This blog is a way for me to share hard learned lessons about money with those who are just starting out on their own. I hope it's a way for you to avoid making the mistakes I made, and to benefit from my experiences

Thursday, January 25, 2007

Hunting for New Life Insurance

I went quote shopping for new term insurance on a couple of those internet sites. Wow! I have been getting barraged by calls from agents, all of whom claim to be independent. All but one have been pushing one company over another, each a different company. I can't help but think it's because that's who they'll be getting the biggest commission check from. No bother. I'm after the lowest rate and I don't care how much commission they get, as long as the company is rated A+ or better by AM Best and gives me a great price.

One good thing about these calls is that one agent really took the time to show me that I'm woefully underinsured. As a result, I've doubled the coverage that I'm seeking. Whichever policy I do choose, it will be a bigger bite than I was hoping before because of that. Still, since I'm the only breadwinner, I have to make sure my family is secure if I'm gone.

So far, only 3 agents are credible. 1 pushing West Coast Life, 1 pushing US Financial and 1 pushing Prudential. I currently have West Coast Life, and my health has only gotten better since I took the policy two years ago. If they quote me based on the health info they have, I know it's a real price. I think some of the other agents were giving me too optimistic of quotes saying I'd fit into a catagory that I don't think I can fit it. My health is fine, but I'm way overweight for my height.

I'm surprised that not one agent has tried to push me into whole life or variable life or any of that other garbage. The one agent who talked me into seeking higher coverage even told me that term was the best way to go, and that any extra money should be invested in my retirement program, rather than a cash value life insurance policy. He's got a lot of credibility right now with me.

If any readers have any useful tips to pass along, please leave a comment for me.

Sunday, January 21, 2007

Roth vs. Traditional IRA

I keep seeing everyone advocating putting money in Roth vs. a Traditional IRA. Maybe they're seeing something I'm missing. To me, a Roth is really the best choice only in a narrow set of circumstances.

For many, they did not save as early as they should of. And even if investing everything they can for retirement, their retirement will still earn them less taxable income than they earn now. So why would you want to pay the higher tax rate now and then invest in a Roth, vs. take the bigger tax break now and invest in a Traditional IRA or your 401k?

For example. Right now I'm in the 25% tax bracket. However, by every retirement calculator I've ever ran, my annual retirement income will place me in the 20% or less bracket. So why not pay lower taxes later?

The common argument against my point is that you don't know what Congress will do to tax rates in the future. Fair enough. But you also don't know what they'll do to Roth rules either. If the gov't is hard up enough that they need to raise income taxes on less affluent retired seniors, they can just easily turn around and say that Roth earnings can be taxed too.

The Roth does offer one nice feature. You can withdraw your contributions (not earnings) early, without penalty. This makes it a good way to save for retirement, but still have that cash available without penalty if another more important need arises. I have seriously considered this as an investment vehicle for my son's college education / my retirement, while putting everything I can into my company's tax-deferred 401k. If you ever look at the 529 plans, they have penalties galore if the money is not used to spend on a post-high school education. The Roth would have none, as long as I only took out my contributions, and left the earnings in for my retirement.

Unless you are predicting a rosy scenario retirement, I say take the sure thing bigger tax break now, and use that extra tax savings for further investments of one sort or another.

Thursday, January 18, 2007

Tip on Tax Return Advances

Many people when they take their taxes to a tax preparation center, or even if they do it with some computer software, will be offered a Tax Return advance from the tax preparation company. These companies will give you your tax return instantly for a small fee, and then your tax return from the IRS will be given to them later. Sounds great, right?

AVOID THESE OFFERS LIKE THE PLAGUE! If you calculate the fee as you would interest on a loan of 1 to 3 weeks, you often wind up paying 600% or more on that loan. You've already paid too much to the IRS and let them hold your money for a year or more. What's another week or three?

In fact, some companies actually make very little money on the tax preparation, and make their real profits from these short term loans. The actual tax preparation is almost a loss leader.

If you are that anxious to get your money as soon as possible, adjust your witholding exemptions to a higher number, so you keep more of your money every payday. Then you won't have a large return at tax time.

Friday, January 12, 2007

What's Old is New Again

USA Today reports that AT&T will be ending the Cingular brand and replacing it with AT&T. Uh....Cingular used to be AT&T Wireless.

"Today's AT&T was known as SBC Communications until late 2005, when that
regional Bell company acquired its former parent, the AT&T Corp.
long-distance business. Several years before that deal, the AT&T
long-distance company spun off its cellphone business, AT&T Wireless, as an
independent concern. Then, in late 2004, AT&T Wireless was acquired by
Cingular, which had no real desire or legal right to adopt a brand still owned
by the AT&T long-distance business."

I just find it amusing that here Cingular has invested all that time and money in brand building over the last 6 years, and it's just scrapped like that, especially when they already had the AT&T name before, and chose not to use it.