.58%
7-Year	2.42%	3.36%
10-Year	3.20%	4.44%
15-Year	3.89%	5.40%
20-Year	4.21%	5.85%
30-Year	4.62%	6.42%

Investors give up some safety because municipalities can not print money. If they go bankrupt, you can lose everything!

To get our current recommendation (pg 5 of the September issue) for municipal bonds, subscribe to The Retirement Advisor Now!

Note 1: “Taxable equivalent yield” is the “tax-free rate” divided by “one minus your federal tax bracket.” For example, if you are in the 28% tax bracket and can get a AAA rated GO bond paying 3.20% this is equivalent to getting 4.44% in a fully taxable AAA rated bond. [ 3.20% / (1 – 0.28) = 4.44% ]

For more information, read:

US Treasury Rates

2009-09-05T07:59:00.000-07:00

Below is a table of US Treasury rates (coupon and yield) as of September 5, 2009.

U.S. Treasuries Term	COUPON	MATURITY DATE	CURRENT YIELD %
3-Month	0.000	12/03/2009	0.13
6-Month	0.000	03/04/2010	0.22
12-Month	0.000	08/26/2010	0.40
2-Year	1.000	08/31/2011	0 .93
3-Year	1.750	08/15/2012	1.43
5-Year	2.375	08/31/2014	2.35
7-Year	3.000	08/31/2016	3.05
10-Year	3.625	08/15/2019	3.44
30-Year	4.500	08/15/2039	4.27

Data from bloomberg.com

For historical data, current quotes and more, see:

US Treasury Rates at a Glance

Municipal Bond Primer – Part 2

2009-08-08T20:03:00.000-07:00

We continue our discussion of municipal bonds in Part II of our series.

General Obligation Credit Bond Risks

Any investment carries risk. In the world of finance, the reward you get should be commensurate with the risk. That is why United States Treasuries generally pay the least yield, the theory being that the Treasury can always print more money to pay off its obligations. Thus, unless the Federal government fails, you will get your investment paid back hence the lowest risk.

Municipal bonds (munis) are not backed by the “full faith and credit” of the Federal government so they are not as safe as Treasuries. However, some munis are backed by the taxing power of State governments making them much less risky than corporate bonds. These are generally called general obligation munis and they tend to be the “safest” of municipal bonds.

The fact that general obligation municipal bonds are safer than corporate bonds doesn’t mean they carry no risk. There are many State and local governments that are in dire financial straits right now. While most people believe that general obligation bonds can’t fail because either the government entity will simply raise taxes to pay them, or the Federal Government will bail them out, it is by no means certain that will always be the case. Moreover, a government could in theory change the terms of its General obligation bonds and defer payment of its interest.

Examples of general obligation bond defaults include New York City in 1975 and Cleveland in 1978. In the case of New York, the City defaulted on its debt and gave bondholders the choice of sitting still for a moratorium on payments, or exchanging their bonds for new paper that would later be converted to cash. Eventually, creditors were paid in full for both New York City and Cleveland, but the interim period was not a good time for the bond- holders.

For individuals approaching or in retirement that rely on the income from municipal bonds, not getting your money back in a timely manner can be extremely stressful and the interruption of cash flow can be life-changing. The point of this discussion is not to denigrate the benefits of general obligation bonds, but simply to point out that they do carry some risk — a point that is not usually addressed by the institutions that are selling these bonds, or the government entities that are raising capital through their issuance.

A more current example of the risk in general obligation bonds is the State of California. On May 29, 2009, Fitch Ratings changed its outlook to negative from stable on California's long-term general obligation bond rating of A, citing growing concerns with the state's widening budget and cash-flow deficits. If the state legislature fails to act quickly, other actions are likely, Fitch said, adding that it’s “A” rating depends on the state's ability to find solutions to its cash flow and budget problems amid the weak economy. Fitch said in a statement. "While there appears to be consensus for quick action by the legislature, should it be delayed or fail to materialize, further rating actions may occur.”

We do not currently recommend California General Obligations and have no intent to at this juncture due to our philosophy of not chasing yield in the fixed-income side of a portfolio. For subscribers who have investments in California General Obligations, you should be aware that although the principal and interest on all GO bonds are paid out of the State’s general fund, the State Constitution provides that all state revenues shall first be applied by the State for support of the public school system and public institutions of higher education. The California bondholders are next in line.

If you own or plan to own any General Obligation, we recommend you request from the issuing entity a copy of any specific constitutional or statutory protections that are afforded the debt holders.

Revenue Bond Risks

Revenue bonds, a different type of municipal bonds, are more risky than general obligation bonds because their repayment is dependent on specific revenue streams such as user fees (e.g. highway tolls) or lease payments.

In 2003, Fitch Ratings published a study that covered municipal defaults. There are a few important points to be gleaned from their study. First, default rates varied significantly across municipal sub-sectors with industrial revenue bonds having a cumulative default rate of 14.62%; multi-family housing 5.72%, and non-hospital related healthcare 17.03%. These three sectors accounted for 8 percent of all bonds issued but 56 percent of defaults! Safer bets were education and general-purpose sector bonds that accounted for 46 percent of issuance but only 13 percent of defaults.

The study also concluded that there was a moderate correlation of default risk with economic cycles. Not much of a surprise there, but what is noteworthy that a one-year lag produced a higher correlation. Given that we are about one year after the beginning of the economic downturn, we expect to see more and more defaults in this area. In a sign of the times, Moody's recently assigned a "negative outlook" to the creditworthiness of all of the nation's local governments. That was an unusually broad and sweeping generalization that Moody's defended on the grounds of the magnitude of the recession.

Some good news from the Fitch study was that defaulted municipal bonds have a fairly high recovery rate of 68.33% based on the number of defaults. But it can take time.

Next month, we will continue our discussion of municipal bonds by addressing the issues associated with owning individual municipal bonds or bond funds.

* * *

To learn how to subscribe to The Retirement Advisor Newsletter, visit our web site where you can download a free issue with instructions on how to subscribe. Subscribers are able to obtain all of our back issues at no extra cost.

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Table of US GDP Growth - Gross Domestic Product By Quarter

2009-08-04T08:51:00.000-07:00

Table of US GDP Growth

The US Economy measured by gross domestic product (GDP) contracted at a 1.0% annualized rate in Q2-2009. This marked the fourth straight quarter with GDP contraction that has not happened since records began in 1947.

Quarter	Q4 07	Q1 08	Q2 08	Q3 08	Q4 08	Q1 09	Q2 09	Q3 09
GDP Growth %	(0.2)	0.9	3.3	(0.5)	(5.4)	(6.1)	(1.0)	??

For more information about the US economy, our take on the data plus our model portfolios subscribe today to get our just published August 2009 issue of The Retirement Advisor.

We are very proud of our results:

The Retirement Advisor Portfolios	Dollar Value on 7/31/09	Change
Model Portfolio 1	$197,717	(1.1%)
Model Portfolio 2	$211,427	5.7%
Model Portfolio 3	$230,970	15.5%
DJIA 12,501.52 on 1/1/2007	$8,447	(32.4%)
S&P500 1,418.30 on 1/1/2007	$919.32	(35.2%)

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

At the Retirement Advisor, we have consistently advocated against “chasing” asset classes that have already risen significantly. Likewise, we also do not believe in abandoning positions simply because they have declined in value. Instead, we believe our subscribers should focus on determining their most suitable asset allocation and focusing on ensuring their portfolio meets that goal.

Our three Model Portfolios are designed to provide a framework that investors approaching or in retirement can adopt for their asset allocation. For those interested in The Retirement Advisor Model Portfolio 1 (up 10.4% YTD), studies have shown that a balanced portfolio with 50% in a broadly diversified basked of equities and 50% in fixed income, has a 98% chance of success of lasting 30 years with a 4.0% annual withdrawal rate.

