Six Ways Retieries Can Beat Inflation - From Forbes September 2010

Let me list the ways so you can glean the info contained afterwords more quickly than I did through Forbes on-line, and between all of the pages and pages of ads.

1. Buy an annuity with an inflation rider
2. Get a fixed annual bump-up
3. Buy in stages (Like $150K @ 65 yrs old and another $150K @ 70 yrs olds)
4. Buy stocks instead
5. Buy a government annuity
6. Live with it (Use the money now @ younger age)

All Greek to the common man. BUT, you won't save a dime more unless you do something more than you are now. Take only one action step and you might enjoy some benefits. Don't believe what you read here, simply do your own research for a better comfort level. However, don't spend all your time researching and never taking any action.

In the next blog I will try and link definitions like

From FORBES September 15, 2010. By William Baldwin

"There's no perfect way to deal with the rising cost of living," says William Baldwin. But here are some options.

Let's say you have just retired and want to invest your savings to produce steady income. You could buy immediate annuities, which provide a nice payout since a lot of the money you get in the monthly checks is a return of principal. Absent special provisions, however, annuities die when you do. But while you are alive they pay well. Thus, they protect you from the risk of outliving your savings.

If you are a 70-year-old male, for example, you can get $630 a month for life from insurer New York Life by plunking down $100,000. That's a 7.6% annual payout, a lot more than you could get from other relatively safe investments, like bank CDs and U.S. Treasury bonds.

But annuities come with two hazards. One is that an insurer might go bust. You can protect yourself against the worst by buying only from insurers with high financial ratings and by spreading your capital around. Instead of buying one annuity for $300,000, you could buy three $100,000 annuities from different companies. It's unlikely that all three will go the way of AIG.

1. Buy an annuity with an inflation rider.

By accepting a lower initial payout, you can get a promise from the insurer to raise your check to keep up with the Consumer Price Index.

Advantage: You don't have to guess how high inflation will be.

Disadvantage: The rider may be hard to find--and is going to cost you a pretty penny. That's because the insurer doesn't know how high inflation will be, either, and has no cheap way to cover its bets. Note that the inflation-adjusted versions of U.S. Treasury bonds (called TIPs) carry a tiny 1% real yield.

2. Get a fixed annual bump-up.

With an automatic 2% annual increment (irrespective of what happens to the CPI), New York Life's payout for the 70-year-old male investing $100,000 drops from $630 to $533.

Advantage: Because the insurer knows in advance what its payouts will be, it can fund them by investing in conventional (not inflation-adjusted) bonds. Those bonds have much better yields than TIPs, so the insurer doesn't have to be so chintzy with its payouts.

Disadvantage: You might experience worse inflation than the 2% (or whatever you choose) that is built into your annuity policy.

3. Buy in stages.

Instead of putting $300,000 into annuities at age 65, you could do $150,000 now, then buy more at age 70, says Martha Kendler, who oversees annuity sales at Northwestern Mutual. If inflation has resurfaced by then, interest rates will be higher and you will get a better monthly return as a result. (Remember, the insurance company is covering its obligations by investing your cash in fixed-income assets like corporate bonds.) Even without any rise in interest rates, the monthly payout is going to be better for longevity reasons. That's because 70-year-olds, on average, don't have as many years left to collect as 65-year-olds do.

Advantages: You can invest the $150,000 for five years, and presumably will have more than that sum in 2015 to use on annuity purchases; you get a higher monthly payout per dollar invested, because you're older; and you get a peek at the Grim Reaper's plans for you. If your health is very poor at age 70 you just don't buy the second annuity.

Disadvantage: You've missed five years of monthly payouts.

4. Buy stocks instead.

The S&P 500 stock index yields about 2%. Stocks have a history of enjoying dividend hikes that, over a long period, more than keep up with inflation. Indeed, without being considered a spendthrift you could both cash the dividend checks and also sell off 1% or 2% of your portfolio every year to help pay the rent. It's likely that you could continue that spending behavior indefinitely without depleting your capital.

