MGT 12Y Final
major features of health insurance:
premium COPAY:: fixed dollar amount you pay for health care provider or purchasing a prescription associated w hmo COINSURANCE:: % of bill responsible after meeting deductible DEDUCTIBLE: pay out of pocket before insurance starts paying % of bills out of pocket maximum
actuarial value/insurance levels
plan must cover x% of avg annual cost per person
Adverse selection:
ppl at greater risk will buy more insurance -Pre Existing conditions/ terminally -consider history/age EX: life insurance: cancer patient health: smoker, cancer patient/pre-existing disability: broken leg
number of uninsured on the rebound
use to be 40mill without 2018: last yr of tax penalty now: uninsured may go up
Deductibles
what you pay BEFORE insurance kicks in Raising deductible=insurance is cheaper
waiting for 2nd
Higher SAT score; lower substance abuse; lower obesity; better response to stress; better social skils
SS running out of money?
If no changes made, can pay until 2037 then decrease by about 5% Possible changes Increase in retirement chance Future shortfall System still pay for our grandparents
Credit v Debit card
Overdraft protection: do you want protection against overdrafts? Don't opt-in to debt card based overdraft Link checking to savings or money market account at bank Track palace Switch to a checking or prepaid account Overdrafts can be re-ordered high to low
where iwll money come from for retirment
SS- most important income. similar to investment in gov bonds- guaranteed by gov retirement saving investment in home can be riskier in investment when young/less risk approaching stock more return but riskier. infrequent/large loss.
US after the first mortgage , which rep most borrowing in 2016?
STUDENT LOANS: Loans dropped after 2008 (became harder to obtain a loan)
How to build credit?
Use credit card Pay debt regularly Secured credit card
If a car is stolen, which type of coverage will you need to get reimbursed by your insurance company?
comprehensive
overconfident traders
think they know more than they do trade more earn less under diversify makes markets volatile study: -buys did 3% worse than sells over 12 months + plus invesotrd paid trading costs trading hazardous to your health men more overconfident in trading than women (45% more) single men 67% more than single women men and women underperformed , but men underperformed 1% more, 1.4% single men why trade toomuch? self atriibution bias: take success if good blame others if bad confirmation bias: tendency once we think smt true, to look for why right and ignore when wrong too easy
CREDIT types : Borrowing: consume today, pay later (pay today, consume later)
Credit cards Bank: visa Single: target, gap, gas
disability insurance
Disability protects income if you get sick and can't earn Most disability restuff of illness and off job injury Types Short term: last for specific time; sometimes paid by employer; 1 yr Long term: up to age 65/70 How much to get Enough to cover basic monthly expenses Gov insurance: Workers comp covers on job Social security Veterans
Investing in risky market tip
Don't pay too much attention: stick w ups and downs more successful
to determine a sustainable withdrawal amount from your retriement savings, terry odean recommends
*The IRS required minimum distribution*
Self control
Avoid temptation Make future salient Anti smoking commercials Asking new employees to save
mutual fund should focus on:
1. Asset allocation: the mix of dif classes of investments in your overall portfolio/How much in stocks and bonds 2. Diversification: reducing risk related to any one company by holding a variety of stocks or bonds
Who defaults on student loans?
1. For-profit schools: Default rates higher at for-profit vs non-profit 2. Non graduates: default rates higher if fail to graduate, 3. Depends on financial payoff of education: Default rates by degree, grad status, age: Borrow for masters that don't lead to good paying jobs
What shouldnt you buy w stocks? -4
1. Particular industries-biotech 2. Single country (besides USA/own country) 3. Leverage-borrowed money 4. Bet that market going down
Credit scores breakdown
35% payment history 30% credit limits v how much you owe 15% length of credit history 10% recent credit apps 10% other
chasing performance
39% new money flowing into mutual funds went into top 10% for performance last year and over half new money went into top 20% good mutual fund performance isnt more persistent than chance -funds did worse than chance why do they still chase mutual fund performance? -learning deduction and induction -random v deterministic. more random than investors realize. they think there are more patterns than there are
How to calc RMD?