The Retirement Advisor Model Portfolio 2, with about 30% in equities (up 6.8% YTD), does not have the same potential upside as Model Portfolio 1 but it allows you to retire with less volatility than Model Portfolio 1. We believe that subscribers will be able to implement a 3% per year withdrawal rate from this portfolio.

For those investors with no tolerance for the volatility of the stock market, The Retirement Advisor Model Portfolio 3 (up 2.8% YTD), provides a more consistent and relatively steady rate of return – especially when contrasted to the stocks during periods of downside volatility.

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"Where to live in Retirement"

While California may be a sunny place to live or retire, its high income and sales tax rates, both near 10%, plus high housing prices can rain on anyone’s parade. Taxes reduce the purchasing power of your hard earned savings. This month (August 2009) we update a reader favorite “where to live in retirement” with links to the latest information to help make this important decision.

Libor Rates At Historic Lows

2009-07-25T09:03:00.000-07:00

London Interbank Offered Rates (LIBOR) set a new historical low this week. The short term, 1-month LIBOR rate is down to a new record low at only 0.29% from 2.46% just a year ago.

This table shows all LIBOR rates are down significantly from a year ago.

Updated 7/25/2009	This week	Month ago	Year ago
1 Month LIBOR Rate	0.29	0.31	2.46
3 Month LIBOR Rate	0.50	0.61	2.80
6 Month LIBOR Rate	0.96	1.15	3.14
1 Year LIBOR Rate	1.49	1.74	3.26

New historical lows shown in red

Data from	###### LIBOR ######				Prime	Fed
1993 to	1 Mo	3 Mo	6 Mo	1 Yr	Rate	Funds
7/25/09						Rate
Current %	0.29	0.50	0.96	1.49	3.25	0.25
Min %	0.29	0.50	0.96	1.46	3.25	0.25
Max %	6.94	6.85	7.07	5.43	9.5	7.063

See Libor Rates at a Glance for current rates and graphs.

Definition: LIBOR is the London Interbank Offered Rate. It is a daily reference rate based on the interest rates banks in the London wholesale money market (or interbank market) offer to lend unsecured funds to each other. LIBOR is usually slightly higher than the London Interbank Bid Rate (LIBID). LIBID is the rate the same banks are prepared to accept deposits.

Municipal Bond Primer – Part 1.

2009-07-11T15:07:00.000-07:00

This month we take up an area of investments that is of special interest to fixed-income investors – the municipal bond market.

What are they? The term “municipal bond” is somewhat of a misnomer. Municipal bonds certainly include bonds issued by municipalities (i.e. cities, towns and counties), but it also includes bonds issued by individual states and other governmental and quasigovernmental entities. The bonds are issued by these entities to raise money for various projects. Municipal bonds might be issued to raise money to build a hospital for example, or to fund construction of your favorite sports team’s stadium.

Are they widely held investments? Absolutely. According to the Securities Industry and Financial Markets Association, more than $2.6 trillion in municipal bonds was outstanding in 2007, two-thirds of which was held by U.S. households or mutual funds.

How do they work? Municipal bonds, in one sense, are like any other bond. You are loaning money to the issuer in exchange for a set number of fixed, regular interest payments over a predetermined period. At the end of that period, the bond reaches its maturity date and the full amount of your original investment is returned to you.

Where does the money come from to pay you back? In general, municipal bonds are paid back in two ways: (1) through the ability of the issuer to obtain tax receipts; or (2) through income generated by the project the bond is raising money for. The first type is typically referred to as a general obligation bond, the most common of which are issued by State governments who have the power to tax their citizens. The second type is typically referred to as revenue bonds. Revenue bonds are most concerned with the repayment of interest to lenders who believe in financing a given public works project such as, tunnels, parks, and buildings of education. In the case of education or school systems, bonds issued for colleges and universities are from the state level and are generally backed by income or progressive taxes. Bonds, which are issued by towns, cities, and counties, are backed by local property (ad valorem) or regressive taxes and all other sources of revenue to the municipality

What makes municipal bonds special? Many (but not all) municipal bonds have special tax advantages on the interest paid that make them unique as compared to a typical bond. Specifically, an investor in a tax-free municipal bond will ordinarily not have to pay federal income taxes on the interest, or income taxes of the state in which the bond was issued. For individuals in high income tax brackets, that can make municipal bonds particularly attractive as the after-tax yield can deliver better returns than taxable bonds of comparable quality.

How do you determine if the municipal bond pays a better yield? Comparing the coupon rates of municipal bonds to corporate or other taxable bonds is not an apples-to-apples comparison because taxes reduce the net income on taxable bonds. The following simple formula can help you do the necessary calculation: (tax-free rate / 1-federal tax bracket = taxable-equivalent yield). For example, if you were in the 25% federal income-tax bracket and you were offered a corporate bond yielding 7% or a tax-free municipal bond yielding 5%, which would you choose? Using the foregoing formula, your taxable-equivalent yield would equal the tax-free rate (5% in this example) divided by 1 minus 0.25, or 0.75. The answer: 6.67%. In this case, you're better off with the taxable bond. But if you were in the 35% tax bracket, then the municipal bond would give you a tax-equivalent yield of 7.59%, making it more attractive. Next month we will continue our discussion of municipal bonds, including risk factors, individual bonds vs. funds and the creation of a municipal bond ladder.

To learn how to subscribe to The Retirement Advisor Newsletter, visit our web site where you can download a free issue with instructions on how to subscribe. Subscribers are able to obtain all of our back issues at no extra cost.

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Auction Results: 30-Year U.S. Treasury Bond

2009-06-16T11:40:00.000-07:00

On Thursday June 11, 2009 the US Treasury department said it received bids totaling more than $29 billion for the $11 billion worth of 30-year notes sold. The bid-to-cover ratio, a gauge of demand, was 2.68, the highest since May 2008 and well above the average of 2.39 in the previous three 30-year reopening auctions according to Reuters.

30-Yr U.S. Treasury auction summary:

$29.6 billion Tendered
$11.1 billion Accepted
CUSIP Number 912810QB7
Series: Bonds of May 2039
Interest Rate 4-1/48%
High Yield: 4.72%
Median Yield: 4.684%
Low Yield: 4.599%
Issue Date: June 15, 2009
Maturity Date: May 15, 2039

For more details, see:

US Treasury Rates at a Glance
US Treasury Announcement - PDF File

30-YEAR TREASURY BOND
(Historical Quotes for: ^TYX)

Related ETFs:

iShares Barclays 1-3 Year Treasury Bond - SHY
iShares Barclays 3-7 Year Treasury Bond - IEI
iShares Barclays 7-10 Year Treasury - IEF
iShares Barclays 10-20 Year Treasury Bond - TLH
iShares Barclays 20+ Year Treasury Bond - TLT

ISHARES LEHMAN 20-yr+
(Historical Quotes for: TLT)

==> Very Best CD Rates with FDIC <==

In every issue of The Retirement Advisor newsletter , we cover the US Treasury bonds, bills and notes plus our recommendations for fixed income investments including a full page titled "CD Rates and Maximizing Returns on Cash." Check out or free issue

FREE issue of The Retirement Advisor newsletter in pdf:

=> January 2009

Website for more information and our annual Performance Data

COLA: Social Security Cost of Living Adjustments by Year

2009-06-15T12:55:00.000-07:00

Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2008 through the third quarter of 2008, Social Security and Supplemental Security Income (SSI) beneficiaries received a 5.8% percent COLA for 2009.

Below are the last five adjustments

Year COLA

2006 4.1%

2007 3.3%

2008 2.3%

2009 5.8%

Year	COLA
2006	4.1%
2007	3.3%
2008	2.3%
2009	5.8%

For more COLAs back to 1975, see the article "Social Security Cost-of-Living Adjustments (COLAs) by Year."

In every issue of The Retirement Advisor newsletter , we cover the latest Social Security news. On page 4 of the June 2009 issue we tell how early retirees can "reset the clock" on your Social Security benefits if you go back to work so you can get the higher monthly payment when you eventually decide to retire.

