The 3 Key Retirement Numbers You Need To Know

Retirement

Retirement means different things to each of us. As you consider your vision for retirement, there are three key numbers to keep in mind; you’ll want to discuss them with your financial adviser if you have one:

Your Withdrawal Rate

This could be your most important retirement number. Your withdrawal rate is the amount you will be taking out of your investment portfolio each year.

Nothing has a bigger impact on your retirement strategy than this number since it can help determine how sustainable your retirement strategy will be. If you choose a number that’s too high, you may run out of money; if the number is too low, it could mean you are being unnecessarily frugal and not living the life you want.

So what withdrawal rate makes sense for you? The answer is: it depends.

As you consider what makes sense for you, start with these questions: How many years will you spend in retirement? Can you be flexible with your withdrawals and not automatically increase your spending each year if you don’t need to? Can you cut back on years of negative investment performance?

For example, we believe a 4% withdrawal rate may be a good starting point, but this assumes a 25-year retirement and the ability to be flexible with your spending if needed. In reality, your personal withdrawal rate will probably differ based on a number of different variables such as your age, how long you expect retirement to last, your asset allocation, and your spending habits, among other things.

Additionally, this rate isn’t something you set and forget — it should be reviewed each year.

The more years you plan on spending in retirement and the less expense-flexibility you have, the more conservative your withdrawal rate should be. This leads us to the second number:

Your Reliance Rate

Your reliance rate is simply the percent of your retirement income coming from your investments. While your withdrawal rate helps determine the sustainability of your retirement strategy, your reliance rate helps measure the sensitivity of your retirement strategy.

For example, say you’ll need $50,000 a year in retirement. If $40,000 will be coming from your portfolio and $10,000 will come from outside sources, your reliance rate is 80%.

As your reliance rate increases, so does your sensitivity to market fluctuations. Regardless of their withdrawal rate, people who rely on their portfolios for 80 percent of their income are probably more sensitive to market declines than people who rely on their portfolios for only 20 percent.

A higher reliance rate means that market declines may have a greater effect on your strategy unless you can be flexible in your spending and maintain a lower portfolio withdrawal rate.

If you are relying on your portfolio for the majority of your income, ask yourself some questions: How flexible are you with your spending? Can you spend less, if necessary, during the inevitable short-term market declines? Also, can you consider other options to increase your income from outside sources? If you can, this could not only reduce your reliance rate, but also the withdrawal rate from your portfolio over the long-term.

And this leads to the third key retirement number:

Your Age for Claiming Social Security

A full discussion of your Social Security options is beyond the scope of this article, but it’s important to understand that your Social Security benefit is an incredibly valuable retirement asset. The decision about when to take Social Security not only affects the amount of your benefit but also your spouse’s potential survivor benefit.

You can start taking it as early as 62 or wait as long as age 70. The more you delay receiving the money, the bigger your benefit will be.

Since your Social Security benefit is unaffected by market performance, it can be the foundation of your retirement income strategy. But it shouldn’t be considered in isolation.

So before you decide when to take Social Security, be sure you evaluate all your options and their effect on your retirement strategy.

Together, these numbers can be used to help ensure that you are better positioned to achieve your vision for retirement.  It’s also important to remember they will probably change over time, so be sure to revisit them so you can stay on track.

By addressing these numbers, you can turn your focus to a more important one —  the number of things you want to accomplish in retirement.

Source: http://www.forbes.com/sites/nextavenue/2015/03/13/the-3-key-retirement-numbers-you-need-to-know/

6 Times to Use Credit Cards Instead of Cash

Credit cards

You might prefer to use cash if you're not a big fan of debt, but don't give credit cards the cold shoulder so quickly. Believe it or not, there are times when it makes more financial sense to use a credit card than to pay in cash. Yep, you read that right. If you know how to use credit responsibly — and if you're committed to only buying what you can afford — there are benefits to enjoying that satisfying swipe. Here are six times it's better to pay with plastic. (See also: Awesome Credit Card Perks You Didn't Know About)

1. Buying Electronics

Whether you're buying a flat-screen TV or a small appliance for your kitchen, the retailer will probably offer an extended warranty at checkout. If you're spending hundreds or thousands for an item you intend on keeping a long time, buying an extended warranty makes sense, especially since many manufacturers only offer a one-year warranty.

