Retirement Plan for Self Employed Individuals

Many self employed individuals use a KEOUGH or SEP IRA as their retirement plan.  If you have the cashflow to make even greater contributions than these two plans allow, you should consider a solo 401k.  It is fairly easy to set up.  The great part is you can contribute as both employer and employee.  An individual can contribute a total of up to $49,000 per year or $54,500 if over age 50.  However, you have until December 31, 2009 to make your 2009 contributions.  If anyone is fortunate enough to have had a good year and can afford to make a larger contribution to your retirement plan, you should think about the solo 401k.

Financial Literacy

NYPL has a campaign for financial literacy program with lots of great free programs at the Library in NYC.  Pass this information along to anyone who really needs to get started on financial literacy.  Here is the link for the website:
http://www.nypl.org/financialliteracynow/index.html

Anytime I can get involved in the process of education the masses on financial issues, I love to do it.  Much of the volunteer work I do is here in Westchester as we are trying to get more programs started here.  Within the city, there are already some fantastic programs and this is indeed one of them.  If there is a group or an event you would like a financial planner to speak at, please go to www.fpaghv.org.  That is the Financial Planning Association in Westchester County where I am currently Chairperson.  We can find a good speaker for you depending on the topic you are looking for.

October Return Numbers

October was a down month for most segments of the stock market, the first probably since February of this year.  Hefty positive returns for the year abound--especially in growth stocks (like technology stocks) and small company stocks.  Here you go:

The Monthly Index Report for October 2009

Index	Oct-09	QTD	YTD	Description
S&P 500 Index*	-2.0%	-2.0%	14.7%	Large-cap stocks
DJIA*	0.0%	0.0%	10.7%	Large-cap stocks
Nasdaq Comp.*	-3.6%	-3.6%	29.7%	Large-cap tech stocks
Russell 1000 Growth	-1.4%	-1.4%	25.4%	Large-cap growth stocks
Russell 1000 Value	-3.1%	-3.1%	11.3%	Large-cap value stocks
Russell 2000 Growth	-7.0%	-7.0%	20.2%	Small-cap growth stocks
Russell 2000 Value	-6.6%	-6.6%	8.6%	Small-cap value stocks
EAFE	-1.2%	-1.2%	28.0%	Europe, Australasia & Far East Index
Lehman Aggregate	0.5%	0.5%	6.2%	U.S. Government Bonds
Lehman High Yield	1.8%	1.8%	51.7%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	-1.1%	-1.1%	-3.0%	Managed Futures
3-mo. Treasury Bill***	0.0%	0.0%	0.3%
All returns are estimates as of October 30, 2009. *Return numbers do not include dividends. ** Returns are estimates as of October 29, 2009.

Home Buyer's Tax Credit

It looks like the tax credit is going to be extended, though it has not passed yet, according to the WSJ in an article on Oct 29,2009.  From the article:

"The Obama administration blessed the proposed extension of the $8,000 tax credit for first-time home buyers on Thursday as the Senate neared a compromise that would extend the credit to more potential buyers.... 
First-time home buyers are eligible for up to $8,000 on the tax credit, which is the same as the current credit. The Senate version of the bill creates a new credit of up to $6,500 for homeowners who have lived in their homes for five years. That provision would start on Dec. 1....
The tax credit phases out for home buyers with incomes above $125,000 for single filers and $225,000 for married couples. Also, homes that cost more than $800,000 aren’t eligible for the credit."

Important information that may be helpful to you.  

No COLA increase for social security recipients

There will be no cost-of-living-increases for recipients of social security.  If you remember, last year there was an almost 5% increase.  That's bad news number one.
The second piece of bad news is there are no COLA increases for contributions to 401k/403b plans.  Contribution limits will remain at $16,500 per year and $5,500 catch up contribution for those 50 or older.  This means for anyone older than 50, you can put away a total of $22,000 a year. 

My session with author Nick Murray today

I spent a good part of my morning listening to a presentation by author Nick Murray.  I don't expect you would recognize the name as he is really considered an advisor to advisors.  His whole message in a nutshell is that no one can predict what the markets are going to do and when.  The only thing we really know is that over long periods of time (30 years), we need to be owners of companies that make this country great (stock owners).  Any attempt to prognosticate, predict or in any way try to think we can be smart enough to know what is going to happen next--is a complete waste of time, an effort in futility.

I agree wholeheartedly.  So what am I to do?  How am I to function in a world where most people I know including other advisors think that my job IS to predict, IS to know what is going to happen next, IS to pick the next hot sector or stock.  I asked Mr. Murray this question (at which time he became very impatient with me and the length of my question..he is a cranky guy).  He said I should tell the truth to as many people who will hear it.  This is what I try to do every time I post on this blog.

So what can you expect from me as your financial advisor--or for that matter, from any financial advisor? Here is my definiton (I am going to send it to Webster): a financial advisor's job is to advise you how to reallocate your resources in a way that will allow you to meet all of your goals.  Let's make it simpler; I am going to tell you if you are saving enough, I'm going to make sure your investments are properly diversified, I am going to be a source of information for all things financial.  But most of all, I am going to make sure you won't be seduced by the latest investment fad or be seduced by fear. I will help you solve problems and  I will help you make sensible, realistic decisions.

So don't be confused when I post about market returns.  This is just for information purposes--to show you that markets go up and markets go down and that there are very different segments of "the market".  But all that I do cannot be contained in market returns--it is really about everything other aspect of your financial life.

Nick Murray does have one book that is perfect for non advisors.  It is called Simple Wealth, Inevitable Wealth which can be purchased at his website :     http://www.nickmurray.com/books.html

Thanks for reading.

One Year Later

If you had invested in small or mid cap stocks on October 23, 2008---when it seemed like the end of the world was near, you would be up over 30%.  Those who did buy on the dips (rather than sell), are now reaping the benefits.  Large company stocks are only up about 10%.   This data was reported by Morningstar in their weekly market report to financial advisors.