FREE issue of The Retirement Advisor newsletter in pdf:

=> January 2009

Website for more information and our annual Performance Data

Vanguard to Close and Merge Funds to Preserve Yield for Current Shareholders

2009-06-04T10:38:00.000-07:00

To preserve competitive yields in its money market funds, Vanguard will merge its Vanguard Admiral Treasury Money Market Fund (VUSXX) and Vanguard Treasury Money Market Fund (VMPXX).

US Treasury Rates at a Glance

To protect current shareholders from dilution of yield that comes from new deposits, Vanguard also closed its "Vanguard Federal Money Market Fund" on June 2. The decision to close the fund was made "to protect the interests of current fund shareholders by limiting the fund's need to purchase new short-term federal agency securities that offer negligible yields."

The merger of Vanguard Treasury Money Market Fund, which has an expense ratio of 0.28%, into Admiral Treasury Money Market Fund, with its lower expense ratio of 0.15%, will reduce expenses for Treasury fund shareholders. After the merger, the fund is expected to maintain its expense ratio of 0.15%. Additionally, reducing new cash flow into the Vanguard Federal Money Market Fund may slow the decline of that fund's yield.

For similar reasons, Vanguard Admiral Treasury Money Market Fund and Vanguard Treasury Money Market Fund were closed to new accounts on January 26, 2009.

Vanguard Admiral Treasury Money Market Fund (VUSXX)

Closed to new investors
Category = Taxable Money Market
Expense ratio as of 12/29/2008 = 0.15%
SEC yield as of 06/03/2009 = 0.18%

Vanguard Treasury Money Market Fund (VMPXX)

Closed to new investors
Category = Taxable Money Market
Expense ratio as of 12/29/2008 = 0.28%
SEC yield as of 06/03/2009 = 0.05%

Vanguard Federal Money Market Fund (VMFXX)

Closed to new investors
Category = Taxable Money Market
Expense ratio as of 12/29/2008 = 0.28%
SEC yield as of 06/03/2009 = 0.34%

If you have less than a few million dollars to invest, I would look to invest in 6 month to 2 year CDs to get much better yield with FDIC and NCUA protection spread between several banks and credit unions.

For example, the 1-year US Treasury note is only paying 0.46% but you can get a 1-year CD at Ally Bank (formerly GMAC Bank) that pays 2.80%.

More Information about CD Rates:

Page three of our newsletter, The Retirement Advisor, has a monthly summary of what is happening in the world of CDs, a popular feature titled "Maximizing the Returns On Your Cash" and a table of the best CD rates with links to web sites.
See "Very Best CD Rate Survey" to get an idea what the best CD rates are for terms from 6 months to 10 years.

Charts for Vanguard Equity Index Funds:

Total Stock Market (VTSMX)
S&P500(VFINX)
Extended Market (VEXMX)

Charts for Vanguard Fixed Income Funds:

GNMA (VFIIX)
Total Bond (VBMFX)
TIPS (VIPSX)
High-Yield/Junk Bond (VWEAX)

Money Market Fund Pages at Vanguard:

Vanguard Admiral Treasury Money Market Fund (VUSXX)
Vanguard Treasury Money Market Fund (VMPXX)
Vanguard Federal Money Market Fund (VMFXX)

Read the full story: With yields at record lows, Vanguard announces changes to three money market funds

US Treasury Auction Schedule

2009-05-01T11:29:00.000-07:00

Below is the tentative US Treasury Auction Schedule. For current US Treasury rates, see US Treasury Rates at a glance.

Security Type	Auction Date
3-year note	Tuesday, May 5, 2009
10-year note	Wednesday, May 6, 2009
30-year bond	Thursday, May 7, 2009
13- & 26-week bill	Monday, May 4, 2009
52-week bill	Tuesday, May 5, 2009
4-week bill	Tuesday, May 5, 2009
13- & 26-week bill	Monday, May 11, 2009
4-week bill	Tuesday, May 12, 2009
13- & 26-week bill	Monday, May 18, 2009
4-week bill	Tuesday, May 19, 2009
13- & 26-week bill	Tuesday, May 26, 2009
2-year note	Tuesday, May 26, 2009
5-year note	Wednesday, May 27, 2009
7-year note	Thursday, May 28, 2009
4-week bill	Wednesday, May 27, 2009
13- & 26-week bill	Monday, June 1, 2009
52-week bill	Tuesday, June 2, 2009
4-week bill	Tuesday, June 2, 2009
13- & 26-week bill	Monday, June 8, 2009
3-year note	Tuesday, June 9, 2009
10-year note	Wednesday, June 10, 2009
30-year bond	Thursday, June 11, 2009
4-week bill	Tuesday, June 9, 2009
13- & 26-week bill	Monday, June 15, 2009
4-week bill	Tuesday, June 16, 2009
13- & 26-week bill	Monday, June 22, 2009
2-year note	Tuesday, June 23, 2009
5-year note	Wednesday, June 24, 2009
7-year note	Thursday, June 25, 2009
4-week bill	Tuesday, June 23, 2009
13- & 26-week bill	Monday, June 29, 2009
52-week bill	Tuesday, June 30, 2009
4-week bill	Tuesday, June 30, 2009
13- & 26-week bill	Monday, July 6, 2009
10-year TIPS	Monday, July 6, 2009
3-year note	Tuesday, July 7, 2009
10-year note	Wednesday, July 8, 2009
30-year bond	Thursday, July 9, 2009
4-week bill	Tuesday, July 7, 2009
13- & 26-week bill	Monday, July 13, 2009
4-week bill	Tuesday, July 14, 2009
13- & 26-week bill	Monday, July 20, 2009
4-week bill	Tuesday, July 21, 2009
13- & 26-week bill	Monday, July 27, 2009
52-week bill	Tuesday, July 28, 2009
20-year TIPS	Monday, July 27, 2009
2-year note	Tuesday, July 28, 2009
5-year note	Wednesday, July 29, 2009
7-year note	Thursday, July 30, 2009
4-week bill	Tuesday, July 28, 2009
13- & 26-week bill	Monday, August 3, 2009
4-week bill	Tuesday, August 4, 2009
3-year note	Tuesday, August 11, 2009
10-year note	Wednesday, August 12, 2009
30-year bond	Thursday, August 13, 2009
13- & 26-week bill	Monday, August 10, 2009
4-week bill	Tuesday, August 11, 2009
13- & 26-week bill	Monday, August 17, 2009
4-week bill	Tuesday, August 18, 2009
13- & 26-week bill	Monday, August 24, 2009
52-week bill	Tuesday, August 25, 2009
2-year note	Tuesday, August 25, 2009
5-year note	Wednesday, August 26, 2009
7-year note	Thursday, August 27, 2009
4-week bill	Tuesday, August 25, 2009
13- & 26-week bill	Monday, August 31, 2009
4-week bill	Tuesday, September 1, 2009
13- & 26-week bill	Tuesday, September 8, 2009
3-year note	Tuesday, September 8, 2009
10-year note	Wednesday, September 9, 2009
30-year bond	Thursday, September 10, 2009
4-week bill	Wednesday, September 9, 2009
13- & 26-week bill	Monday, September 14, 2009
4-week bill	Tuesday, September 15, 2009
13- & 26-week bill	Monday, September 21, 2009
52-week bill	Tuesday, September 22, 2009
2-year note	Tuesday, September 22, 2009
5-year note	Wednesday, September 23, 2009
7-year note	Thursday, September 24, 2009
4-week bill	Tuesday, September 22, 2009
13- & 26-week bill	Monday, September 28, 2009
4-week bill	Tuesday, September 29, 2009
13- & 26-week bill	Monday, October 5, 2009
10-year TIPS	Monday, October 5, 2009
3-year note	Tuesday, October 6, 2009
10-year note	Wednesday, October 7, 2009
30-year bond	Thursday, October 8, 2009
4-week bill	Tuesday, October 6, 2009
13- & 26-week bill	Tuesday, October 13, 2009
4-week bill	Wednesday, October 14, 2009
13- & 26-week bill	Monday, October 19, 2009
52-week bill	Tuesday, October 20, 2009
4-week bill	Tuesday, October 20, 2009
13- & 26-week bill	Monday, October 26, 2009
5-year TIPS	Monday, October 26, 2009
2-year note	Tuesday, October 27, 2009
5-year note	Wednesday, October 28, 2009
7-year note	Thursday, October 29, 2009
4-week bill	Tuesday, October 27, 2009
13- & 26-week bill	Monday, November 2, 2009

Schedules were Last Updated: April 29, 2009

The next group of Auction Calendars will be available at 9:00 AM on August 5, 2009.