401k balance: 250,000 Use investor.gov website Reports withdrawl factor Dividing previous year account balance by withdrawl factor=RMD Whether she can withdrawl more or less depends on how mutual 401k this year If spouse more than 10 yrs younger, use dif RMD (will be lower) Advantages of RMD: Adjust for portfolio returns + based on life expectancies But it is simple/one size fits all (not accounting for age/health)
50/20/30 budget plan
50% must have expneses (after tax income) 20 financial: debts savings emergency fund 30 on wants
how big does first retirement check need to be
50,000 x (1.03)^40 inflation 003 40 yrs from today
Who elligible for medciare
65 older in USA who have worked here and pay premiums when worked Can buy in later if come to country later Cover disabilities-waiting period. 24 months after disability begins. Kidnsye disease, end stage (dialisis)
full retirement age for born after 1960
67
Qualified longevity annuity constract
Can be purchased in traditional IRAs and 401k plans as longetivty annuity contracts QLAC Not every 401k plan offers Rules Most you can spend is 25% of balance in IRA/401 without exceed 125k Start by 85 May require to buy before 69 Do not apply to derfered income annutiies purchased from ROTH
Quality of insurance provider: sourced from
Consumer reports
Wills
Every adult needs; optional if still in school Who gets positions/benefits when die
First save for your own retirement or kids seducation? t
First save for your own retirement, then for your children's education. No retirement scholarships.
Who should consider buying a deferred income annuity?
For ppl who recently/not yet retired without a pension Be sure to keep enough money outside of annuity for emergency/until you statt receiving 20-25% in deferred income Assumes good health, not attractive for those in poor health
Things to consider when estimating cost of owning a car for 5 yrs
Fuel, maintenance, cost of car, Taxes and fees, Insurance + DEPRECIATION=how much it decreases in value over time
Prioritize savings: How should you prioritize savings
If your employee makes matching contributions to your 401k retirement plan, always contribute enough to the plan to get the entire match → not doing so is like not cashing your paycheck (Counts as saving 20% savings)
Social Security
In 1935, great depression, unemployment 20% 50% seniors lived in poverty → SS issued monthly requriement checks in 1940 Ida may fuller: first person to receive, only 24$ but got 22k in beenfits Pay-go systems: current workers pay retirement ppl Didn't pay payroll entire life How much is SS worth to you? Start collecting at 62, but wait til 70s → added benefits every year. Don't wait after 70. Adjusted for cost of living
Financial decisions as we age:
Long term care insurance policy How can we protect oursevles from financial decisions whenw e get old? 1/3rd 85 older suffer from dimsension; and 1/3rd have cog impairement without dimensia Scores of financial lit test drop 1% eac yr as we get older But confidence of financial lit increase (unaware of loss) Talk to spouse,children, financial advisor If aging parents, tlak about cognitive decline If assets in trust, appoint someone as co-trustee with provisions to take over when you get too old Trusted person to make decisisons If married, start sharing responsibility for investment decision. Make decisions together to help with surviving partner. Financial confidount. Talk about investments, major purhcase, before you act → establish dependable habit
m
Money is the #1 argument starter between couples (⅓ disagreements) Automatic savings (committment device)
income tax
Most states have income tax on top of fed
CARS: Insurance basics
Purpose: ensure a LARGE financial loss Basic rule: can I self-insure? handle the worst financial loss?