Advantage: If you can get by on just the dividends plus a 2% withdrawal of capital, you are likely to leave a nice pot for your heirs.

Disadvantages: There are two disadvantages. One is risk. Dividends get cut in a recession. And what if we get a 25-year bear market in stocks? What if you own a disproportionate amount of the next Enron or AIG? The other problem is that you cannot match the 6% to 8% payout that retirees can get on annuities. Take 7% a year out of a stock portfolio and there is a significant chance that, by time you turn 80, you will be sleeping on the sidewalk.

5. Buy a government annuity.

Here's the deal. You start collecting Social Security at age 62 (we're assuming you are out of the workforce). If you're still healthy at 70, you repay all your Social Security checks to that point and reapply. That entitles you to a much higher lifetime benefit, and this benefit is adjusted for inflation. "In effect you are buying an inflation-protected annuity from the government," explains Matthew McGrath, a managing partner at Evensky & Katz, Florida.

Advantage: The terms are very good. Each dollar spent at age 70 buys a much bigger increment in monthly benefits than you could get from a commercial insurer.

Disadvantage: The terms are too good. The SSA is moving to limit this option.

6. Live with it.

Plan on a fixed monthly income during retirement. Your purchasing power will gradually decline (assuming we don't get deflation). Maybe that's something you can stand. It would mean more traveling at age 65 than at age 75.

Advantage: You go to Europe when you are still young enough to enjoy it.

Disadvantage: Other costs, like medical costs, may go up a lot as you age.

Take action now and click here.

Teens Can Protect Their Credit Card

Protect your Credit Card

Teens misplace things like driver licenses, Social Security Cards, birth certificates, and yes, their credit cards. They are busy people and their minds are on things like the party, Face Book and friends. Seems like it's right of passage. Their

When using your credit card it is important to protect your card information. Here are some tips to keep in mind:

• If your card is lost or stolen, contact the issuing bank or financial institution immediately.
• Never provide your credit card information – the account number, expiration date or 3 digit security code on the back of your card – in response to an unsolicited e-mail, phone call or other type of communication that you didn’t initiate.
• Only give your credit card number to reputable merchants or organizations.
• When making online purchases with your credit card, make sure you’re dealing with a legitimate Web site and that your information is being encrypted (scrambled for security purposes) during transmission.
• For additional protection when shopping online, some retail merchants may require you to enter a secure code that only you know.
• Major credit card companies provide additional protection by offering ‘zero-liability’ programs that protect consumers from unauthorized use of their card.First Bank of Ohio

Teens and Credit Cards - Parents Too

Parents could learn allot from the following information written and meant for teens.

Credit Cards are convenient, easy to use, and provide the ability to buy now and pay later. But using a credit card means you have been loaned money to make your purchase and that money has to be repaid. If used appropriately, credit cards can help you establish good credit, which will provide you access to financial resources for major purchases in the future.

A few things to remember in order to build good credit:

• Manage your debt.
• Keep your debt levels manageable.
• Keep track of your purchases and avoid large impulse buys.
• Don’t use a cash advance to pay for normal, daily expenses or to make a payment on another card.
• Never borrow more than 20% of your annual net income.
• Never let your monthly card payments be more than 10% of your monthly net income.

• Choose your card carefully.
• Don’t choose a card just because there’s no annual fee or to get a free T-shirt.
• Shop around for a card that suits your borrowing habits.
• If you’re able to pay in full each month, choose a card that offers a rewards program.
• If you expect to carry a balance from month to month, which means you’ll be charged interest, look for a card with a generous ‘grace period’ (the amount of time before your payments are due) or a card with a low interest rate.
• Read the card agreement carefully and understand the grace period, annual percentage rate (APR), all fees and charges, repayment terms and credit limit (the maximum amount you can borrow).