For Treasury Direct information or Public Debt Auction announcements please see the following link: http://www.treasurydirect.gov/indiv/indiv.htm

For other Public Debt information contact (202) 504-3550.

For additional information regarding Treasury auction announcements and results please see:
Treasury Marketable Securities Offering Announcement Press Releases

For Current US Treasury Rates see
US Treasury Rates at a glance

4% PenFedCU CD | Pentagon Federal Credit Union

2009-05-01T11:23:00.000-07:00

4% CD Rates at Pentagon Federal Credit Union

At a time the 5-year US Treasury note is only paying 2.04%, PenFed is paying nearly two times that for certificates with the same 5-year term.

PenFed CU, or Pentagon Federal Credit Union, is paying 4.0% on five and seven year NCUA insured certificates of deposit.

==> " Pentagon Federal Money Market Certificates " <==
as of 5/1/09

Term   APY

6-Month 1.75%
1-Year  2.00%
2-Year  2.25%
3-Year  3.50%
4-Year  3.75%
5-Year  4.00%
7-Year  4.00%

More information at Pentagon Federal Credit Union

For more rates and terms, see

Congress has temporarily increased NCUA share insurance from $100,000 to $250,000 per depositor through December 31, 2009.

Your Pentagon Federal Credit Union deposits are insured to at least $250,000 and backed by the full faith and credit of the United States government. National Credit Union Administration, a U.S. Government agency. We do business in accordance with the Federal Fair Housing Law and the Equal Credit Opportunity Act.

CERTIFICATES OF DEPOSIT

2009-04-14T19:53:00.000-07:00

The Retirement Advisor has previously recommended that our subscribers consider joining the Pentagon Federal Credit Union (Penfed). The Retirement Advisor has looked into the organization and Penfed offers some wonderful opportunities for those approaching or in retirement, including one very unique opportunity that is discussed below.

By way of background, Penfed serves 700,000 members in the Air Force, Army, Coast Guard, Department of Homeland Security, Department of Defense, defense- related companies, and the Veterans of Foreign Wars. It was federally chartered in 1935 and has $8 billion in assets. Penfed consistently offers some of the most attractive rates on money market savings accounts, certificates of deposits, loans and other financial instruments.

The National Credit Union Administration (NCUA), an agency of the U.S. Government, insures your savings with Penfed up to $250,000. Penfed offers Money Market Certificates and IRA Certificates to its members. Both of these are the equivalent of Certificates of Deposit. In other words, these Certificates are debt instruments where in exchange for tying up your invested money for the duration of the certificate's maturity, you will earn a fixed rate of return.

Penfed's IRA Certificates require a minimum investment of $1,000 where you can lock in prevailing rates and hold these Certificates in your IRA. Penfed offers maturities ranging from 1 to 7 years. Dividends are compounded daily and paid monthly for maximum returns. When we first recommended PenFed in our third newsletter, they were offering CD rates in the 3-5 year maturity with well over a 5% yield!

To learn about the special opportunity at Penfed that we discussed in our Retirement Advisor Newsletter, subscribe now!

To learn how to subscribe to The Retirement Advisor Newsletter, visit our web site where you can download a free issue with instructions on how to subscribe. Subscribers are able to obtain all of our back issues at no extra cost.

Click to Subscribe Now

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401(k) Plans, Fees and Expenses

2009-04-10T07:30:00.000-07:00

Have you ever wondered how much your 401(k) plan cost to run? Most investors look only at the returns, but at The Retirement Advisor we have always been concerned with the cost of investments since that impacts your bottom line.

Ever since U.S. companies started adopting 401(k) plans as a retirement savings vehicle in the early 1980s, they have grown to be the savings vehicle of choice, with the number of participants in 401(k) plans surpassing those in traditional defined benefits plans during the mid 1990s.

Many employers tack on additional fees to administer their 401(k) plan. A recent publication from the Investment Company Institute (ICI) on “The Economics of Providing 401(k) Plans” breaks down the sources of fees into the following three general groups:

1. Administration services: This includes recordkeeping, transaction processing, and trustee services.

2. Participant-focused services: This includes participant communication (such as web access or call centers), participant education, investment management, and loan processing.

3. Regulatory and compliant services: This includes creating plan documents, consulting services (assistance in selecting the “right” mutual funds), accounting and auditing services, and legal advice.

According to a report published by the U.S. Government Accountability Office (GAO), out of all the different subgroups mentioned in the ICI publication, investment fees (fees that are charged by companies managing mutual funds) and plan recordkeeping fees together account for nearly all of the fees being charged to 401(k) plans. Investment fees are typically borne by the participants in the 401(k) plan, while recordkeeping fees generally by the company (that is, the plan sponsor).

So Where is the Problem?

While mutual funds are legally required to disclose their fees and expenses to the participants, the current disclosure requirements are limited in nature and does not allow for an easy comparison across investment options or across different plans. In the GAO’s own words, ERISA “requires that plan sponsors provide participants with certain disclosure documents, but these documents are not required to contain information on fees borne by individual participants. Additional fee disclosures are required for certain – but not all – plans in which participants direct their investments. These disclosures are provided to participants in a piecemeal fashion and do not provide a simple way for participants to compare plan investment options and their fees.”

Given the opaque nature of fee arrangements, and given the sheer size of the $2.4 trillion 401(k) plan industry, there is a significant incentive for service providers to overcharge 401(k) plan participants or to mask the nature of their fee arrangements (such as arrangements that result in conflicts of interest). Make no mistake: An extra 0.5% or 1.0% charge on a midsize 401(k) plan (approximately $100 to $200 million in assets) can result from additional fees of $500,000 to $2 million on an annual basis – hardly a trivial sum. For the retiree as well, having an extra 1% annual fee deducted from his or her 401(k) plan would result in a 19% “savings shortfall” relative to his original savings (the amount which the participant would have saved if the extra 1% charge had not been implemented) if compounded over 20 years. In other words, a 19% savings shortfall is not trivial! For plan participants who are not sure how much they are being charged in their 401(k) plans, we recommend at The Retirement Advisor that you ask your employer for a full disclosure and start saving money.

To learn how to subscribe to The Retirement Advisor Newsletter, visit our web site where you can download a free issue with instructions on how to subscribe. Subscribers are able to obtain all of our back issues at no extra cost.

Click to Subscribe Now

Don't Delay Your Financial Health Any Longer!

States With No Income Taxes

2009-04-07T07:24:00.000-07:00

There are seven states in the United States that have no income taxes at all. If you are considering a place to retire and you want to keep as much of your money as possible, then you should consider one of the seven states that have no income tax. They are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. (From "Individual Tax Rates by State for 2008.")

Once you let a politician start to tax you, they find it easier to raise taxes "just a little" to take more of your hard earned income.

The three states with the highest tax rates are 9.0% or more. They are Oregon at 9.0% California at 9.3% and Vermont at the top with 9.5%.

To see the individual and married tax rates by state, see "Tax Rates by State for 2008".

Don't forget to look at sales taxes! I live in California where the incremental tax rate at the top is 9.3% then we have a sales tax too! That means for every $100 in 2008 income above $44,815, we pay $9.30 cents to California in income tax. Then what is left over, we now have a 9.25% sales tax in Santa Clara and San Mateo Counties where I spend most of my time and money. I heard on the news last night that Oakland California is considering raising their city tax to balance their budget (common excuse) so their total "sales tax" will be 10%!