Revocable living trust
Put assets in it/makes management of assets easier Don't have to go through probate/cost and delays Agreemtn where you transfer legal responsibility of assets to someone when you cant
401K and IRA Accounts:
Saving 5k a year from 50k salary (10%) with 7% return → 1 million by 65. Smart about taxes. Retirement accounts 401k: set up through employer. Tax deferred (will pay once retire). Companies offer matches sometimes. Can take money with you in a different job. Doesn't count for what employer match/contributions. Some may allow 20% of contribution every 2 years, etc. IRA: Traditional IRA: through fidelity. Tax deferred (pay once retire) BUT... No employer match Contribution limit lower than 401k Penalty if you take out before 59. ROTH 401k and IRA roth=pay income tax on year but not when you take it out. Tax now, not later. Roth IRA: If you earn too much, you can't contribute. Not true for roth 401k. Any month you take out, can take out as emergency fund. 401k: low cost and fees. How to choose? (for young ppl) Can have mix 401k match = immediate return. Get maximum match. Consider tax rate v later: invest additional in roth IRA. If high tax bracket now to traditional over roth Maximize roth ira Add more to 401k or traditional ira
when to sign up for medicare
Sign up for part B when become elligible - you turn 65 Birth month or 3 months prior first date of birth month If on disability, sign up What happens if you miss 7 month window Didn't enrolll → open enrollment begins jan and begins july For every yr you delay, your premiums are higher Sign up Begin with ss administration handle enrollment /website Wait til retire? Med A start kicking in Med B: wait and ask employer
stocks v bonds
Stock investors EARN MORE ON AVG higher returns than bond but face more frequent/larger loses (more risk) stocks=rollercoaster
Tax to GDP Ratios
Tax revenue: GDP USA is the 5th lowest tax burden in all developed countries (fairly low)
renter's insurance
Why buy? → coverage for your possessions/cost of replacement Renters insurance could be cheaper than you think Ask for auto + renters deals Provides liability/medical coverage on your property (roommates/fan not included) Landlords may require Covers damage, theft Named Perils: protects against listed perils Open Perils: protects against anything not specifically excluded NEITHER: earthquakes and floods Replacement cost or actual cash policy? Actual cash: what used tv worth today on craigslist Replacement cost: insurance gives enough money to buy new tv Renters insurance MAY include living expenses coverage
Earned Income Tax Credit
help low income wage earners/families by providing tax credit (designed for those w children/helps distribute income to them on condition they are working) BUT 20% eligible people DONT CLAIM Eligibility requirements: income (must work) + filing status
why not play it safe with stocks/bonds
if you have savings you're not willing to risk, inflation-protected US bonds are as safe an investment as you're going to find if you put all your investments in bonds when you're young your portfolio will grow too slowly, may not have enogu hto retire when want to. playing it too safe can be risky invest more in stocks than bonds in youbg -nore moe than 75 or no less in 25 in either -investment in bonds roughly equally to age -100-age in stocks (or 110-in age by jane)
investing in index funds
smart and easy choose well diversidied indices and funds with low fees
health insurance changing fast
insurance mandate dropped in 2018 effects unclear
Saving more: 6 strategies
1. Automate Savings: deducted from paycheck and deposited directly to retirement savings 2. Focus on the big stuff: insurance + mortgage. If you can get the same for less money, you can save more. Comparison shopping + choosing higher deductibles. + refinancing home (depends on interest rates since getting mortgage) → shop carefully: costs and fees from banks & get multiple quotes + sell car and buy a cheaper one! (cheaper to maintain older than new one) Find a place you can afford. Get a roommate. 3. Save first then buy - don't buy on credit. Don't rent to own. 4. Increase your income: get a higher paying job? Earn more w another degree or professional training? Shop carefully. 5. Comparison shop: crucial for big ticket items like cars and computers. Save money on regular repeated purchases by finding a store that sells items for less. Bulk buy 6. Don't neglect the small stuff: $5/day x 40 yrs at annual market return of 7% = 380,000. Deny self small luxuries but small, regular savings do add up. Spending is about trade-offs. If you are keeping your must have expenses and saving 20%, you should spend money on anything you want! YOU CAN ONLY ONLY BUY ONCE.
