by Jessica L. Anderson
Friday, March 18, 2011
http://finance.yahoo.com/focus-retirement/article/112374/how-to-stash-1-million-savings?mod=fidelity-buildingwealth&cat=fidelity_2010_building_wealth
Dane Lacey, 49, a radiologist from San Diego, has saved nearly $1.4 million for retirement in eight years by living below his means.
Did you always have a goal to front-load your savings? Yes. I want to retire when I am still young enough to travel, hike and body surf. It was a race for me to put a large amount away so that I could enjoy it. I knew that if I got it in early, it could grow.
You've been in practice for 14 years. Why the big push for the past eight? During the tech bubble, I put every cent into Cisco and other tech stocks. Within two years, I had accumulated $300,000, while I was living on about $35,000 a year. I went on vacation and came back to find that my $300,000 was worth $10,000 because the bubble had burst. So I started over at age 41.
How did you make it happen? As a resident physician, you get paid about $26,000 a year for four years. Then when you're in practice, you start making big money. My first job paid $220,000 a year, so I had all this money coming in, but I didn't feel like I needed that much. I live in a small bungalow and drive a Chrysler PT Cruiser. I decided to live on what I was making before and just pay myself a little bit more each year. It would seem like a pay raise but still allow me to put a lot away for retirement. ( I do this!)
In at least two of the past eight years, you contributed more than $250,000 to retirement savings. How did you do that? Until recently I worked as a navy contractor, and I was basically self-employed, so I was able to save more money in tax-deferred retirement accounts than the average employee. In addition to funding my 401(k) account, I established a traditional defined-benefit pension plan for my business, which allowed me to contribute as much as $240,000 in one year. I used any excess money to pay down my mortgage or to add to personal savings and my IRA.
How do you manage your money? I used to keep all my money with a Merrill Lynch manager, who invested it in mutual funds. The approach was diversified, but he wasn't as aggressive as I wanted to be. Three years ago, I diversified my money managers as well, and I split the money in the defined-benefit plan in half. My guy at Merrill Lynch invests in mutual funds with half of the money, and I have a guy at Schwab who invests in stocks with the other half. It has given me peace of mind that I'm not basing my future on one person's decisions or one company's philosophy.
How did you learn to be so disciplined? My parents were very good with money and taught my brothers and me to be responsible. At age 14, we were required to get a job and budget our money. We budgeted for clothing, college, and room and board (which went into a college account), and we kept 20%. My family instilled good financial sense in me — your salary is for day-to-day expenses, and anything to play with, you work extra for. I don't borrow, except for my mortgage, and I pay my credit cards off every month.
What is your best advice for savers? Save first and pay yourself later. If you pay yourself first and then try to save, your standard of living will always adjust up to what you're making, and you're not going to have money left to put in savings. Figure out a goal and what you need to save for that, and then keep the rest.
Now that you've saved so much, what's next? Although I want to have the money to retire locked up by age 50, the savings habit is so ingrained in me that I'll probably just keep saving the way I have been and look at retiring early and getting out of the rat race. I plan on having a second career in retirement, something to get up to do every day, but without the responsibilities of being a physician. I'd be happy living a more comfortable lifestyle, although not a rich one. Still, I've always said that when I turn 50, I'll buy a doctor's car — a BMW or a Mercedes.
Friday, March 18, 2011
Monday, March 14, 2011
What is your tax bracket?
What's Your Tax Bracket?
Peter McDougall
Friday, March 11, 2011ShareretweetEmailPrintprovided by
Pop quiz: What's your tax bracket?
If you don't know which of the six brackets you're in, you're in good company. But you could be making some money goofs or paying too much in taxes as a result. "Figuring out your tax bracket is very simple," says Gil Charney, tax analyst at The Tax Institute at H&R Block. "And that number is key to every tax-related decision you make."