2.5% CDs at Citibank

2009-04-01T13:32:00.000-07:00

Citibank is offering a 2.50% APY FDIC insured CD with an 8 month term.

Strings:

$1,000 minimum
Must have a Citibank checking account

You can also get a 1-yr CD with only $500 and no checking account with a 1-year term according to the web site as of 4/1/09.

For more rates and terms for Citibank certificates of deposit plus contact information, see Citibank or call 1-800-374-9500.

Top Five 1-Year CD Rates

2009-03-30T07:49:00.000-07:00

These are the top one year CD rates available in the US for banks with FDIC insurance.

Bank Name

DATE
m/dd

RATE
%

APY
%

MIN.
DEPOSIT

Corus Bank

3/27

2.77

2.81

10,000

UmbrellaBank.com

3/27

2.71

2.75

1,000

State Bank of India

3/27

2.70

2.73

5,000

GMAC Bank

3/27

2.62

2.65

500

UFBDirect.com

3/27

2.62

2.65

8,000

Data from bankrate.com. Click bank names and scroll down for contact information.

Every month we review the best CD rates for 6-month, 1, 2, 3, 4 and 5-year terms. (See page 4 of this FREE issue of The Retirement Advisor newsletter in pdf: => January 2009.) Give it time to load as pdfs can be slow.

Withdrawal Strategies for Retirement Portfolios

2009-03-25T20:12:00.001-07:00

We often get questions from people who are approaching or in retirement who need help managing their portfolios to fund their retirement needs. A sample of these questions include:

• How much of my portfolio should I withdraw every year to fund my retirement needs?

• What is considered a “safe” withdrawal strategy, taking into account the potential for significant equity market declines (such as the 1973-1974, or 2000-2002 bear market) or periods of high inflation?

• I want to withdraw a certain percentage of my portfolio every year. What should be my portfolio’s allocation to equities or other growth assets, such as REITs?

First, subscribers should adopt a “total portfolio approach” when determining an appropriate withdrawal percentage from a retirement portfolio. In other words, not only should one take into account all other current income sources (such as Social Security or annuity payments from a defined benefits retirement plan) and expense needs, but projected income sources and expense needs as well, such as:

• The impact of inflation on the purchasing power of existing annuity income, as unlike Social Security
payments, there is usually no cost-of-living adjustments for regular annuity payments.

• An increased spending on goods and services that are typically “consumed” by retirees. Examples include health care expenses, vacation and holiday expenses, or even financial responsibility for an elderly parent (which is increasingly common since many folks are now living into their 90s).

• A “shock event,” such as a 50% decline in the global equity markets or the destruction of your primary residence due to a natural disaster.

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US Treasuries are Uncle Sam's IOU: How they work

2009-03-24T01:36:00.000-07:00

Treasuries are Uncle Sam's IOU: A United States Treasury security is really just an IOU from the government. You lend Uncle Sam some money, and he promises to pay you back, plus interest. To be more formal, a Treasury security is government debt issued by the United States Department of the Treasury through the Bureau of the Public Debt.

Treasury securities are the debt financing instruments of the United States Federal government. You know our federal government can spend some money big time And somebody is paying for all of these stimulus packages. Sure, us taxpayers contribute up a lot. But our government is running some big time deficits. Not to mention the “off the book” stuff like social security. So, our government needs to borrow even more money and to do that, it sells Treasuries. (Securities issued by other Federal agencies accounts for the rest of the Federal debt).

Pretty much anyone can purchase Treasuries. You, me, funds, institutions, foreign governments. Foreign governments own a lot of our country’s debt. The top 10 are China, Japan, the United Kingdom, Caribbean banking nations, certain oil exporting nations, Brazil, Russia, Luxembourg, Hong Kong and Switzerland. I know what you are thinking, it is kind of a strange concept, but nobody in Washington seems to be complaining.

There are four types of marketable treasury securities: Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation Protected Securities (TIPS). There are several types of non-marketable treasury securities including State and Local Government Series (SLGS), Government Account Series debt issued to government-managed trust funds, and savings bonds. All of the marketable Treasury securities are very liquid and are heavily traded on the secondary market. The non-marketable securities (such as savings bonds) are issued to subscribers and cannot be transferred through market sales.

Treasuries are considered the "safest" investment there is. Why? Because the government is the only entity that has a legal printing press to print more money to pay back its debt. Of course, others would argue gold is a safer investment because it has intrinsic value as a precious metal, but that is also topic for another day. Let’s take a quick look at Treasuries.

Treasury Bills

Treasury bills, or T-bills, are sold in terms ranging from a few days to 52 weeks. Bills are typically sold at a discount from the par amount (also called face value). For instance, you might pay $990 for a $1,000 bill. When the bill matures, you would be paid $1,000. The difference between the purchase price and face value is interest. You can buy a bill in TreasuryDirect or Legacy Treasury Direct, or through a bank, broker, or dealer. Bills are sold in increments of $100 and the minimum purchase is $100. All bills except 52-week bills and cash management bills are auctioned every week. The 52-week bill is auctioned every four weeks. Bills are issued in electronic form. You can hold a bill until it matures or sell it before it matures. For Treasury Bills, Notes and Bonds, an investor can buy up to $5 million by non-competitive bidding or up to 35% of the initial offering amount by competitive bidding. To learn more, or to open an account with Treasury Direct, go to this url:

http://tinyurl.com/237zv6

Treasury Notes

Treasury notes, or T-notes, are issued in terms of 2, 3, 5, 7, and 10 years, and pay interest every six months until they mature. The price and interest rate of a Note are determined at auction.

Treasury Bonds

Treasury bonds are issued in terms of 30 years and pay interest every six months until they mature. When a Treasury bond matures, you are paid its face value. The yield on a bond is determined at auction. Bonds exist in either of two formats: as paper certificates (these are older bonds) or as electronic entries in accounts. Today, the Treasury issues bonds in electronic form, not paper but paper bonds can be converted to electronic form.

Savings EE Bonds

Series EE Bonds are reliable, low-risk government-backed savings products that you can use for retirement income, as well as gifts such as for children and grandchildren and financing education. Series EE Bonds purchased on or after May 1, 2005, earn a fixed rate of return, letting you know what the bonds are worth at all times You can purchase EE Bonds electronically over the Internet at www.TreasuryDirect.gov or you can purchase paper EE bonds at banks and other financial institutions. If you redeem EE Bonds in the first 5 years, you’ll forfeit the 3 most recent months’ interest, but if you redeem them after 5 years, you won’t be penalized.

Treasury Inflation-Protected Securities

TIPS, or Treasury Inflation-Protected Securities, are securities whose principal is tied to the Consumer Price Index. With inflation, the principal increases. With deflation, it decreases. Interest is paid every six months, based on a fixed rate applied to the adjusted principal. At maturity, TIPS pay the original or adjusted principal, whichever is greater. TIPS are sold in terms of 5, 10, and 20 years.

I Bonds

The Treasury’s inflation-indexed I bonds are designed to offer all Americans a way to save that protects the purchasing power of their investment by assuring them a real rate of return above inflation. I bonds have features that make them attractive to many investors. They are sold in electronic form in amounts of $25 and above, or in paper form at face value in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000, and earn interest for as long as 30 years. I bond earnings are added every month and interest is compounded semiannually. They are state and local income tax exempt, and the federal income tax on I bond earnings can be deferred until the bonds are cashed or they stop earning interest after 30 years. Investors cashing I bonds before five years are subject to a 3-month earnings penalty. Savers and investors can now open an on-line account to purchase I bonds in electronic form, as well as EE savings bonds and Treasury marketable securities, through the website www.TreasuryDirect.gov. Account holders can purchase, manage, and redeem such I bonds over the Internet 24 hours a day, seven days a week.