Estimating Spending A simple approach → All your worth book
1. Must-haves: bills even if you lost job, rent, utilities, groceries, student loan, alimony, transport. Include expenses that don't come every month (6 months, divided by 6); *Must-have expenses at/below 50% of after tax income: protects you in times of financial crisis* 2. Savings: divide must-haves by monthly tax income and monthly savings by monthly tax income; must have 50% of after tax income *Save 20% of your after tax income: because you need to save. Most Americans save too little. Decades ago, the government helped pay for retirement. Goal not starting place (work way up to 20%)* 3. Wants: charity, things for you Monthly tax income: take home + contributions that comes directly from your pay *Spend 30% of your after-tax income on wants. Track to see where this is going for 1 month*
Types of liability covrg -states require minimum covg
1. Property damage 2. Bodily injury: one person/bodily > 1 person/property liability
ss: paygo system
1. Signed by FDR 1935 2. SS tax collected in 1937 3. Ida may received first monthly retirement check, retired in 1940s but lived to be 100
changes in the RMD: secure act changes retirement savings -3
1. begins at 72 not 70.5 2. may continue contributions to traditional IRA after 70.5 3. penalty free withdrawls for birth/adoption
opening vanguard
1. decide roth or traditional 2. pick investment (target date can be as low as 1k) 3. fund account
employer sponsored retirement plan -2
1. defined benefit plans 2. defined contribution plans (401k, roth 401k, 403b
when chosing own allocation
1. how is portfolio doing relatvie to goals 2. consider other investments (own equity in home can be more risky) 3. comfort level with risk
to sum up
1. in retirment account, allocate assets between domestic stocks, intenrational stocks, and domestic bonds 2. decreae allocation to stocks as you get older (SS and traditional pension is like being invested in bonds) 3. target date funds make asset allocation choice for you and you ajdut allocation as you get older 4. conseir own circumstances (own home? what if market crashes?)
Equifax data breach
Affected 143 million ppl US gov guidance Check reports; credit freeze; minitor accounts closely; file taxes early
What options are offered for deferred income annutiies
Do you want spouse to continue receiving if you die? → if spouse will need benefits, survivorship benefits make sense. If wont need entire amount, can get 2/3rd or ½ benefit level. Do you want income from annuity to increase each year to adjust increasing costs of living? → cost of living adjustments (COLAS) make sense . companies offer fixed cost and others CPI-U Consumer Cost index for Urban areas=safest bc offer protection with inflation. Between 2-3%. Cost of living ajdustment option DOES NOT apply to the yrs between when you purchase a deferred income annuity and when annuity begins to pay you income Consisder inflation when considering (2-3%) If you think you need 2k a month in todays, from annuity that starts pahying in 15 yrs, you shoud buy policy of 3k a month If you die before you've collected as much money as you paid the insurance company, do you want the insurance company to pay the dif to beneficiaries? → if you pay 100k but die before? → souds great but DO NOT TAKE THIS OPTION. Reutning purchase price to beneficiary ruins the risk sharing. Pay too high of premium. → get more income for smaller premium
Life insurance:if
Does someone besides me depend on my income/ Types Term life (by far better) Payment to beneficiary if you die Policy is for a specific length of time Cheaper. Simpler. Lower commissions for agents. Cash value: whole life, universal, variable insured for entire life Payment when die Tax sheltered investment Combine investment and life insurance Investment return bad complicated Separate life insurance and retirement savings. Save for retirement w 401k. Level term: fixed annual premium for fixed # of years.
health insurance
GDP per capita given high income, our life expectancy is worse health spending USA pays far more yet our life expectancy isn't better
types of health insurance: HMO v PPO
HMO: primary care physician refers patients to specialist within HMO PPO: offers more choice, more expensive, in-network services covered at high levels, out-of-network services covered at lower levels
Carrying costs v operating cost: drive car as long as you can bc
Holding car longer makes depreciation small (decreased value)
The basics of a security fund/emergency fund.
How much: 6 months of must-have expenses for security (less if high income/secure job) What for: Not for health/disability insurance or vacations; for money for when car breaks down/get sick Where to keep: not checking account/stock market, keep in standard savings account Why keep: help cope w unexpected without going into debt Like an insurance policy, long run better off not investing Saving 20% of after tax income is good goal Save 10% in retirement account; 5% in security fund; rest for down payment of house/increase to retirement → final 5% to save for something important to you (special trip, child's education) Saving for your wants: Xmas money, new couch, trip to hawaii Pay for wants in advance. Save up for them and buy once you have the money. Pay for vacation in advance. Start saving for your retirement and other goals: 20% for savings. 10% of after tax income to 401k or other retirement account. (if over 35 yrs, you should put more than 10% into retirement savings) Build up a security fund Save for a down payment on a home or pay off principal on mortgage on the home you want.