If you're thinking about getting an extended warranty, this isn't the time to pay for an electronic appliance with cash. It might come as a surprise, but several credit cards offer extended warranties for electronics as a cardmember perk. Use an eligible card to pay for an item and you might receive a free extended warranty that matches the manufacturer's warranty up to one year. Coverage varies by credit card, so contact your credit card company in advance to know your limits.

2. You Want the Best Price for an Item

There's nothing more frustrating as a savvy consumer than buying an item — only to find it cheaper somewhere else (which is why you should also comparison shop online first). But there's an easy way to save yourself the headache of exchanging items you've overpaid for: Since many credit cards offer price protection, simply pay using your plastic. If you make a purchase in retail stores or online, and later find the same item at a lower price within a specific length of time (usually 90 days), your credit card company may refund the difference up to a certain amount. Not all credit cards offer price protection, so you'll need to read your cardmember benefits to see if you're eligible.

3. You Want to Earn Rewards

Reward credit cards open the door to a variety of freebies, ranging from airline tickets to merchandise. Use a rewards credit card and earn points or cash back for every dollar you spend, then redeem points for travel, gift cards, or even a statement credit. You don't receive these types of perks when paying with cash. Just make sure you pay off your balance every month to avoid high-interest debt.

4. You're Traveling Overseas

Bringing cash when going overseas might seem like the best way to stay on budget, but it's a dangerous way to travel. Lost or stolen cash can't be replaced. On the other hand, if your credit card is lost or stolen, you're not liable for unauthorized charges. Credit is also a good choice because some credit cards don't have a foreign transaction fee, thus allowing you to convert purchases into dollars for free. Depending on the plastic, this can save you the typical 1%-3% foreign transaction fee imposed by some credit cards.

5. You Need to Keep a Record of Purchases

Whether you're running a business or keeping a record of personal expenses, it's easier to track spending with a credit card. You can go online, pull up monthly statements, and view any transaction. With cash, your receipt is the only record, and if you misplace the receipt, you can lose track of where you spent the money.

6. You Have Limited Cash

If you have an emergency, like a home or car repair, using cash you've set aside for bills can strain your finances and cause additional hardship. Some people warn against using a credit card, especially when you can't pay off a balance anytime soon. But if you have a credit card featuring a 0% introductory rate for the first 12 to 18 months, it makes more financial sense to use credit and keep your cash available for other needs. Since you're not paying interest, it's the same as paying cash, so long as you pay off the balance during the 0% APR period. Make sure you check the credit card terms. Some credit cards only apply 0% interest to balance transfers, whereas others apply it to balance transfers and purchases.

What does a credit card instead of cash make more sense for you?

Source: http://www.wisebread.com/6-times-to-use-credit-cards-instead-of-cash

10 Things I Want to Teach My Kids About Investing

Start Investing

I've been blessed with three amazing kids. As their father, I feel compelled to not only protect and provide for them during their childhood but also to help them learn how to provide for themselves when they reach adulthood.

I've also been very fortunate to spend several years as an analyst at The Motley Fool, where I have had the pleasure of working beside and learning from some of the best investors in the world, including David and Tom Gardner.

Along the way, I've learned some foundational principles that have guided my professional and personal investing strategy. They helped me achieve market-beating results in Tier 1, the real-money portfolio that I manage for the Fool, and even helped my family and I purchase our new home.

The following 10 core investment (and life) lessons comprise some of the most important aspects of my Foolish education and form the foundation of what I hope to pass on to my children in the years ahead.

1. Investing in stocks is one of the best ways to build lasting, long-term wealth. Cases can be made for achieving wealth through real estate or the creation and ownership of private businesses, but few asset classes have a track record of wealth creation as solid as public stock ownership, especially on a real (inflation-adjusted) basis. 

Source: Ibbotson Associates. 

2. Stocks represent an ownership stake in a real business. Stocks aren't just pieces of paper or flashing blips on a computer screen. They're a legal claim on the current and future cash flow of a business and should be treated as such. When viewed through this lens, the fundamental drivers of long-term investing success become more clear and easier to grasp.