* * *

Ok, so that’s the basic on Treasuries. Now, as noted earlier, China owns a bunch of our Treasuries, to the tune of about $1 trillion. China surpassed Japan last year as the largest foreign holder of Treasury bonds. In fact, they have over half of their foreign currency invested in our debt so you can imagine that they want to make sure their investments will pay off.

This weekend, China’s Premier Wen Jiabo acknowledged that China was worried about having all of this money in U.S. Treasury Bonds. Specifically, Premier Jiabo said, "Of course we are concerned about the safety of our assets. To be honest, I'm a bit worried. I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets."

China is worried that the dollar is going to depreciate because of the excess spending on the part of Uncle Sam. But China is kind of in a bind as well. After all, where are they going to put all that money? The Financial Times is reporting that a director-general at the China Banking Regulatory Commission had this to say on the topic:

“Except for US Treasuries, what can you hold? Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option. We hate you guys. Once you start issuing $1 trillion - $2 trillion...we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

Hmm, you have to at least appreciate his frankness, if not his sentiment. More on that at the following url:

http://tinyurl.com/dhv8lg

The comments by China’s premier are important for several reasons. We know the United States has embarked on a spending spree the likes of which our country has never seen. The Federal Reserve, the Treasury, the White House and most of Congress have adopted the view that we must spend now to avoid a deepening recession. The hope is that the economy will start back up, tax revenues will start coming in again, employment will rise, and THEN, we will be in a better position to start paying down our debt. It’s a plan, that’s for sure. Whether it is a realistic one, I don’t presume to be any smarter than the top dogs at the Fed or at the Whitehouse, nor do I have a crystal ball.

My personal belief, however, is that the economy will recover as the spending works its way through the system, and the Fed’s efforts take hold. However, I think we will face another crises shortly thereafter. There are unfunded promises made for Social Security, Medicare and federal retirement programs that account for a significant portion of taxpayer liabilities. And neither the Republicans nor the Democrats have really been willing to curb government spending when in power so to expect either party to change too much seems to be unrealistic.

Not to digress too far, but the yields on Treasury Bills, Notes and Bonds right now are extremely low. At some point, if foreign governments like China decide to curb back their investments in our government’s debt, then the interest we pay on our debt will have to be higher to attract new investors. Either that, or the government could allow or force a debasement of the dollar so that the debt could be purchased at what is really a discount since foreign investments into Treasuries must be made with dollars.

The other side to this equation is inflation. Right now, inflation is basically zero (as reported by the government) and the bigger worry from the Fed is deflation. But down the road, I am of the opinion we will get inflation of some sorts, and if you are locked in on a long-term Treasury bond and yields are rising, you are not going to be happy. If it is a date-certain bond that you hold to maturity, you will get your money back. But the purchasing power of your money is going to be eroded by inflation. If you are in a bond fund with long-term maturities and yields start rising, the net asset value should decline and that is also not an ideal situation if you own the fund.

Right now, Treasuries are reflecting a world that is paying a premium to avoid risk. But that will change as the pendulum swings again.

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Bob Brinker on Approaching Retirement

2009-03-08T11:43:00.000-07:00

Bob Brinker on Approaching Retirement vs. The Retirement Advisor

Bob Brinker has been able to reach a wide audience over the years by virtue of the syndication of ABC’s Radio Show, Moneytalk which he hosts on the weekend. Mr. Brinker has often discussed asset allocation, but in recent years we believe his market timing choices, and other recommendations have included poor recommendations. For example, he told a person approaching their retirement years that he wouldn't have a problem having more than 50% equities given his bullish outlook at the time. His Model Portfolio which was designed for someone in retirement, had well over 50% in stocks at one point. This came at a time when Bob Brinker was extremely bullish on stocks, and was recommending to lump sum purchase into equities when the S&P 500 was around 1450. His subsequent “buy” signals were lower and lower, but the market continued to go lower. At The Retirement Advisor, our most aggressive portfolio for someone approaching or in retirement has maximum exposure of no more than 50% in stocks. Our other two model portfolios have even less exposure to the stock market and have weathered this bear market quite favorably.

Brinker also had recommended the Vanguard High Yield Corporate Bond fund for one of his Model Portfolios that invested solely in the fixed income arena. At The Retirement Advisor, we completely disagree with this investment choice. We believe fixed-income holdings should be conservative investments that investors do not have to lose sleep over. That fund lost over 20% in one year -- which we regard as totally unacceptable losses for someone approaching or in retirement who invests in bonds.

The Retirement Advisor Model Portfolios were constructed with the goal of safety and one other important goal in mind: Simplicity. Studies have shown that the most effective way to save and invest for retirement is to construct and maintain a diversified portfolio of low-cost index funds matched to one’s retirement needs and risk tolerances. There is no need (and in fact, this may be detrimental to your financial health) to invest in the hottest technology fund, or buy actively managed mutual funds where annual expenses could be over five times as high as low-cost index funds.

We invite you to learn about our newsletter which is very reasonably priced and hopefully will help you achieve your goals as you head into your retirement years. You can download a free sample, and learn how to subscribe to The Retirement Advisor by going to this URL:

To learn how to subscribe to The Retirement Advisor Newsletter, visit our web site where you can download a FREE issue with instructions on how to subscribe.

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What Does TALF Mean?

2009-03-03T11:29:00.001-08:00

Today the US Treasury and Federal Reserve announced the launch of the "Term Asset-Backed Securities Loan Facility" or "TALF" for short. The purpose of TALF is to help "Main Street" get access to credit so consumers and small businesses can once again buy goods and services on credit. This is expected to significantly stimulate the economy.

From the joint press release:

In carrying out the Financial Stability Plan, the Department of the Treasury and the Federal Reserve Board are announcing the launch of the Term Asset-Backed Securities Loan Facility (TALF), a component of the Consumer and Business Lending Initiative (CBLI). The TALF has the potential to generate up to $1 trillion of lending for businesses and households.

The TALF is designed to catalyze the securitization markets by providing financing to investors to support their purchases of certain AAA-rated asset-backed securities (ABS). These markets have historically been a critical component of lending in our financial system, but they have been virtually shuttered since the worsening of the financial crisis in October. By reopening these markets, the TALF will assist lenders in meeting the borrowing needs of consumers and small businesses, helping to stimulate the broader economy.

Under today's announcement, the Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated ABS backed by newly and recently originated auto loans, credit card loans, student loans, and SBA-guaranteed small business loans. Issuers and investors in the private sector are expected to begin arranging and marketing new securitizations of recently generated loans, and subscriptions for funding in March will be accepted on March 17, 2009. On March 25, 2009, those new securitizations will be funded by the program, creating new lending capacity for additional future loans.

The program will hold monthly fundings through December 2009 or longer if the Federal Reserve Board chooses to extend the facility.

Today the Board also released revised terms and conditions for the facility and a revised set of frequently asked questions. The revisions include a reduction in the interest rates and collateral haircuts for loans secured by asset-backed securities guaranteed by the Small Business Administration or backed by government-guaranteed student loans. The modifications are warranted by the minimal credit risk on these assets owing to the government guarantees, and, by making the terms of the TALF loans more attractive, they should encourage greater flows of credit to small businesses and students.

Additional details of the TALF and the CBLI can be found at http://www.financialstability.gov/. Further information on the Federal Reserve's credit and liquidity programs is available at http://www.federalreserve.gov/monetarypolicy/bst.htm. The Treasury Department also released a new white paper outlining efforts to unlock credit markets. On February 10, 2009, the Board and Treasury announced an expansion of TALF to include new asset categories that could generate up to $1 trillion in new lending. Teams from the Treasury Department and Federal Reserve are analyzing the appropriate terms and conditions for accepting commercial mortgage-backed securities (CMBS) and are evaluating a number of other types of AAA-rated newly issued ABS for possible acceptance under the expanded program. The expanded program will remain focused on securities that will have the greatest macroeconomic impact and can most efficiently be added to the TALF at a low and manageable risk to the government.