individual retirement plans
IRA (roth and traditional) -roth: after tax dollers -tradiitonal: pretax
Power of autoney related to property
If incipacited, can engage in financial decisions: selling property/sotcksk, opening/closng bank accoutns, buying canceling insurance → pick trustworht person
Deferred income inuity
Irrevocable Pays you monthyl income starting some years after you buy it Buy at 70 → starts paying at 85 Protect you from outliving savings Cant cash out monhtly Keep self cognitivitly healthy (exercise regularly) Trouble hearing → hearing aid (could affect dimensia) For ppl without traditional pensions, relying on savings, living longer than money is risk Buy from insurance company, often paying 1 single premium (someitmes installements) Insurnace agent payed commision inlcudied in price Compare prices from sev sources Regulated by state agencies Each state has fund to cover lossses if insruance company fails (most states cover 250k per person) not per policy If fails, another insurance company will take over annuitieis Pay attn to credit rating of insurance company → AMBEST.COM to compare A++, A+, A don't buy under A Guarntees fixed income until die Series of small income annuities over time Also known as advanced life delayed annuities Qualified longevitiy annuitiy contracts (if in 401k) NOT same as variable annuities Varibale annutiies: complicated products that function like mutual funds with certian income guarnatees and reoccuring fees Sld to ppl who don't undedstand them, for agents w large commissions NOT GOOD, complex
methods to budget
Journal method=tediuous but effective Old school envelope method Apps: mint, YNAB, goodbudget
Moral Hazard:
Lack of incentive to guard against risk when one is protected from its consequences (taking more risk bc you're insured/skydiving)
Advanced directives, Wills, Trusts Who needs advanced healthcare directive → EVERY ADULT needs one
Lets physicna, fam, friends know which health treatments you want if you're terminally ill/unable to express care decisions For when you can't make own decisions For your benefit and for benefit of fam. Spare them from agonizing which interventions you'd want. No matter how old you are.
Medicare:
Medciare: fed health program for over 65, permanent disabiities, insurance for anyone with kidney disease Dif parts Medicare A--Hspital: home health, hospital health Medicare B--Medical: physician, outpatient, lab, equiptment, screening services Prescriptiondrugs? Med D --Drug plans Med advantage Gov doens't pay claims, private plans - certain limitations of physicians Can go whereever you want, extra benefits like dental Not all medicare free Out of pocket: Med A 1260 then pays rest. B: 147 deductibl Coinsurnace: B-pays for 75% of your expenses together so decutible is set every year based on projected amount for program. You are responsible for 20% Medicare supplemental insurance/medigap For ppl with medicare, they sometimes don't want to be at risk for 20% coinsurnace/deductibels Available across states to avoid risks of expenses Compare standardized plans
What is advanced health care directive
Most have 2 basic parts Appoint healthcare agent/proxy for healthcare 1.Authorize person to make decision about healthcare if dr says you lack ability to cmn 2. State wishes about healthcare (covers more than living will bc person will advocate for you) Keep orginal advanced directive in safe place/original and have in medical records
Index Funds:
Mutual funds= best investment for majority (despite ad saying otherwise) bc good for saving for long-term goal, like retirement. include investment companies, own diversified portfolio, buy shares then share pulls your money Open ended: bought and sold directl from mutual fund companies like vanguard, fidelity or purchase thru financial advisor/brockerage firm vs close end (not appropriate) Actively managed: hires portfolio manager who tries to be benchmark of types of securities it buys but they underperform bc too many ppl, too much time/money trying to beat US market. Hard to tell skilled managers from those who've just been lucky (avg, greater number of actively managed funds underperform in the market each year than outperform it; good performance is no more persistent than pure luck) ADVANTAGE OF INDEX> actively managed funds Better diversified, Much lower fees/Lower trading costs, trades little/less often, More tax-efficient
Homeowners insurance