3. As such, buy shares in the best businesses you can find. This is the foundational principle of Tier 1, where I seek out and invest in the world's elite businesses. In fact, I usually begin my Tier 1 buy alerts with this quote from legendary investor Charlie Munger:

"And, by the way, the bulk of the billions in Berkshire Hathaway has come from the better businesses. ... And most of the other people who've made a lot of money have done so in high-quality businesses."

These include companies with the strongest competitive advantages, largest growth opportunities, and best management. They are the innovators, disruptors, and best of the breed. These businesses are ... Tier 1. And they tend to create tremendous wealth for their shareholders as they lead the world forward.

4. Buy stocks with the intent of holding them for as long as you possibly can. Warren Buffett has said his "favorite holding period is forever." Here at the Fool, Tom Gardner has implemented a minimum five-year holding period requirement in his Everlasting Portfolio, because he, too, is a big believer in the power of long-term stock ownership. While I don't impose that restriction on myself in Tier 1, I do strive to only purchase stock in businesses that I plan to hold for years -- and potentially even decades -- to come. I'm talking about outstanding businesses such as Amazon.com (NASDAQ: AMZN), Google(NASDAQ: GOOG  ) (NASDAQ: GOOGL), and Disney (NYSE: DIS). These companies have dominant competitive advantages that provide a wide moat around their cash flow, yet they still have tremendous runways for growth. They are all core positions in Tier 1 today, and I wouldn't be surprised if they form the foundation of my children's portfolios decades from now.

5. Winners tend to keep on winning. This is another core tenet in Tier 1, and another valuable lesson I learned from Tom and David Gardner. I like to invest in companies and management teams with proven track records of success. That's because I believe past success is one of the best indicators of future success. It certainly is not a guarantee, but I believe winning is a habit. The confidence and momentum achieved from past and current wins tend to pave the way for further risk-taking. Not blind risk predicated on arrogance, but prudent, calculated risks based on optimistic and opportunistic bets on a brighter future.

6. Strive to buy these great companies early in their growth cycles. The earlier you invest in a great business, the more you can profit as other investors catch on to the company's success. This is where fortunes are made, where the 10- and even 100-baggers are found. I have achieved multi-bagger returns in CAPS with several stocks, including 1,000+% gains in Apple (NASDAQ: AAPL  ) and Baidu (NASDAQ: BIDU  ), and it's a major goal of mine to find more of them going forward in Tier 1 so that I can help more people achieve these types of market-crushing -- and potentially life-changing -- returns.

7. Make your portfolio your best expression of the world. David Gardner once urged me to "Find out where the world is going, and get there as soon as possible." Your portfolio should reflect your passions, interests, field of study, and/or profession -- this is where your edge lies. But most of all, your portfolio should be positioned according to your vision of the future, and the more optimistic, the better.

8. Never stop learning. To have an informed opinion of where the world is going, we should seek to expand our horizons and circle of competencies beyond investing and even business, to include a wide array of disciplines such as psychology and the sciences. For the market moves not solely on others' rational thinking and is often swayed by the biases and other intricacies of human behavior. Each day, I strive to learn more about the world in which we live. I hope you'll do the same.

9. Never quit. There will be times when you throw up your hands in frustration and question whether it's worth all the trouble. Seemingly irrational short-term volatility and vicious bear market declines tend to be brutal on high-quality yet often premium-priced businesses. These difficult market times can play havoc on your emotions. However, the only way to win is to stay the course through the inevitable downturns. Steel yourself with the knowledge that this, too, shall pass, and that your best-of-breed businesses will likely emerge from the rubble even stronger as they take share from weaker rivals. As such, learn to look at these sell-offs as opportunities to add to your positions at even better prices, and you will magnify your long-term gains.

10. Use for good the tremendous wealth these principles will help you create. Along with investing in businesses that lead the world forward, strive to have a positive impact on the world around you. Help others. Donate what you can to worthy causes. And pass on what you have learned, as I have attempted to do here.

On that note, I'd like to ask all the Fools reading this article to list the lessons you would like to pass on in the comments section below.

