Federal Benefit Consultants
1836 N. Pine Island Rd.
Plantation, Florida 33322
One: Ace Your Retirement
By the time you're 65, you'll need to have socked away about $25 for every dollar you expect to withdraw annually. That means throughout your working life, you must save. And save. And save. Oh, and don't forget to pick investments and manage your portfolio year in and out. You can take care of all of that work with one simple act.
The Easy Way: Buy a target-retirement fund in your 401(k)
A 401(k) is nothing if not easy: Contributions come out of your paycheck before you can spend them. You don't owe taxes on the money you invest, and earnings grow tax-deferred. Sign up and aim to save 10% to 15% of your salary (including the company match).
Target-retirement funds are becoming one of the most popular 401(k) choices are the ultimate in hands-off investing. You pick a fund with a date that matches the year you plan to retire - 2010, 2020, 2030 - and you get a wholly diversified mix of stocks and bonds that's appropriate for you. This no-brainer fund automatically shifts stock assets into bonds each year, becoming more conservative as you age.
A target retirement fund is a case in which simpler is better. Sure, you can come up with an intelligent allocation and pick top funds, but 401(k) investors often do a lousy job at that. These funds give you a disciplined plan, the key to retirement success.
Two: Invest (Almost) Like a Pro
You can put your investing strategy on autopilot with a target retirement fund. But perhaps you want to manage your portfolio. All it takes is a few hours a year with this two-step plan.
Step 1: Pick a mix
First, decide how you'll divvy up your money between stocks and bonds. You can use online tools to fine-tune a mix for your age and appetite for risk. But the easy way to decide how much you should devote to stocks is to subtract your age from 120. So if you're 40, put 80% of your long-term savings in stocks and 20% in bonds. If nothing else, this simple rule ensures that you'll own an ample amount of stock when you're young and can take more risk. Every year, subtract your age from 120 again and adjust the mix as needed.
Step 2: Buy index funds
The clear choice is an index fund for an investment that doesn't require constant vigilance. You can own virtually the entire stock or bond market with a single fund.
No index fund will ever top the charts, but history suggests that they'll earn a better than average return over the long run. You can build a perfectly adequate portfolio with just two funds: a total stock market index fund and a total bond market index fund.
Three: Cruise into College
Want to make college savings easy? A piece of cake. Use a state 529 savings plan. There is no need to select stocks, bonds, or funds on your own and then deftly manage the money until your child enters school. Just pick a single age-based fund in a 529, and your work is pretty much done. These funds will shift gradually from stocks to bonds as your child nears school. Relax about taxes too. In a 529, earnings are tax-free if the money is used for college-related costs, such as tuition or room and board. You don't need to remember to save either. Most 529s let you set up an automatic investment plan. The only decision is which 529 to choose.
The Utah plan
If you don't have the time or inclination to sort through 529s, go straight to the Utah Educational Savings Plan (800-418-2551; uesp.org). With its selection of Vanguard index funds, it gives you age-based choices at rock-bottom prices. You'll have to select one of five different stock and bond allocations. If in doubt, stick with option two. One drawback: You may be giving up valuable state tax breaks.
Research your state plan
In 28 states, you are entitled to a tax deduction or credit for money you put into your local 529. For your state's tax breaks and plan options, visit Savingforcollege.com. Stay with your state plan if you earn a generous tax break, you don't have to pay a sales charge to invest, and the plan's annual expenses are no more than 1% a year. If not, Utah's 529 remains your best bet.
Four: Disaster-Proof Your Family
Life throws you a curveball sometimes: cutbacks on the job, a roof that needs to be replaced. You can't completely insulate yourself from such shocks, but three straightforward steps will protect you against 90% of the problems.
Build an emergency fund
Put aside at least three months' worth of living expenses in cash so you can get through a rough patch without having to borrow or dip into retirement savings (make that six months if your family relies on one wage earner).
Buy life insurance
With insurance, the most straightforward choice is also the best. Term insurance gives you the most significant death benefit for your premium in almost every case. All you need to decide is how much and for how long. Buy life insurance equal to five to 10 times your annual salary. The more children you have, the more debt you carry, and the longer your family will need help (until your kids are out of college, say), the closer you should be to the top end of that range. You can lock in your payment for 10 to 30 years, but for most new insurance buyers, 20 years is about right.
You also need disability insurance, which typically pays up to 60% of your salary if you can't work. But this policy virtually defies simplification. If you don't get adequate coverage on the job, you'll have to confer with an agent.
Write a will
You should have a will that, at a minimum, appoints a guardian for your minor children, outlines how you want to divvy up your assets, and names an executor. If you have an estate worth less than $2 million and you're leaving almost everything to your spouse and kids, you can write it yourself. If your situation is complicated, spend about $1,000 on a lawyer.
Five: Protect Your Identity
There's no shortage of products promising to fend off identity theft. The easiest solution: Follow these three steps to lock up your data and keep tabs on your credit.
Dry up junk mail
Thieves use your pre-approved credit card offers to open accounts in your name, which is the hardest type of ID theft to detect. Opt-out of receiving the junk mail by calling 888-567-8688, a service run by the credit bureaus. Select option three to permanently remove your name from marketing lists (you can always opt-in later).
Shredding will eliminate your paper trail. Even easier is to receive and pay bills online, which ensures that information cannot be lifted from stolen mail. Plus, with 24-hour account access, you'll see an unauthorized charge on your card right away.
Watch over your credit.
Want more oversight? It's easy to request a free report from one of the big three bureaus every four months at AnnualCreditReport.com. For $5 a month, TripleAlert.com will monitor your credit and alert you to any changes. Even better is a credit freeze, but just 25 states allow it, in some cases only for ID theft victims.
Six: Shop Smart for a Car
Buying a car can seem like a huge hassle, from figuring out what price you should pay to handle the hard sell on the dealer's lot. You can avoid the work in one of two ways.
Hire a car buyer
If you are willing to spend an extra $400 to $800, you can reduce the entire car buying experience to a couple of phone calls and one visit to the dealer to pick up the keys. Car buying services such as AutoAdvisor.com and CarQ.com will find the model you want, negotiate a competitive price and loan terms with the dealer, and, in many cases, set up a test drive.
If you want to save as much money as you can, do it yourself. Even that doesn't have to be hard if you tap the internet. Go to Edmunds.com and use the True Market Value (TMV) tool to determine what people in your area are paying to drive your desired model off the lot. Aim to pay this price or less. You may also want to get pre-approved for a bank loan and ignore dealer financing until you have settled on a price.
Next, solicit dealer offers online. At Edmunds.com (or Autobytel.com), you enter the model you want, your contact info, and your zip code (or nearby ones), and within a few hours, you'll get quotes by e-mail or phone. You should have an easier time negotiating a price because the dealership's online department makes commissions based on volume, not the price. They won't waste time wheeling and dealing with you.
Seven: Simplify Your Credit Life
Credit-card issuers relentlessly tempt you with new offers and can keep changing the terms of the cards you carry. While it's good to have a backup for an emergency, sticking to one card will minimize the number of bills you pay and maximize your card rewards.
If you carry a balance: Get a low rate that lasts.
You'll find it easier to chip away at a balance if your interest rate is well below today's 14.1% average. A 0%-balance-transfer teaser is tempting, but you can owe fees as high as 4% of the balance. And if you can't pay it off within six or 12 months, you'll be left with the hassle of chasing the next offer. Skip the promo and opt for a low ongoing rate.
If you pay in full: Get a rewards card you can use
If you don't carry a balance, make your No. 1 card a rewards card. You may be squandering your spending power, though, if you earn miles when you rarely fly or move between two or three cards.
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