Not all policies the same Shop for your policy : same deductibles? Same replacement cost rules? Less insurance you buy, lower the premiums Take lage deductibles as you can pay , will save you money Should insure for 100% of what it would cost to rebuild Copy of estimates Policy types Actual cash value policy: get paid less than ½ cost of replacing it → gives you as much as you could get on craigslist ; Insurance have dollar limit Replacement cost policy: insurance company will pay entire cost of replacing your destroyed roof, up to the limits of your policy → insurance will give you cost to replace new one w similar featured Insurance have dollar limit Guaranteed replacement : insurance company will pay full cost of replacing roof up to some amount above your policy limit, such as 125% Homeowners insurance: Loss of use coverage: pay for renting a place if home in fire Liability insurance and medical if someone injured on your property Named Perils coverage: less expensive; only cover things covered in policy All risks coverage: cover everything but things explicitly said; better Standard: don't include earthquakes and floods Standardized: H02: most basic H03-most common Ho5: most comprehensive and expensive
debt and marriage
Not responsible for debt spouse brings to marrage, but both responsible for debts incurred on joined account In event of divorce→ joint debt follows both spouses, ind debt depends on state law (common law responsible for own)
when're ppl more likely to buy
People more likely to buy when not paying with cash (downside of credit cards)
A penny saved is a penny earned
People should burn money on first date When men motivated by romantic attraction, spend more on flashy items When women find info that man spent on porch they find this more desirable Argue: Spending money could be undesirable: knowing they can afford but restrain would be more desirable → Argue: saver=Self control, keep promises, accomodating in conflict, help you achieve goal Person who spends less was perceived as more desirable WHY savers=less materialistic, more future viability, more general self control; more hygiene may be more outward appearance Savers are more physically attractive but LESS EXCITING. (not great for short-time fling) Savers for longer term/marriage How to identify saver/spender Look at them. Hairstyle necklace earrings. Snap judgements true. Strong correlation. Spending a lot on a first date is not always best.
Med Insurance:
Reasons Medical treatment is expensive Affordable care act makes it the law: pay penalties if uninsured Two types PPO: preferred provider : special contract with certain doctors; willing to accept; % you must pay=copay Network dr have negotiated rates w insurance companies about what they charge Can choose out of network dr and pay higher prices Will be given EOB: explanation of benefits. HMO: health maintenance org Pick primary care physician as point person Must stayin HMO network Need referrals to see specialist Co-pay: portion of bill you pay for medical visits and procedure s low/no deductibles; may be less expensive than PPO. Dr: get per-capita rate. Both pay Premium: amount you pay every month Coinsurance: amount you pay for each visit Deductible: amount of medical cost you pay before coinsurance kicks in Tradeoff between deductible and premium Low premium w high deductible High premium low deductible ←- Get insurance from your employer. Change in open enrollment time.
How much can you spend in retirement?
What if you retire with no traditional pension → buy deferred income annuities Before when retire to be given fixed income at certaind date (EX: turn 80) until you die When you wait for annuity to pay, live off retirement savings How much to spend without deferred income annuities 4% rule 1st yr of retirement: spend 4% of savings Each following year, same amount adjusted for inflation Doesn't adjust savings Not safe plan Instead, income plan for retirmenet RMD approach: required minimum distribution Minimum amount IRS requires ppl to withdraw from IRA/401K starting calendar year of 70.5 yrs old IRS doesnt rquire minimum distribution from ROTH, but can calc RMD from ROTH and then spending from ROTH Withdraw/spend required distribution after subtstracting fed/state income taxes Spend no more than 1/12 of annual RMD + social security after substracting taxes This used to pay: insurance food rent +++ unexpected expenses (unanticipated health/grad gift for grandson) Spend less than RMD+Social securtiy (90%) so you can save (10%) for unexpected Pay for things in advance
Warren's money rules for couuples
What mine is ours Be trustful + make it easy for partner to be too Stop playing blame game Give each other some free money Keep money issue separate from the real stuff Fight fair For ppl without traditional pensions, relying on savings, living longer than money is risk Buy from insurance company, often paying 1 single premium (someitmes installements) Insurnace agent payed commision inlcudied in price Compare prices from sev sources Regulated by state agencies Each state has fund to cover lossses if insruance company fails (most states cover 250k per person) not per policy If fails, another insurance company will take over annuitieis Pay attn to credit rating of insurance company → AMBEST.COM to compare A++, A+, A don't buy under A Guarntees fixed income until die Series of small income annuities over time Also known as advanced life delayed annuities Qualified longevitiy annuitiy contracts (if in 401k) NOT same as variable annuities Varibale annutiies: complicated products that function like mutual funds with certian income guarnatees and reoccuring fees Sld to ppl who don't undedstand them, for agents w large commissions NOT GOOD, complex