A quick tutorial: The U.S. tax system has graduated rates, which means you pay low tax rates on the first dollars you earn and progressively higher rates as your income goes up. If you file taxes jointly with your spouse, the first $16,750 you earn in 2010 is taxed at 10 percent; the next $51,250 is taxed at 15 percent; the next $69,300 at 25 percent and so on. The highest rate you pay is your marginal tax rate, often called your tax bracket.
Below, we've produced a full list of 2010 tax brackets for single people, married filing jointly and head of household. (Head of household status means you were unmarried on December 31, paid more than half the cost of keeping up your home, and a "qualifying person," such as a child, lived in your home more than half the year.)
On Dec. 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law. The law basically extended everything that was in place for another year.
Here are some of the differences for tax year 2011:
• The $400 ($800 if married filing jointly) Making Work Pay Credit will expire.
• The Social Security payroll tax rate will decrease by 2 percent, to 4.2 percent from 6.2 percent, for wages up to $106,800.
• The self-employment tax will decrease by 2 percent, to 10.4 percent from 12.4 percent, on self-employment income up to $106,800.
• The estate tax will return with a rate of 35% and a lifetime exclusion of $5 million for 2011 and 2012.
• The personal exemption amount will increase to $3,700 (from $3,650 in 2010).
• The 2011 standard deduction will be:
-- $5,800 for unmarried taxpayers or married taxpayers filing separately
-- $11,600 for married taxpayers filing jointly
-- $8,500 for taxpayers filing as head of household.
Once you've figured out your bracket from these tables, you can better tackle the financial questions that follow.
Filing Status: Single
Filing Status: Married filing jointly
Filing Status: Head of household
1. Should you buy a municipal bond fund or a taxable bond fund?
There has been quite an uproar recently in the municipal bond market. It started when experts and analysts questioned the ability of fiscally depleted states and municipalities to repay their bond obligations in the aftermath of the Great Recession. The anxiety of bond-holders skyrocketed after analyst Meredith Whitney went on "60 Minutes" and predicted widespread defaults in the municipal bond market. (Here is a great primer on munis; here is how a municipal default would work and here is a rebuttal to Whitney's central thesis.)
Since that time, municipal bond prices have dropped, causing individual investors to question whether these assets deserve a place in their portfolios. Here's a reminder of why municipal bonds might be worth considering.
Municipal bond interest is exempt from federal income taxes (and in some cases state taxes), but it generally make sense to buy a muni bond fund only if you're in a high bracket. Otherwise, you might earn more, on an after-tax basis, with a taxable corporate or government bond fund.
Say you have $10,000 to invest and you're choosing between a muni fund yielding 3 percent and a taxable corporate bond fund yielding 4.5 percent. The muni fund will produce $300 in tax-free income. If you're in the 25 percent bracket, you'd earn more with that taxable fund: $338 after taxes. But if you're in the 35 percent bracket, a muni fund would be a better bet because its $300 tax-free payout beats the $293 you'd earn after taxes with the taxable fund.
If you live in a high-tax state such as New York or California, buying a single-state muni fund can be even more beneficial since you don't pay state or federal income taxes on the income.
To compare yields on taxable versus tax-exempt funds, calculate the muni fund's taxable-equivalent yield -- that's the yield a taxable fund would have to pay to produce the same after-tax income. The formula is the muni yield divided by (1 minus your tax bracket)/100. You can use online calculators such as Vanguard's to do this math.
2. Should you pay off your mortgage?
As a rule, the higher your tax bracket, the less money you'll save by prepaying your mortgage. Reason: The higher your bracket, the more your mortgage interest deduction is worth to you. Say you have a $300,000, 30-year, 5 percent fixed-rate mortgage and are consider sending the bank an extra $100 a month from day one. You'd save $39,938 in interest over 30 years. Subtract the value of your mortgage interest deduction, however, and you'd wind up saving $29,954 over 30 years if you're in the 25 percent bracket but only $25,960 if you're in the 35 percent bracket. Rather than using after-tax money to pay down their mortgage, high earners are better off boosting their pre-tax 401(k) contributions, where the money will grow tax deferred.