And lastly, to my children, know that Daddy loves you -- now, and always.

Source: http://www.fool.com/investing/general/2015/03/08/10-things-i-want-to-teach-my-kids-about-investing.aspx

To Combat Fraud, Visa Wants to Track Your Smartphone

Visa

NEW YORK -- Those days of calling your bank to let them know that, yes, you really are in Thailand, and yes, you really did use your credit card to buy $200 in sarongs, may be coming to an end.

The payment processing company Visa (V) will roll out a new feature this spring that will allow its cardholders to inform their banks where they are automatic, using the location function found in nearly every smartphone.

Having your bank and Visa know where you are at all times may sound a little like "Big Brother." But privacy experts are actually applauding the feature, saying that, if used correctly, it could protect cardholders and cut down on credit card fraud.

Credit and debit card fraud costs consumers and banks billions of dollars each year, and that figure has been growing as data breaches have become more common. The banking industry had $1.57 billion in debit card fraud in 2013 and $4 billion in credit card fraud in 2012, the latest years for which data are available, according to the Federal Reserve.

Facing these high costs, banks and the payment processors have been stepping up their efforts to cut down on fraud, and Visa's announcement is just one small piece of this drive. JPMorgan Chase (JPM) CEO Jamie Dimon has said repeatedly that his bank spends $250 million overall on cybersecurity every year and plans to double that spending.

Tracking Purchases

Here's how it works: starting in April, banks will update their smartphone apps to include Visa's new location-tracking software. If the consumer opts in, the Visa software will, over a period of time, establish a customer's home territory of roughly a 50-mile radius. If the person uses his or her Visa card at stores in that area, those transactions will be considered low risk for fraud.

When that person travels outside their home area, the phone will notify Visa that they've entered a new city or country, using either the phone's cellular data plan or the next time the phone connects to a Wi-Fi network. When that person uses their Visa card for a transaction in that location, Visa will already know he or she is there and will be less likely to flag the card for a fraud alert.

"We will be able to compare the merchant's location to the most recent cellphone location to show it's a less risky transaction," Visa executive Mark Nelsen said.

The feature is optional and can be deactivated at any time. Visa also says none of the location trackings will be used for marketing purposes.

Combating Counterfeit Cards

One type of fraud Visa's feature will directly address is counterfeit credit cards. Criminals can take stolen credit card information and code it onto a new card using equipment that can be readily purchased online. Counterfeit cards look like any other credit card but have someone else's information on the magnetic stripe.

Nelsen said Visa hopes the new security feature will prevent "a good portion" of fraud perpetrated with counterfeit cards because those cards are often used in a location other than where the actual card owner lives.

Visa's new anti-fraud measure, which the company announced Thursday, won't address every potential fraud situation. If a card user has both their phone and credit cards stolen, for example, Visa wouldn't necessarily know that the card was at risk of fraudulent use until the cardholder contacted the company.

The current version of Visa's anti-fraud software doesn't address the possibility of stolen credit card data being used to make online purchases, but a future version will Nelsen said.

Visa is just one of the dozens of financial companies trying to figure out the best way to use new technologies to combat fraud. MasterCard (MA) said Friday it is rolling out a pilot program later this year that will integrate biometric data, such as face, voice or fingerprints, into its payment system to help authenticate transactions.

Cumbersome Process

Many travelers have had the experience of having their credit cards declined when using them for the first time in a foreign city or country because the bank assumed the charge was fraudulent. The only solution in those situations was for the cardholders to call the banks or credit card issuer every time they travel to let them know where they will be.

The process is cumbersome and time-consuming for cardholders and also for banks, which incur large expenses to staff call centers to deal with these types of calls from customers. Some banks use systems like text message alerts, but that usually requires customers to reply or call a number before the transaction will go through.

"The goal is to let more of those good transactions go through so we can focus on the real fraud," Nelsen said.

Privacy experts were generally warm to the idea, as long as banks are clear on how a customer's smartphone location will be used.

"When a trusted party -- and I think people think of their bank as a trusted party -- is looking out for you using what technology they have, I think people will welcome that," said Jules Polenesky, with the Future of Privacy Forum. Polenesky said Visa approached him six months ago to get feedback on this idea and to address any privacy concerns.