Tom and Maud: insurance
Yes: Car, home Maybe: disability (depends) NOT: life insurance: no dependents (are assets enough for spouse to live on tho?) and no renters
financial advisors
ask how they make money -fee-only/hourly rate feasible retirement goals and acheiveing those goal help you stick w investment -good when you need to pay for kids edcuation, etc BEST INTEREST STANDARD (not as good as fiduciary which is highest standard) Fiduciary: put client's interest above my own Compensation models: determine how giving dif advice may benefit Commission: mutual fund companies may be given. Some pay large/small/none Funds that pay larger: higher fees. higher fees underperform funds that charge high fees. conflcit of interest dont accept comission: fee-only advisor. only paid by client. reduces conflcit of interst fee based receive commission common comp for fee only: fee based under client's management. recommend low-fee funds however based upon client's investmn portfolio may loose income if they recommend deferred income annutiy (reduces portfolio size) so conflcit of interest could arrse for those who need this/may outlive savings pay by hour-not popular for hour. feels more salient than % read form ADV before choosing financial advisor look at FINRA record for misconduct
target date funds (life cycle funds)
choose asset allocation for you date you plan to retire similar allocation but dif fees so pay attn
health insurance ex
deductible 1300 allowable cost: (20,000) *(20,000- 1300) x.20=3740* $5040 exceed out of pocket max of 4,400
what is the current max annual benefit
exceeded SS max taxable earning for 35 yr
Public Service Loan Forgiveness
forgives remaining balance on your direct loans after you've made 120 qualifying monthly payments under qualifying repayment plan
social securty
gov sponsored retirement plan
individual investor : insencitivity to fees
investors paid attn to mutual loan fund fees but ignored annual expenses fees matter a lot on avg when individual investor in taiwan bought a stock from an instituional investor that stock didn't do as well as the market and when individual invesotr sold a stock to an institutional investor, that stock tended to do better individual investors put money into market, did worse took out, did better looked at: -market timing loses -stock picking losses -added in comissions -transaction tax --> added all costs of trading --> cost of trading over 2% of country's GDP --> tradng reduced return for individual investor aggregate by 3.8 points per yr summary 1. taiwan individual investors trade v actively 2. when individual investor in taiwann places a trade, it's prob with another individual 3. individual investor in US places a trade, it's prob with institutional investor what should invesotrs do if stocks you buy do worse -do the opposite ? --> invest for long run buy and hold diversified portfolio pay attn to fees and taxes BUY AND HOLD WELL DIVERSIFIED INDEX FUNDS
money and relationships
kids/money most arguments
Affordable Care Act (ACA) 10 essential benefits
lab emergency prescription drugs MH maternaty pediatric rehab ambulatory preventative hospitalization
What you DONT want to focus on when you buy mutual fund?
last years' performance is NOT a good predicotr of what's going to happen this year
deferre d income annuity "longevtiy"
lump sum payment and insurance company pays you every moth
minimum age to receive old age social security
minimum age 62
why its hard to beat the market
sports analogy individual investers do worse than chance when pickig stocks small edge they have isnt enough to cover their costs 1. on avg, the small performance edge mutual fund managers have isnt enough to cover the fees they charge 2. buy and hold low-fee well-diversified index funds 3. an index fund is an open-end mutual fund or exchange traded fund constructed to track the market index, such as SP 500
how does holding dif mixes of stocks and bonds affects ups and downs of portfolio
stock-must bigger ups and downs international- loweres vollatility
asset allocation
stocks bonds international? 3 main asset classes 1. equities: stocks 2. fixed income: gov bonds, corporate bonds 3. cash: bank accounts, certificates of deposits (dont go up as much/not high return) - have cash in bank for emergencies
if you need life insurance, you should buy
term life insurance (specified # of yrs and amount due is fixed) - buy when needed not.. whole life cash value variable universal not specified period of time + bundled/savings account so price high
retirement asset allocation
us international bonds review every 5 yrs
