Archive: December, 2009

Master Limited Partnerships (MLPs) Another financial instrument which is getting popular when it comes to saving taxes in the current low interest rate regime is master limited partnerships (MLPs). These instruments have also become popular because of the higher yield in comparison to other instruments like treasury bonds, bank CDs, or money-market accounts. MLP’s can operate at a loss particularly in the first few years particularly in industries like developing oil and gas pipelines due to high depreciation and hence reduced net earnings.  However after the initial phase MLP’s will in probability generate free cash flow in excess of earnings on which taxes are not levied until the owner sells the unit as it is treated as a return on capital. Approximately 80% of MLP distributions are labelled as return on capital. High yields on MLP’s is another factor that makes this an important  [...]

The times are definitely hard and in these hard times taxes can be a big drain on one’s pocket. One easy and very effective way to save on taxes is by investing in tax saving instruments. But is it so simple. Not all investments will get you the same tax benefit. In fact I would like to modify my earlier statement and say that the best way to save on taxes is to invest judiciously.  For instance one way of reducing tax liability is to hold on to investments for longer period of time. You will in all probability be taxed higher if you sell off your investments earlier than its total life. However holding all investment assets for a long time will not help in saving taxes. It is important to understand which assets should be held for a longer period to get maximum tax benefits. In short investors need to understand the methods of financial planning that will help them reduce their tax  [...]

Green jobs is a phrase which has been made famous by President Obama. As per research done by Pew Charitable Trusts in June approximately 0.5% of the total job market that is around 770,000 jobs were green jobs. Compare this against the number of jobs created in other established industries like telecommunications where 989,000 jobs were created and biotech where 200,000 jobs were created and one clearly gets the idea that green jobs will be the next big thing in the job market. Also this is one segment of the job market that is experiencing fast growth. Green jobs are estimated to grow by 9.1% as against 3.7% growth projected for all jobs. As per placement company Challenger Gray & Christmas, the economy is already generating approximately 1.3 million new green collar jobs every year. American Solar Energy Society estimates that by 2030 there would be 40 million US jobs directly or indirectly  [...]

On Thursday stocks declined sharply mainly as a consequence of increase in the value of dollar which gained on the back of Fed’s comments that economy still continues to be weak. The Dow Jones industrial average declined by 133 points (1.3%) to close at 10,308.26 points with 28 of the 30 Dow components registering a decline. Other indices also declined with the S&P 500 index declining by 13 points (1.2%) to close at 1,096.08 points. The Nasdaq composite also declined by 27 points (1.2%) to close at 2,180.05 points. Sector wise all sectors declined on Thursday with the materials and financials registering the maximum decline of 2.3% and 1.8% respectively. Material stocks were under pressure mainly on account of increase in the value of dollar. Among the financial stocks leading the decline was Citigroup whose stocks were down by 7.5%. American Express stocks declined by 2% while JPMorgan  [...]

Plan for long-term care The biggest retiree medical expense which is the long-term care is normally not covered by Medicare. Just to give an idea of the cost involved let us look at the numbers. As per Genworth Financial survey a room in a private nursing home last year cost an average of $76,460 a year which is $209 per day. Again costs differ in different states and can start from an average of $125 a day in Louisiana to $515 in Alaska. There are other not so expensive options but even they don’t come in retiree budget. Per hour on an average home-health aide cost $19 which by simple compounding amounts to $43,884 per year for 44 hours a week of care. One needs to shell out on an average $36,090 annually for a private one-bedroom unit in an assisted-living facility. Adult day care costs $15,236 per year, on average, for care five days a week as per survey done by Genworth Financial. So  [...]

Postpone retirement till you qualify for Medicare One easy way to take care of your medical bills given that you don’t have health insurance in retirement would be to continue being employed till you are 65 and hence are qualified for Medicare. However the challenge here is to stay employed in a company that provides health care benefits till you are 65 given the current economic scenario. But what if you are fired? Check out then if you are covered under spouse’s health plan and COBRA continuation coverage through your former company which typically covers you for the maximum of 18 months. Employees terminated between Sept. 1, 2008, and Dec. 31, 2009 are eligible for a 65 percent subsidy toward COBRA premiums for up to nine months under the American Recovery and Reinvestment Act passed in February. Research shows that if you retire before you are eligible for medicare then you are  [...]

Health care expenses are increasing day by day. Also planning for health care expenses in retirement is one difficult task given that it is very difficult to predict health care expenses in your old age. Many companies earlier used to provide life time coverage but now this is a thing of past for many. Even people who retired with life time coverage are finding that this facility has been scrapped on account of cost cutting pressures. This is what happened to my neighbour and close friend Jack. Jack who retired at the age of 65 after 34 years in General Motors as Sales and marketing manager was considered to be one lucky person. He retired with two of the most sought after retirement benefits- pension and lifetime medical coverage. But then recently General Motors due to cost cutting pressures scrapped his retiree health care facility. He however was not the only one some 100,000 white-collar  [...]

The purpose of life For many of us our professional life is an integral part of our identity and existence. A simple manifestation of this is when we meet people for the first time we tell them what we do and where we work. Working gives a meaning to life and for some people even a reason to live. After retirement many people lose the purpose of living and they feel they are useless to the society. They lose the tempo to get up in the morning and do something effective. According to a recent Sun Life Financial and Interviewing Service of America survey on the reason to continue working after 67, 84% of the people surveyed feel that it is for money but a huge 81% also feel that it is for staying active mentally and 65% feel that they work because they enjoy working. Your social life Social life for many of us is at work be it attending office parties or having lunch with colleagues. After  [...]

At the outset the idea of retired life looks attractive to all. After all who wants to go through the daily tough commute to reach office or sit those late hours at office and tolerate that irritating boss. But then think about the positive things these say 20years at work has given you like those great friends that you made at work or the fun of having a daily routine in place. Then there are also financial incentives associated with the delayed retirement.  Also experts feel that working keeps you healthy and fit. Below are few important factors that will make you rethink about your retirement again. Getting a job again Before taking that big decision to retire please consider the fact that once you have left the job it would be almost impossible to get another employment again particularly in the current bleak economic scenario where jobs are scarce. So we suggest that if you are retiring  [...]