Justin Bookman, director of consumer privacy at the Center for Democracy & Technology, also supported the feature as long as banks are clear it's optional and how the data is being used.

"We effectively share our location with our banks every day when we swipe our credit cards," Bookman said. "As long as it remains optional, I believe it's a worthwhile idea."

Source:https://www.latimes.com/business/la-fi-visa-security-20150213-story.html

5 Easy Steps to Get Control of Your Finances

Being in control of your finances is a great stress reliever

If you’re living from paycheck to paycheck or your finances are feeling pinched, it’s a good indicator that it’s time to take control of your finances. One of the most important steps to doing that is to take a good hard look at the money you have coming in vs. the money you have going out so that you can establish a solid budget — and stick to it.

Here are 5 easy steps to get you started:

1. Evaluate Your Income

How much money do you have coming in? Including your paycheck is a given, but don’t forget other income: A second job, alimony, child support, or any other miscellaneous cash that you might have coming in. Write it all down and add it up.

2. Calculate Your Expenses

One of the most difficult steps in establishing a budget is determining how much money you’re spending – how much money is going out. First, make a list of all your fixed expenses. This would include rent, mortgage payments, car payments, insurance, utilities, cable, etc. Next, include variable expenses such as food, gas, entertainment, etc. And lastly, don’t forget about miscellaneous and maintenance expenses like property taxes, car maintenance, tag renewals, birthday gifts, etc. Once you’ve added up your out-going monthly expenses, subtract them from your income and that’ll tell you whether or not you’re spending more than you earn, and help you get a better idea of where you can cut back.

3. Trim The Fat

Now that you’ve gotten the hard part out of the way, it’s time to look at where you can cut back. If you’re spending $60 a month at the local coffee shop for your daily double mocha lattes, consider only splurging once a week and switching to coffee at home. One way to easily determine areas that you may be able to cut costs is to evaluate which expenses are actual ‘needs’ versus ‘wants’ or ‘nice to haves.’ This can add a whole new perspective to your budgeting efforts and give you the extra push you need to cut the expenses that aren’t necessarily ‘needs.’

4. Pay Yourself

In today’s economic environment it’s more important than ever to have a financial cushion for emergencies. Don’t forget to leave room to pay yourself. Setting aside enough money for savings or an emergency fund can make all the difference in the world when you’re blindsided with an unexpected job loss or financial emergency. Ideally, you should aim to have at least 3-6 months salary in your emergency fund, but even having $1,000 as a backup is better than no backup at all. If you’re struggling and can only afford a little each week, setting aside even $10 a week is better than nothing.

5. Stick To It

So you’ve established a solid budget and have a great plan in place – but how do you stick to it? It’ll take some dedication on your part, but the reward is well worth the effort. If you have a spouse, work together to hold each other accountable for any spending oversights. If one of you overspends, set rules that the guilty party has to contribute more to that month’s savings fund – a sort of quarter jar method with a twist. It’s much easier to do when you’re working at it together and you can make it more of a competition to keep it interesting. If you’re single, consider creating a support group amongst your friends with a monetary reward for reaching your budgeting goals. Whether it’s a vacation fund or a night out on the town, the extra incentive will help keep your eyes focused on the goal and make it fun in the process.

Saving Tip: Save Like You’re Paying Off A High Interest Debt

Savings

I was driving down the highway on my way home from work the other day when I looked up and saw a billboard for a local bank. It had a two-sentence ad for their high-yield savings account that really caught my attention. It said:

Your future called. It said to send money

This really got me thinking about our debt culture, and how most people don’t even bother to save for their future. We value having things now, and for most people saving for the future never even enters their minds. In fact, according to MSNBC.com, the Commerce Department reported that the nation’s personal savings rate for all of 2006 was a negative 1 percent, the worst showing in 73 years. The article continues:

As the nation’s largest generation retires, that will further depress savings because typically retirees are drawing down their accumulated savings in an effort to make up the difference between the salaries they earned on the job and their smaller Social Security and other pension payments.

“We have to face the question of whether we are anywhere near where we need to be with our savings to see us through,” said David Wyss, chief economist at Standard & Poor’s in New York.