Peter McDougall
Friday, March 11, 2011ShareretweetEmailPrintprovided by
Pop quiz: What's your tax bracket?
If you don't know which of the six brackets you're in, you're in good company. But you could be making some money goofs or paying too much in taxes as a result. "Figuring out your tax bracket is very simple," says Gil Charney, tax analyst at The Tax Institute at H&R Block. "And that number is key to every tax-related decision you make."
A quick tutorial: The U.S. tax system has graduated rates, which means you pay low tax rates on the first dollars you earn and progressively higher rates as your income goes up. If you file taxes jointly with your spouse, the first $16,750 you earn in 2010 is taxed at 10 percent; the next $51,250 is taxed at 15 percent; the next $69,300 at 25 percent and so on. The highest rate you pay is your marginal tax rate, often called your tax bracket.
Below, we've produced a full list of 2010 tax brackets for single people, married filing jointly and head of household. (Head of household status means you were unmarried on December 31, paid more than half the cost of keeping up your home, and a "qualifying person," such as a child, lived in your home more than half the year.)
On Dec. 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law. The law basically extended everything that was in place for another year.
Here are some of the differences for tax year 2011:
• The $400 ($800 if married filing jointly) Making Work Pay Credit will expire.
• The Social Security payroll tax rate will decrease by 2 percent, to 4.2 percent from 6.2 percent, for wages up to $106,800.
• The self-employment tax will decrease by 2 percent, to 10.4 percent from 12.4 percent, on self-employment income up to $106,800.
• The estate tax will return with a rate of 35% and a lifetime exclusion of $5 million for 2011 and 2012.
• The personal exemption amount will increase to $3,700 (from $3,650 in 2010).
• The 2011 standard deduction will be:
-- $5,800 for unmarried taxpayers or married taxpayers filing separately
-- $11,600 for married taxpayers filing jointly
-- $8,500 for taxpayers filing as head of household.
Once you've figured out your bracket from these tables, you can better tackle the financial questions that follow.
Filing Status: Single
Filing Status: Married filing jointly
Filing Status: Head of household
1. Should you buy a municipal bond fund or a taxable bond fund?
There has been quite an uproar recently in the municipal bond market. It started when experts and analysts questioned the ability of fiscally depleted states and municipalities to repay their bond obligations in the aftermath of the Great Recession. The anxiety of bond-holders skyrocketed after analyst Meredith Whitney went on "60 Minutes" and predicted widespread defaults in the municipal bond market. (Here is a great primer on munis; here is how a municipal default would work and here is a rebuttal to Whitney's central thesis.)
Since that time, municipal bond prices have dropped, causing individual investors to question whether these assets deserve a place in their portfolios. Here's a reminder of why municipal bonds might be worth considering.
Municipal bond interest is exempt from federal income taxes (and in some cases state taxes), but it generally make sense to buy a muni bond fund only if you're in a high bracket. Otherwise, you might earn more, on an after-tax basis, with a taxable corporate or government bond fund.
Say you have $10,000 to invest and you're choosing between a muni fund yielding 3 percent and a taxable corporate bond fund yielding 4.5 percent. The muni fund will produce $300 in tax-free income. If you're in the 25 percent bracket, you'd earn more with that taxable fund: $338 after taxes. But if you're in the 35 percent bracket, a muni fund would be a better bet because its $300 tax-free payout beats the $293 you'd earn after taxes with the taxable fund.
If you live in a high-tax state such as New York or California, buying a single-state muni fund can be even more beneficial since you don't pay state or federal income taxes on the income.
To compare yields on taxable versus tax-exempt funds, calculate the muni fund's taxable-equivalent yield -- that's the yield a taxable fund would have to pay to produce the same after-tax income. The formula is the muni yield divided by (1 minus your tax bracket)/100. You can use online calculators such as Vanguard's to do this math.
