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How Much Financial Advice Do You Need? (Hint: Less Than You Think)

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By CNBC

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How much financial advice do we need? It’s a question we all ask ourselves, whether we pay a certified financial planner handsomely or go it alone.

But with a troubling national shortfall in retirement savings and the lingering effects of a foreclosure crisis, policymakers and researchers are asking the same question in the hope of coming up with low-cost ways to keep people on the right track.

The answer, to judge from a rash of recent studies, is not much.

The credit-rating agency Experian recently conducted a study with Neighborworks, a nonprofit that helps lower-income families buy homes, measuring the effectiveness of Neighborworks’ weekend workshops. It showed that as little as eight hours of counseling on real estate basics reduced mortgage delinquencies by more than a third.

The study included experienced homeowners as well as first-time buyers, and Experian was careful to control for those who required remedial advice.

“The study looked at pre-home ownership credit behavior, so you didn’t only have people who already had bad credit,” said Douglas Robinson, a Neighborworks spokesman. He added that middle- and even high-income buyers could also benefit from a brief acquaintance with what to expect from home ownership.

“We reduce the ‘unknown knowns,’ ” Robinson said.

Other studies have shown that the unknowns can be reduced with far less effort.

At Stanford University’s Institute for Economic Policy Research, a group looking for ways to spur higher retirement savings found that employees who got occasional, customized projections from their employer of how much income their IRAs and 401(k)s would provide them responded by increasing their annual contributions.

Similar results can be realized simply by using an online retirement calculator. A recent paper from the Employee Retirement Research Institute showed that those who figured their retirement needs with a Web tool increased the adequacy of their savings targets as much as 18 percent. In fact, those who used an online calculator ended up with more realistic savings targets than people who relied on a financial adviser.

That evidence raises another question: What kind of financial advice do we need?

Jack VanDerhei, research director of EBRI and co-author of the paper about online calculators, suspects that most people seek out advisers for guidance on other investment matters, such as asset allocation. “That tells me nothing as to what my overall savings targets should be,” VanDerhei said.

And it does little to connect our picture of home ownership or retirement with reality.

“All of us sort of dream in color,” said Anna Behnam, a financial adviser with Ameriprise Financial Services in Rockville, Md. “When we think about buying a

From: http://www.dailyfinance.com/2013/04/18/how-much-financial-advice-do-you-need/

Business, Finance, Occupation & Industry

Barbara Piasecka Johnson: The Maid Who Launched 1,000 Prenups

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By Bruce Watson

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Jack Kanthal, AP Barbara Piasecka Johnson poses at her estate in Princeton, N.J., Wednesday, June 4, 1986.

It’s a classic story: Aging wealthy man meets younger woman. They fall in love (or some variation thereof), get married (or at least cohabitate) until he dies (or she gets greedy) and then, a legal battle begins. The two principals, or some of their relatives, hire a passel of lawyers, file mountains of depositions, and pay vast sums to lawyers before reaching some sort of settlement.

And though it’s a tale oft told, it remains endlessly fascinating as it’s replayed, every year or two, with a fresh cast and a new set of headlines. Even years after the events, in the most notorious cases, the principals retain the kind of fame that is so powerful that it doesn’t even require a last name. Kimora Lee. Anna-Nicole. Ivana.

And Barbara.

Barbara Piasecka Johnson was the first contemporary version of the story, the one who arrived on the scene just when celebrity culture was ramping up, fueled by an explosion in mass media and a fascination with the lifestyles of the rich and famous. She was the prototypical rags-to-riches girl, a Polish woman who arrived in New York City in 1968 with $200 in her pocket. Before long, she was working as a cook and maid for the Johnson family, of Johnson & Johnson fame. And it wasn’t too long after that before she was winning the heart of J. Seward Johnson Sr., heir to the makers of Band-Aids.

The pair were married in 1971, and remained so until J. Seward’s death in 1983. And that’s when the probate battle began. Barbara was in line to receive the bulk of Johnson’s estate, valued at $500 million. Johnson’s children disagreed. What followed was a three-year legal battle complete with all the trimmings: character assassinations aimed at Barbara Johnson, claims of abuse, counter-claims of loving care in Johnson’s final days, counter-counter claims of gold digging, on and on, ad nauseum.

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As a side-note, you may recognize the last name of Nina Zagat, the lawyer who wrote J. Seward Johnson‘s will. She and her husband later went on to found a now-famous restaurant rating system.

Ultimately, with the lawyers fed (to the tune of $24 million) and the newspapers filled, all parties reached an agreement that left Barbara Johnson with $350 million, her in-laws with $40 million, and an oceanographic institute that J. Seward Johnson had founded with $20 million. Barbara Johnson faded from the scene, moving to Europe, where she invested in art and spent millions of dollars on charitable causes.

But while Barbara Johnson‘s tale faded from the public consciousness, the trail that it blazed continues to be well-traveled, pouring fodder into the celebrity press — while feeding endless fears of probate battles, worries about wills, and a …read more

Source: FULL ARTICLE at DailyFinance

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Court's Marriage Ruling Could Save Same-Sex Couples Big Money

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By CNNMoney

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Emmanuel Dunand/AFP/Getty Images

By Blake Ellis

Should the Supreme Court overturn a federal law that defines marriage as solely between a man and a woman, some married same-sex couples will save $8,000 or more in income tax, a new analysis finds.

This week, the court will hear a case challenging the Defense of Marriage Act, a 1996 law that prevents same-sex couples from receiving more than 1,000 federal benefits that opposite-sex married couples receive.