We are not saving enough for our future needs, and we need to find a way to turn that around. We need to start saving NOW!

Saving For The Future

We know we need to save for the future, but how do we start? How do we get motivated to start putting away the funds that we’ll need down the line?

I read an article on NPR.com where they were talking about debt. One of the quotes was from Financial Times columnist Tim Harford. He said:

Debt is your future self sending you money back in time. So the question is, are you and your future self both happy with the deal?

No, I’m not happy with the deal – that’s why we don’t do debt. This quote did make me think, what if this went in reverse, and it was our present self sending money to our future self?

Savings is your present self sending you money in the future.

Now that is a deal I’ll sign up for!

Dayana Yochim in her article, “Give Your Future Self a Raise” talks about how most people have been told to save 10% for retirement, but that it just isn’t enough. What does it take to turn that around? It’s pretty simple:

Save more. Work longer.  End of story.

Sounds dull, but if you get serious about those two things — work an extra two years and sock away just 3% more in savings if you can — you will turn your entire financial future around.

Saving Is Like Paying A High-Interest Debt To Your Future Self

Sometimes just saving for the future isn’t motivation enough. You need to couch it in different terms. Here’s what I’ve come up with for myself. When you have debts, the debts become a priority, you have to pay them off before you can buy the things you want like a new gadget or a vacation. If you don’t pay your debts eventually the creditor will repossess your house or other assets.

I like to think of savings as a high-interest debt that I’m paying to my future self. I have to pay myself for the future before I pay for other things because if I don’t my future prosperity will be repossessed. And I don’t want my future to get foreclosed on! Do you?

Tips To Jumpstart Your Savings

1. Treat retirement savings as a high-interest debt to be paid off.
2. Set a debt goal: Set a debt goal for your retirement savings and try to make payments on that debt as often as you can. Use the Dave Ramsey debt snowball and the concept of snowflaking to add more money to your retirement savings.
3. Save more: If you’re saving 10%, bump it up 15%. Save as much as you comfortably can. You don’t want to make your current life uncomfortable, but you do want to make sure you save enough. Check out PTMoney’s article, “7 Can't-Miss Ways to Kick-Start the Saving Habit” for more ideas of ways to start saving.
4. Work longer: Plan on working longer in order to save more. Take on part-time jobs or save other unexpected windfalls.

In my mind, the most important thing to do when it comes to saving is to just start doing it. Make it automatic, make it a habit. Turn it into a game! You’ll be happy to know that you’re paying your future self for a prosperous retirement. The billboard will now read,

Your future called, you’ve got plenty of money because you started saving!

 What are your tips for jump-starting a saving habit? Leave a comment here!

Source: http://www.biblemoneymatters.com/summer-savings-series-6-saving-tip-save-like-youre-paying-off-a-high-interest-debt/

Tax Payment by Credit Card Lauded

Tax Payment by Credit Card

KUALA LUMPUR, March 3. 2015: 

The Association of Islamic Banking Institutions Malaysia has lauded the use of credit cards to pay income tax, saying it would help avoid penalties while the government benefits from direct tax collection.

President Datuk Mohd Redza Shah Abdul Wahid said the initiative by the Inland Revenue Board (IRB) provides taxpayers with a convenient mode of payment.

“I think it is a good move by the IRB because the more the channels of payment that exist in the payment system here (the better) it is for people to meet their obligations.

“Of course credit will incur but those with no time to go to the IRB can go to the bank and make their tax payments via credit card. This will definitely ease the taxpayers.”

Taxpayers can plan their financing accordingly when using the credit facilities, he said in a phone interview.

Yesterday, the government announced that taxpayers can make their income tax payments via Visa, MasterCard or American Express credit cards as well as debit cards issued by banking institutions in the country.

IRB expects the new initiative to increase online income tax transactions to 25% compared to 12.13% of the 7.53 million tax payment transactions recorded last year.

IRB recorded a tax collection of RM133.694 billion in 2014, up 3.6% from the previous year.

The government and IRB are confident that the new initiative will see direct tax collection reaching RM142.646 billion this year despite external challenges such as falling oil prices and the Goods and Services and Tax implementation in April.