2. Should you pay off your mortgage?
As a rule, the higher your tax bracket, the less money you'll save by prepaying your mortgage. Reason: The higher your bracket, the more your mortgage interest deduction is worth to you. Say you have a $300,000, 30-year, 5 percent fixed-rate mortgage and are consider sending the bank an extra $100 a month from day one. You'd save $39,938 in interest over 30 years. Subtract the value of your mortgage interest deduction, however, and you'd wind up saving $29,954 over 30 years if you're in the 25 percent bracket but only $25,960 if you're in the 35 percent bracket. Rather than using after-tax money to pay down their mortgage, high earners are better off boosting their pre-tax 401(k) contributions, where the money will grow tax deferred.
Sunday, January 23, 2011
What if...
What if loneliness was simply a feeling of impatience, telepathically sent to you by friends you’ve yet to meet, urging you to go out more, do more, and get involved so that life’s serendipities could bring you together…Would you still feel alone?
What if illness was just a signal a healthy body sent to urge clarification of your thoughts, feelings, and dreams…Would you still, at times, think of yours as diseased?
What if feelings of uncertainty and confusion were only reminders that you have options, that there’s no hurry, and that everything is as it should be…Would you still feel disadvantaged?
What if mistakes and failures only ever happen when your life was about to get better that its ever been before…Would you still call them mistakes and failures?
And What if poverty and lack were simply demonstrations of your manifesting prowess, as “difficult” to acquire as wealth and abundance…Would they still cause you to feel powerless?
What if illness was just a signal a healthy body sent to urge clarification of your thoughts, feelings, and dreams…Would you still, at times, think of yours as diseased?
What if feelings of uncertainty and confusion were only reminders that you have options, that there’s no hurry, and that everything is as it should be…Would you still feel disadvantaged?
What if mistakes and failures only ever happen when your life was about to get better that its ever been before…Would you still call them mistakes and failures?
And What if poverty and lack were simply demonstrations of your manifesting prowess, as “difficult” to acquire as wealth and abundance…Would they still cause you to feel powerless?
Tuesday, January 4, 2011
Sustainable Marriage
The Happy Marriage Is the ‘Me’ MarriageBy TARA PARKER-POPE
Published: December 31, 2010
A lasting marriage does not always signal a happy marriage. Plenty of miserable couples have stayed together for children, religion or other practical reasons.
But for many couples, it’s just not enough to stay together. They want a relationship that is meaningful and satisfying. In short, they want a sustainable marriage.
“The things that make a marriage last have more to do with communication skills, mental health, social support, stress — those are the things that allow it to last or not,” says Arthur Aron, a psychology professor who directs the Interpersonal Relationships Laboratory at the State University of New York at Stony Brook. “But those things don’t necessarily make it meaningful or enjoyable or sustaining to the individual.”
The notion that the best marriages are those that bring satisfaction to the individual may seem counterintuitive. After all, isn’t marriage supposed to be about putting the relationship first?
Not anymore. For centuries, marriage was viewed as an economic and social institution, and the emotional and intellectual needs of the spouses were secondary to the survival of the marriage itself. But in modern relationships, people are looking for a partnership, and they want partners who make their lives more interesting.
Caryl Rusbult, a researcher at Vrije University in Amsterdam who died last January, called it the “Michelangelo effect,” referring to the manner in which close partners “sculpt” each other in ways that help each of them attain valued goals.
Dr. Aron and Gary W. Lewandowski Jr., a professor at Monmouth University in New Jersey, have studied how individuals use a relationship to accumulate knowledge and experiences, a process called “self-expansion.” Research shows that the more self-expansion people experience from their partner, the more committed and satisfied they are in the relationship.
To measure this, Dr. Lewandowski developed a series of questions for couples: How much has being with your partner resulted in your learning new things? How much has knowing your partner made you a better person? (Take the full quiz measuring self-expansion.)