• To avoid or minimize interest charges, always pay as much as you can.
• Pay your bill in full each month regardless of the ‘minimum amount due’ listed on your bill. This will avoid unnecessary finance charges and/or other fees, and improve your credit score.
• By paying the minimum payment due each month, it will take longer to repay the debt and cost you more in interest charges. The amount you pay in interest and fees could exceed your original purchase amount.

• Pay your bill on time.
• This will help you avoid a late fee of about $35 or more each month.
• One late payment may cause the interest rate on your card to default to a significantly higher rate.
• Continued late payments may be reported to the 3 major credit bureaus as a sign that you have problems managing your finances. It can also affect you when you apply for a job, housing or a future loan.
• If your credit rating gets downgraded, your card company could raise your interest rate, reduce your credit limit or even cancel your card.

From First Bank of Ohio

Teens and Online Banking - Security Tips

• Never share your User ID and Password with anyone.
• Protect your account information, account numbers, card numbers and PIN.
• Immediately contact your Bank if you believe your User ID and Password have been compromised.
• Don’t have your computer ‘remember’ your User ID and Password.
• Be careful when using a computer in a public area where someone could watch you enter your User ID and password.
• Do not respond to e-mails or pop-up windows asking you to provide, verify or update personal information such as password, PIN, Social Security Number, etc., even if they appear to be from a reputable source.
• Never go to a link you receive within an e-mail, even if it appears to be from a reputable source.
• Be cautious of emails that warn you that your account may be at risk, notify you that fraudulent activity or charges exist on your account, or convey a sense of urgency. These often include details of the suspicious activity requesting you respond to the email or ‘click here’ to visit their site to update your information. By First Ban of Ohio
  

Teens and Debit Cards

Are you tired of having to run to the ATM every time your children need money? Do you want to provide some financial education to help your kids be more prepared when they are on their own? Or do you just want to ensure that your children have access to cash in an emergency situation? First Bank can help. Parents can open a joint checking account with children under the age of 21 that offers the child their own debit card – their First Card.

Our First Card works just like our standard First Bank Debit Card, with some added benefits:

• Daily limits are lower to align more closely with your childs spending habits.
• First Card is a MasterCard® debit card, so it is accepted anywhere MasterCard Debit is accepted.
• First Card can be used with a PIN to get cash back at participating merchants and at more than 900,000 ATMs worldwide. There’s no fee to use a First Bank ATM.
• And as the joint owner of the checking account, you can monitor the account and card usage online and even request that an email notify you if/when the account balance falls below a threshold you determine.
• If your child’s First Card is lost or stolen, report it immediately to First Bank and benefit from MasterCard’s zero liability promise.

MasterCard® SecureCode™ provides added peace of mind when making purchases online. Just like using a PIN at the ATM, a private code is required when using a First Card at participating online merchants. Once the cardholder’s identity is confirmed by First Bank, the purchase is complete. It's that fast, easy, and that much more secure! From First Bank of Ohio, Tiffin, Ohio

Teens & Money

People are more likely to make smart decisions that affect their finances and future if they understand how to manage and save money. Saving money may not be as much fun as spending it, but it’s still important to do.

Since teens are becoming more responsible for handling money and making decisions from everything to everyday purchases to paying for college or buying a car, it’s important that they understand how to make good decisions about their money.

The following is intended to assist parents in educating their teens on the basics of responsible money management. These sections provide information on budgeting, college costs, buying a car and more!

Financial Planning:

Financial planning is the process of defining goals, developing an action plan to reach those goals, and then putting that plan in action. It includes all aspects of your money: spending, credit, savings, and investments. With good financial planning you can live a better, more secure, life than someone without good financial planning that has to live pay period to pay period.
Some things you can do to help with financial planning are to figure out a budget and save money.

Next Blog, "Figuring Out Budget"

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I've been off line for time trying to regain my health.

Will resume posting blogs.