The Federal Reserve and Treasury currently anticipate that ABS backed by rental, commercial, and government vehicle fleet leases, and ABS backed by small ticket equipment, heavy equipment, and agricultural equipment loans and leases will be eligible for the April funding of the TALF. Other types of securities under consideration include private-label residential mortgage-backed securities, collateralized loan and debt obligations, and other ABS not included in the initial rollout such as ABS backed by non-auto floorplan loans and ABS backed by mortgage-servicer advances. As is the case for the current categories of newly originated loans, the TALF will combine public financing with private capital to encourage the private securitization of loans in the asset classes eligible in the expanded program.

Increased TALF lending and other actions to stabilize the financial system have the potential to greatly expand the Federal Reserve's balance sheet. In order for the Federal Reserve to conduct monetary policy over time in a way consistent with maximum sustainable employment and price stability, it must be able to manage its balance sheet, and in particular, to control the amount of reserves that the Federal Reserve provides to the banking system. The amount of reserves is the key determinant of the interest rate that the Federal Reserve uses to pursue its monetary policy objectives. Treasury and the Federal Reserve will seek legislation to give the Federal Reserve the additional tools it will need to enable it to manage the level of reserves while providing the funding necessary for the TALF and for other key credit-easing programs.

Key Dates for the TALF
Schedule for First Funding with Initial Eligible Assets

Date	Announcement/Event
March 3, 2009	Launch of the TALF. Publication of the details for the first funding
March 3-17, 2009	Marketing first funding to investors
March 17, 2009	Subscriptions for first funding for TALF recorded
March 25, 2009	First funds from the TALF disbursed

Schedule for Second Funding

Date	Announcement/Event
March 24, 2009	Announcement of details of second funding
March 24-April 7, 2009	Marketing second funding to investors
April 7, 2009	Subscriptions for second funding for TALF recorded
April 14, 2009	Second funds from the TALF disbursed

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CDARS: Certificate of Deposit Account Registry Service

2009-02-26T10:26:00.000-08:00

CDARS are for lazy investors. CDARS stands for Certificate of Deposit Account Registry Service. Bob Brinker talked about them on his radio show as a way to get around the FDIC minimum.

Here is how they work. Let's say you have $1 million to invest in FDIC-insured certificates of deposit. Today the FDIC insures $250,000 per member institution. If you go to a local bank that participates in CDARS, they can put $250,000 of your money in one of their certificates of deposit you like. Then the CDARS service spreads the remaingin $750,000 between various FDIC-insured banks all over the country, hopfully at a good rate.

What is the catch?

Of course there is ALWAYS a catch on Wall Street. Catches on Wall Street come in the form of added fees! They get the fees by paying you a lower interest rate on the money they invest elsewhere for saving you the time of finding other banks yourself!

Here's an example given by Larry Nusbaum yesterday.

Gibraltar Private Bank & Trust of New York will pay 2.60% on a one-year FDIC-insured certificate of deposit in their bank. If you give them $1 million to invest through CDARS, they will pay you 2%. That means paying them $6,000 a year for the privilege of saving you an hour or two of calling other banks. I am not impressed.

You are much better off surveying the banks yourself and using the money you save on CDARS fees to compensate you for your effort.

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 4.39% APY.

For shorter term, Corus Bank has a 1-year CD with a 2.93% annual percentage rate.

For online savings, GMAC Bank is paying 2.75% on any deposit over $500.

With rates so low, banks will try to sell you their annuity products. Make sure you read my 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	2/24/09	1.21%	Vanguard Prime Money Market Fund
Tax Exempt	2/24/09	0.77%	Vanguard Tax Exempt Money Market Fund
Online Savings	2/24/09	2.75%	GMAC Bank & 2.25% @ HSBC Bank
3-Month Treasury	2/24/09	0.30%	US Treasury Rates at a glance
6 Months	2/24/09	2.60%	GMAC Bank
6-Month Treasury	2/24/09	0.50%	US Treasury Rates at a glance
9 Months	2/24/09	2.75%	GMAC Bank
1 Year	2/24/09	2.93%	Corus Bank 2.90% @ GMAC Bank
1 Year Treasury	2/24/09	0.70%	US Treasury Rates at a glance
18 Months	2/24/09	2.90%	Intervest Bank & UmbrellaBank
2 Years	2/24/09	3.00%	UmbrellaBank & 2.95% @ GMAC Bank
2 Year Treasury	2/24/09	0.98%	US Treasury Rates at a glance
3 Years	2/24/09	3.40%	Flagstar Bank
3-Yr Treasury	2/24/09	1.37%	US Treasury Rates at a glance
4 Years	2/24/09	4.15%	PenFed Credit Union
5 Years	2/24/09	4.39%	Pentagon Federal CU
5 Yr Treasury	2/24/09	1.89%	US Treasury Rates at a glance
7 Years	2/24/09	4.39%	Pentagon Federal CU & 3.50% @ Discover Bank
10 Yr Treasury	2/24/09	2.80%	US Treasury Rates at a glance
10 Years	2/24/09	3.50%	Discover Bank
30 Yr Treasury	2/24/09	3.50%	US Treasury Rates at a glance

Easy to Read Best CD Rate Survey
US Treasury Rates at a Glance

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

Chart: Consumer Confidence Index At Record Low

2009-02-25T11:47:00.000-08:00

Yesterday, the Conference Board, a private not-for-profit organization research consortium baseed in New York, said its monthly "Consumer Confidence index" sank to 25 in February. This reading is a record low level not seen since the measure was first taken in 1967. The graph below, courtesy of Martin Capital, shows consumer confidence plotted for the last 30 years has plunged to new low territory.

Lynn Franco, Director of The Conference Board Consumer Research Center, said in a press release:

"The Consumer Confidence Index™, which was relatively flat in January, reached yet another all-time low in February (Index began in 1967). The decline in the Present Situation Index, driven by worsening business conditions and a rapidly deteriorating job market, suggests that overall economic conditions have weakened even further this quarter. Looking ahead, increasing concerns about business conditions, employment and earnings have further sapped confidence and driven expectations to their lowest level ever. In addition, inflation expectations, which had been easing over the past several months, have moderately picked up. All in all, not only do consumers feel overall economic conditions have grown more dire, but just as disconcerting, they anticipate no improvement in conditions over the next six months."

Related Information:

ECRI: US-WLI & US-FIG

Federal Reserve Chairman Says Recession Should End This Year

2009-02-24T13:18:00.000-08:00

In his prepared remarks today, Federal Reserve chairman Ben Bernanke said the recession should end this year. Bernanke said this will require restoring financial stability. Bernanke said this during his "Semiannual Monetary Policy Report to the Congress" given before the "Committee on Banking, Housing and Urban Affairs" in the U.S. Senate in Washington, D.C. It was broadcast mostly live on CNBC. Bernanke said

"The central tendency of their most recent projections for real GDP implies a decline of 1/2 percent to 1-1/4 percent over the four quarters of 2009. These projections reflect an expected significant contraction in the first half of this year combined with an anticipated gradual resumption of growth in the second half."

Bernanke said we need fiscal stimulus:

"To break the adverse feedback loop, it is essential that we continue to complement fiscal stimulus with strong government action to stabilize financial institutions and financial markets."

Bernanke said the recession could end in 2009 with 2010 a recovery year:

"If actions taken by the Administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability--and only if that is the case, in my view--there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery."

but (there is always one of those) Bernanke said he expects a FULL RECOVERY to take more than two years:

"The central tendency for the participants' estimates of the longer-run growth rate of real GDP is 2-1/2 percent to 2-3/4 percent; the central tendency for the longer-run rate of unemployment is 4-3/4 percent to 5 percent; and the central tendency for the longer-run rate of inflation is 1-3/4 percent to 2 percent, with the majority of participants looking for 2 percent inflation in the long run. These values are all notably different from the central tendencies of the projections for 2010 and 2011, reflecting the view of policymakers that a full recovery of the economy from the current recession is likely to take more than two or three years."