While the notion of self-expansion may sound inherently self-serving, it can lead to stronger, more sustainable relationships, Dr. Lewandowski says.
“If you’re seeking self-growth and obtain it from your partner, then that puts your partner in a pretty important position,” he explains. “And being able to help your partner’s self-expansion would be pretty pleasing to yourself.”
The concept explains why people are delighted when dates treat them to new experiences, like a weekend away. But self-expansion isn’t just about exotic experiences. Individuals experience personal growth through their partners in big and small ways. It happens when they introduce new friends, or casually talk about a new restaurant or a fascinating story in the news.
The effect of self-expansion is particularly pronounced when people first fall in love. In research at the University of California at Santa Cruz, 325 undergraduate students were given questionnaires five times over 10 weeks. They were asked, “Who are you today?” and given three minutes to describe themselves. They were also asked about recent experiences, including whether they had fallen in love.
After students reported falling in love, they used more varied words in their self-descriptions. The new relationships had literally broadened the way they looked at themselves.
“You go from being a stranger to including this person in the self, so you suddenly have all of these social roles and identities you didn’t have before,” explains Dr. Aron, who co-authored the research. “When people fall in love that happens rapidly, and it’s very exhilarating.”
Over time, the personal gains from lasting relationships are often subtle. Having a partner who is funny or creative adds something new to someone who isn’t. A partner who is an active community volunteer creates new social opportunities for a spouse who spends long hours at work.
Additional research suggests that spouses eventually adopt the traits of the other — and become slower to distinguish differences between them, or slower to remember which skills belong to which spouse.
In experiments by Dr. Aron, participants rated themselves and their partners on a variety of traits, like “ambitious” or “artistic.” A week later, the subjects returned to the lab and were shown the list of traits and asked to indicate which ones described them.
People responded the quickest to traits that were true of both them and their partner. When the trait described only one person, the answer came more slowly. The delay was measured in milliseconds, but nonetheless suggested that when individuals were particularly close to someone, their brains were slower to distinguish between their traits and those of their spouses.
“It’s easy to answer those questions if you’re both the same,” Dr. Lewandowski explains. “But if it’s just true of you and not of me, then I have to sort it out. It happens very quickly, but I have to ask myself, ‘Is that me or is that you?’ ”
It’s not that these couples lost themselves in the marriage; instead, they grew in it. Activities, traits and behaviors that had not been part of their identity before the relationship were now an essential part of how they experienced life.
All of this can be highly predictive for a couple’s long-term happiness. One scale designed by Dr. Aron and colleagues depicts seven pairs of circles. The first set is side by side. With each new set, the circles begin to overlap until they are nearly on top of one another. Couples choose the set of circles that best represents their relationship. In a 2009 report in the journal Psychological Science, people bored in their marriages were more likely to choose the more separate circles. Partners involved in novel and interesting experiences together were more likely to pick one of the overlapping circles and less likely to report boredom. “People have a fundamental motivation to improve the self and add to who they are as a person,” Dr. Lewandowski says. “If your partner is helping you become a better person, you become happier and more satisfied in the relationship.”
Published: December 31, 2010
A lasting marriage does not always signal a happy marriage. Plenty of miserable couples have stayed together for children, religion or other practical reasons.
But for many couples, it’s just not enough to stay together. They want a relationship that is meaningful and satisfying. In short, they want a sustainable marriage.
“The things that make a marriage last have more to do with communication skills, mental health, social support, stress — those are the things that allow it to last or not,” says Arthur Aron, a psychology professor who directs the Interpersonal Relationships Laboratory at the State University of New York at Stony Brook. “But those things don’t necessarily make it meaningful or enjoyable or sustaining to the individual.”
The notion that the best marriages are those that bring satisfaction to the individual may seem counterintuitive. After all, isn’t marriage supposed to be about putting the relationship first?