This includes the right to file federal taxes jointly — which, depending on income, gives some married filers a “bonus” of thousands of dollars, while penalizing others.

A same-sex couple with combined income of $100,000, in which one person earns $70,000 and the other makes $30,000, currently pays an extra $1,625 a year by filing separately rather than jointly, according to an analysis H&R Block conducted for CNNMoney. The calculations assume a standard deduction, no children and no tax credits.

The extra tax liability jumps to nearly $8,000 when one spouse earns all $100,000 and the other reports no income. In this case, couples filing jointly owe tax of $11,858, while a same-sex couple filing separately owes $19,585 — a 65 percent difference.

Cutting Tax Liability in Half

“[There’s] a myth that any time married people file jointly they are worse off than filing singly, and that’s just not correct at all — sometimes they get a marriage bonus,” said Jackie Perlman, a principal analyst at H&R Block Inc. (HRB).

That’s because filing jointly merges the two incomes, shifting some of the higher-earning spouse’s income into a lower tax bracket. In some scenarios, couples would even cut their tax bills in half by filing jointly — typically when incomes are low, Perlman said.

As the gap between incomes shrinks, however, the difference in tax liability is less pronounced. In H&R Block’s scenario, no extra tax is owed when each spouse earns an income of $50,000 and they file jointly instead of individually.

Other couples would end up owing more by filing jointly, especially if they miss out on deductions or credits like the Earned Income Tax Credit and the Child Tax Credit because, when combined, their income is no longer low enough to qualify or receive the full benefit.

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Another major tax issue at stake in the DOMA case is the estate tax. Currently, surviving spouses in federally-recognized marriages don’t have to pay taxes on their deceased spouse’s estate, while same-sex widows pay a 35 percent estate tax on anything in excess of a $5 million exemption.

The case challenging DOMA was filed by New Yorker Edith Windsor, who sued to get back the $363,000 in estate taxes she paid when her …read more
Source: FULL ARTICLE at DailyFinance

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What Happens to Your Credit Card Reward Points When You Die?

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By Credit.com

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By Gerri Detweiler

Before one of my relatives passed away from cancer last year, she mentioned to me a couple of times that she wanted one of her heirs to use the rewards points she had accumulated on her credit card. At the time, I thought it was a kind gesture but didn’t want to bother her with trying to transfer them while she was ill. That was probably a mistake, since it’s not clear now that we are going to be able to carry out her wishes. As it turns out, redeeming rewards points after someone has died is not always a simple matter.

Here are the three main reasons why reward balances may disappear when you die:

Your points may not really be yours. In July 2011, Professor Gerry W. Beyer, with the Texas Tech University School of Law, and Mikela Bryant, an editor with the Estate Planning and Community Property Law Journal, published Rewards from the Grave: Keeping Loyalty Program Benefits in the Family, the results of their research into policies of the major credit card companies, airlines, and other loyalty reward programs.

They found that in many cases, rewards aren’t considered property of the program member, and as a result, may be forfeited when a member dies. Yet, some companies will allow points to be transferred to or used by heirs, though there may be a fee charged for this service. For example, here are the published policies of several of the major airlines:

American Airlines: Neither accrued mileage, nor award tickets, nor upgrades are transferable by the member (i) upon death, (ii) as part of a domestic relations matter, or (iii) otherwise by operation of law. However, American Airlines, in its sole discretion, may credit accrued mileage to persons specifically identified in court approved divorce decrees and wills upon receipt of documentation satisfactory to American Airlines and upon payment of any applicable fees.

United MileagePlus: Accrued mileage and certificates do not constitute property of the member. Neither accrued mileage nor certificates are transferable (i) upon death, (ii) as part of a domestic relations matter, or (iv) otherwise by operation of law.

Southwest Rapid Rewards: Points may not be transferred from one Member’s account to another, or to a Member’s estate, or as part of a settlement. (Despite this policy, Beyer and Bryant note that Rapid Rewards points earned in the newer version of the mileage program “may be used by anyone after the member’s death, whether stated in a will or not” as long as the account is active.)

Delta Skymiles: Upon the death of a Member, the Administrator or Executor of the Member’s Estate may designate one or more other Members to receive a transfer of the mileage credit in the deceased Member’s account. Only whole number amounts of miles may be transferred. …read more
Source: FULL ARTICLE at DailyFinance

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New Year, but Same Old Beneficiaries? Here's Why You Need to Review

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By Dan Caplinger

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We’re already more than a month into the new year, which means that millions of ambitious New Year’s resolutions have likely fallen by the wayside. But there’s one quick and easy money task that you really shouldn’t put off a minute longer: Checking the beneficiary designations on your financial accounts.

It may not sound important, but as far as life-and-death to-do items, this one’s pretty high on the list. And getting it done could make a huge difference to your family.

Where There’s a…

New Year, but Same Old Beneficiaries? Here’s Why You Need to Review originally appeared on DailyFinance.com on 2013-02-07T10:20:00Z.

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Estate Tax Is Alive and Well, and States Are Dying for the Revenue

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By Dan Caplinger

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Death TaxThought the estate tax debate was a thing of the past? Not so fast.

Even though the fiscal-cliff compromise kept the federal estate tax exemption at its former level of $5 million, many state governments are imposing estate or inheritance taxes on more modest amounts.

With many states suffering from budget shortfalls, estate tax revenue is more important than ever in keeping government programs running. And that means that some states are hitting the heirs of the recently deceased in the…

Estate Tax Is Alive and Well, and States Are Dying for the Revenue originally appeared on DailyFinance.com on 2013-02-04T16:09:00Z.

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Source: FULL ARTICLE at DailyFinance