Read the Full Text of Bernanke's Testimony here.

During the Q&A, my favorite line was Bernanke explaining why we should help others having trouble paying their mortgages, a policy that he admits "rewards bad behavior."

"I fully understand the sentiment. A lot of this goes against American values of self reliance and responsibility... I would give the following example. If your neighbor smokes in bed and sets his house a fire. And you live in a neighborhood of closely packed wooden houses. You could punish him very severely by refusing to send the fire department and then he would probably learn his lesson about smoking in bed. But, unfortunately, in the process you would have the entire neighborhood burning down."

The question was partially in response to Rick Santelli's "Chicago Tea Party in July" Rant video that led to a flood of letters to congress protesting efforts to reduce what people owe who signed legal contracts with banks, often after lying about their income to qualify for the mortgage.

A Primer and a Forward View on REITs

2009-02-12T16:56:00.000-08:00

At the Retirment Advisor, we do not recommend chasing the "hot performing" sectors. This is what typically burns investors. In February 2007, we took up the issue of Real Estate Investment Trusts, at a time when many advisors were advocating that fixed-income investors use them as a key part of their portfolios. We chose not to. Here is an excerpt from our newsletter at the time:

A Primer and a Forward View on REITs

For retirees who are interested in squeezing a little bit more income from their retirement portfolios, Real Estate Investment Trusts (REITs) have historically offered dividend yields that are higher than what longer-term Treasuries have offered, with the additional benefit of them being an inflation hedge (which Treasuries or bonds do not provide).

REITs (based on its benchmark, the FTSE NAREIT All REIT Index) have also performed wonderfully, beating the S&P 500 seven years in a row starting from 2000 (its last year of negative return was 1999). In the current environment, is an investment in REITs still appropriate for retirees?

What are REITs?

Before we go further, let us take a “time out” and discuss what REITs really are. For individuals who want to diversify into real estate but don't want to directly invest in properties or who want to remain relatively liquid, the best way to invest in real estate is through indirect means, such as through buying shares of REITs (they are traded on the exchanges), real estate exchanged traded funds (ETFs), real estate service companies, or mortgage-backed securities. Today, the global REIT market is approximately $750 billion, with the U.S. making up the majority of the
market at $400 billion.

Congress established the framework for REITs in 1960 as a way to allow the public to more easily invest in a diversified portfolio of real estate properties. REITs are essentially companies that own and manage income-generating real estate, such as office buildings, shopping centers, apartments, manufactured homes, and self-storage facilities. REITs are also highly liquid investment vehicles, most of which are traded on the national stock exchanges.

Forward View

As we previously mentioned, the performance of REITs has literally been “on a tear” ever since 2000. The obvious question is: What kind of performance can we continue to expect, and is investing in REITs appropriate for retirees or those who expect to soon retire going forward?

As we mentioned previously, one of the historical advantages of investing in REITs have been the higher dividend yields that were offered relative to what longer-term Treasuries have offered. With the exception of a brief 18-month period from late 1996 to early 1998, REITs have historically provided a yield that were 0% to 3% higher than ten-year treasury yields from 1990 to 2005. Not coincidentally, REITs subsequently lost 18.8% in 1998 and an additional 6.5% in 1999. Since the beginning of 2006, REIT dividend yields have been below those of ten-year Treasuries. In fact, REIT dividend yields are now 100 basis points (1%) lower than ten-year Treasuries – representing the most negative spread in history. In other words, REITs are no longer a good investment for income purposes.

Finally, it is no longer obvious that REITs will provide a good inflation hedge for retirees going forward. No doubt, rental prices will generally rise with higher inflation, but keep in mind that the value of REITs has appreciated tremendously in recent years despite a generally low-inflation environment from 2001 to 2006. In other words, there are many other factors which have a greater impact on the prices of REITs, including factors such as foreign investment, a greater ease of financing deals (given the financial innovations in recent years, such as in the mortgage-backed securities markets), and a generally low interest rate environment. Buyers beware.

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FINANCIAL PREPAREDNESS CHECKLIST

2009-01-24T22:48:00.000-08:00

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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Best CD Rates at Pentagon Federal CU - 4.50%

2009-01-23T09:31:00.000-08:00

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	1/23/09	0.28%	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	1/23/09	1.12%	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	1/23/09	1.61%	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

2008-12-29T21:05:00.000-08:00

WHERE TO LIVE IN RETIREMENT

The decision of where to live in retirement can be one of the most important ones you make. Obviously, the decision is an important one in terms of the quality of your life where factors such as proximity to family, recreational opportunities, and even weather can play a role. However, deciding where to live in retirement also can have a significant impact on your financial well-being. We at The Retirement Advisor have found that very few investment advisors address this issue and thought our subscribers would benefit from a discussion of this topic. This month, we tackle the issue of taxes and retirement.

Income Taxes

It is no coincidence that Florida remains one of the favorite states for retirees. In addition to the warm and sunny weather, Florida does not have any income tax on earned income or unearned income such as interest and dividends.

When you are in retirement, interest and dividends can be a key source of money that pays for your living expenses. The less of your interest and dividends that goes to pay taxes, the more that you get to keep and spend in retirement.

There are seven states in the United States that do not levy an income tax on earned and unearned income. These states all provide a possible starting point in formulating a decision of where you might want to spend your golden years. The seven states are:

• Alaska
• Florida
• Nevada
• South Dakota
• Texas
• Washington
• Wyoming

Two others, states, New Hampshire and Tennessee do not levy tax on earned income; nevertheless, they do levy taxes on unearned income and dividend income.

The Federation of Tax Administrators has compiled a detailed analysis of each state’s individual income tax rate and it is now available online. The information includes the tax rates, the income brackets and personal exemptions. The information was just updated and is current for tax year 2007. We recommend that our subscribers bookmark their web site which you can find at the following URL:

http://tinyurl.com/2tr64

Sales Taxes

Even if your income is not subject to state income tax, or your state has a low income tax rate, it doesn’t matter too much if what you purchase with your money is subject to high sales taxes. After all, in retirement, you are now spending the money you previously saved and you want your dollar to go as far as it can.

State sales tax rates can range dramatically. There are only five states that have no state sales taxes, including Alaska, Delaware, Montana, New Hampshire and Oregon. On average, most states levy a sales tax of around 4-5%. However, at least five states have sales taxes that are 7% or higher, including California, Mississippi, New Jersey Rhode Island and Tennessee. A few states have exemptions on sales taxes for such items as food, prescription drugs and non-prescription drugs. The following URL will bring you to a web site that shows a state-by-state breakdown of sales taxes:

http://tinyurl.com/cot8p

Individuals approaching or in retirement, should also be aware that many states have tax “holidays” each year. In 2007, for example, Alabama, Connecticut, Georgia, Florida, Iowa, New Mexico, North Carolina, South Carolina, Tennessee, Texas, Virginia and the District of Columbia all designate specific dates (usually in August) where consumers can purchase various items without paying sales tax. Typically, the tax holiday applies to items such as clothing, school supplies, and computers. For many
consumers, waiting to purchase these items until a tax holiday represents a significant savings, although most states do place a cap on the amount you can purchase during the tax holiday. Nevertheless, a penny saved is a penny earned. You can find a table of each state’s tax holidays and information about what is covered at this URL:

http://tinyurl.com/rd724

State Taxation of Social Security and Pensions

For many individuals in retirement, their pensions and social security can account for a significant portion of their retirement income. Ten years ago, the AARP (formerly named the American Association of Retired Persons) Public Policy Institute prepared a brief that addressed the personal income tax treatment of Social Security benefits and pension income for the 41 states and the District of Columbia that have a broad-based income tax. That publication was updated in 2001 and subscribers can use it to help them make decisions on where to retire based on differences in tax treatment. Subscribers can find the publication by going to the following URL and clicking on the section entitled, “Issue Brief (PDF)”:

http://tinyurl.com/2rpl7a

Copyright 2007-2009 The Retirement Advisor, L.L.C.

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