Not anymore. For centuries, marriage was viewed as an economic and social institution, and the emotional and intellectual needs of the spouses were secondary to the survival of the marriage itself. But in modern relationships, people are looking for a partnership, and they want partners who make their lives more interesting.
Caryl Rusbult, a researcher at Vrije University in Amsterdam who died last January, called it the “Michelangelo effect,” referring to the manner in which close partners “sculpt” each other in ways that help each of them attain valued goals.
Dr. Aron and Gary W. Lewandowski Jr., a professor at Monmouth University in New Jersey, have studied how individuals use a relationship to accumulate knowledge and experiences, a process called “self-expansion.” Research shows that the more self-expansion people experience from their partner, the more committed and satisfied they are in the relationship.
To measure this, Dr. Lewandowski developed a series of questions for couples: How much has being with your partner resulted in your learning new things? How much has knowing your partner made you a better person? (Take the full quiz measuring self-expansion.)
While the notion of self-expansion may sound inherently self-serving, it can lead to stronger, more sustainable relationships, Dr. Lewandowski says.
“If you’re seeking self-growth and obtain it from your partner, then that puts your partner in a pretty important position,” he explains. “And being able to help your partner’s self-expansion would be pretty pleasing to yourself.”
The concept explains why people are delighted when dates treat them to new experiences, like a weekend away. But self-expansion isn’t just about exotic experiences. Individuals experience personal growth through their partners in big and small ways. It happens when they introduce new friends, or casually talk about a new restaurant or a fascinating story in the news.
The effect of self-expansion is particularly pronounced when people first fall in love. In research at the University of California at Santa Cruz, 325 undergraduate students were given questionnaires five times over 10 weeks. They were asked, “Who are you today?” and given three minutes to describe themselves. They were also asked about recent experiences, including whether they had fallen in love.
After students reported falling in love, they used more varied words in their self-descriptions. The new relationships had literally broadened the way they looked at themselves.
“You go from being a stranger to including this person in the self, so you suddenly have all of these social roles and identities you didn’t have before,” explains Dr. Aron, who co-authored the research. “When people fall in love that happens rapidly, and it’s very exhilarating.”
Over time, the personal gains from lasting relationships are often subtle. Having a partner who is funny or creative adds something new to someone who isn’t. A partner who is an active community volunteer creates new social opportunities for a spouse who spends long hours at work.
Additional research suggests that spouses eventually adopt the traits of the other — and become slower to distinguish differences between them, or slower to remember which skills belong to which spouse.
In experiments by Dr. Aron, participants rated themselves and their partners on a variety of traits, like “ambitious” or “artistic.” A week later, the subjects returned to the lab and were shown the list of traits and asked to indicate which ones described them.
People responded the quickest to traits that were true of both them and their partner. When the trait described only one person, the answer came more slowly. The delay was measured in milliseconds, but nonetheless suggested that when individuals were particularly close to someone, their brains were slower to distinguish between their traits and those of their spouses.
“It’s easy to answer those questions if you’re both the same,” Dr. Lewandowski explains. “But if it’s just true of you and not of me, then I have to sort it out. It happens very quickly, but I have to ask myself, ‘Is that me or is that you?’ ”
It’s not that these couples lost themselves in the marriage; instead, they grew in it. Activities, traits and behaviors that had not been part of their identity before the relationship were now an essential part of how they experienced life.
All of this can be highly predictive for a couple’s long-term happiness. One scale designed by Dr. Aron and colleagues depicts seven pairs of circles. The first set is side by side. With each new set, the circles begin to overlap until they are nearly on top of one another. Couples choose the set of circles that best represents their relationship. In a 2009 report in the journal Psychological Science, people bored in their marriages were more likely to choose the more separate circles. Partners involved in novel and interesting experiences together were more likely to pick one of the overlapping circles and less likely to report boredom. “People have a fundamental motivation to improve the self and add to who they are as a person,” Dr. Lewandowski says. “If your partner is helping you become a better person, you become happier and more satisfied in the relationship.”
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