Home Buying Tips

Considering buying a new home?  Dave Ramsey suggests a few helpful tips for those getting started.  Check out the section on Dave's website "Home Buying Tips" for more information.

Step 1:  Evaluate Your Finances

Before considering buying a house, you may want to get your finances in order.  Buying a home is a blessing but can be quite a financial commitment, so consider having a fully-funded emergency fund before anything else.  Also, ask some important questions such as 1) Can I make a 10-20% down payment? 2) Can I afford a 15-year fixed rate loan? 3) Can I keep the house payments below 25% of my monthly income?

Next, in order to increase your chance of getting the best deal when buying your home, try getting a pre-approved mortgage.  Taking time to compare offers from trusted mortgage providers can make sure you stay within your price range and allow you to make an instant offer when you find the perfect home.

Also, remember to consider the extra costs involved with owning a home.  Home owners have added expenses of property taxes, utilities, insurance, and more.

Step 2:  Call The Pros

Start by making a list of features you would like in your new home.  A new house is a significant financial AND time investment, and you and your family will want to be happy for many years to come in the new place.  Having a good idea of where you would like to live (city, suburbs, country), how many stories/levels you want, if you want a garage, walk-in closets, and backyard size are just a few considerations to pass along to your buying agent.

Next, find the right buying agent to help you buy your house, to help you save time and money.  A good buying agent could  be someone who only takes commission from the seller of your house and does not charge you, someone who makes sure you never pay more than you should by representing you well in price negotiations, and someone who makes sure all the appropriate paperwork is completed.

Also, take time to find the right home inspector in advance, so when you find the perfect home you will already have someone to inspect it for you.  A good home inspector could be reliable, come highly recommended by people you know, have solid references, and a good background.  The home inspector you pick could have a broad knowledge of home systems and structures and a long history in the inspection business, and should also be independent and have no connection to the seller.  Finally, you may want to make sure your home inspector will give you a complete report.

Step 3:  House Hunting

Location of your new home may be very important, not only now but in the future.  Unless otherwise planned, you may eventually want to resell your house, and you might want it to be in a good location.  Some considerations to make regarding location include 1) How close is the home to your office? 2) Is the home in a good school district? 3) Is the home conveniently located near shopping centers, churces, etc? and 4) Is the home in a low crime area?

 

Also, remember that not every seller may own up to the physical details that need to be fixed.  Consider getting the home inspected early in the process, and possibly hiring an independent inspector to objectively view the home inside and out.  Then consider including anything the inspector finds that needs to be fixed (plus the estimated costs) in the final contract.

Step 4:  Close The Deal

Before making the final moves to buying your home, consider getting a property survey, which could reveal boundaries, easements, encroachments, and other legal concerns which could alter the value of your home and property in the future.   Common issues (such as your neighborhood lots having Public Utility Easement) could allow a utility company to, for example, place a large electricity pole in your front yard, thus changing your home's value.

 

Now is the time to consider utilizing the home inspector you may have already picked.  The inspector may examine the home's condition and look for problems you may not have noticed, with key areas including the roof and gutter, house foundation, basement, and crawl space, heating and air condition systems, electrical systems, plumbing, kitchen counters, cabinets, faucets, etc., and bathrooms.

 

Once the home has been inspected and you are ready to make an offer, this may be the time your buying agent could come in most handy.  The buying agent should have access to a wide variety of information to keep you on track for offering the right amount to buy your home.  When negotiating offers, it may be best to keep the communication going through your buying agent, because they could be your best advocate and your best advisor at this point.

 

Finally, before you sign the mortgage and make the long-term commitment of buying (and continually paying for) your house, you may want to re-evaluate your mortgage to your financial capabilities.  The recommendation is a 15-year fixed rate, with your down payment at 10-20% of the home's value, and your house payment less than 25% of your monthly, take-home pay.

 

This article was written based off information provided by the section "Home Buying Tips" on Dave Ramsey's website (click here).

Newly Retired? Fresh Ideas for Managing Your Retirement Income

As a new retiree, you may be wondering how to manage your retirement income.  Last month, president of Charles Schwab, Carrie Schwab-Pomerantz, published an article titled “Newly Retired?  Fresh Ideas for Managing Your Retirement Income”.  This article hits key points of 1) Which accounts and investments you could draw from first, 2) Options for rebalancing your portfolio once you start to withdraw, and 3) Considering taking your required minimum distributions to avoid penalties (if 70 ½ or older).  Click here to read the entire article, or continue reading for a summary below.
 
Before jumping into the discussion of possibile ways to manage your retirement income, keep in mind the following essentials:
 

• At the point of retirement, you may want give very careful thought to your asset allocation.  Mainly, you may not want to take on as much risk in your investments as you did when you were younger and still working.
• Aside from your Social Security, a pension, real estate investments, or other sources of income, you may want to figure out how much money you could need to withdraw from your retirement accounts.
• Your most tax-efficient investments may need to be kept in taxable accounts, and your least tax-efficient investments may need to be be kept in tax-deferred accounts.
• Maintaining well-diversified portfolios of many types of investments including stocks and bonds could possibly help protect against inflation over your many years of retirement.

Listed below are the strategies outlined in the article “Newly Retired? Fresh Ideas for Managing Your Retirement Income”, in order of which you could consider first.  Please read the full article for more complete descriptions of each strategy:

1. Draw Down Principal from Maturing Bonds and CDs:  The first strategy you could use would be to create a short-term ladder of bonds or CDs, and then you could tap the principal of each bond as it matures.
2. Take Your RMDs if You’re 70 ½ or Older:  Once you reach 70 ½, the IRS requires you to take a yearly distribution from many retirement accounts, known as a Required Minimum Distribution (RMD).
3. Sell Overweighted and Lower-Rated Investments from Your Taxable Accounts:  Since withdrawals from taxable accounts are taxed as capital gains rather than ordinary income, these could be the next accounts from which to draw retirement funds.
4. Sell Overweighted and Lower-Rated Investments from Your Tax-Deferred Accounts:  Generally, your tax-deferred accounts could be the last place to look for retirement income.

Please note:  This post is for informational purposes only and is not intended as advice.  Since everyone's situation is different, please consult a professional before changing your portfolio.

Conversations with Chuck: Charles Schwab on Volatility

Check out this video interview with Charles Schwab on market volatility and portfolio diversification.

Creative Strategies to Collect More Social Security Income (Part 2 of 2)

By Olivia Sandham
 

Continuing from last week’s post, this week we will finish our discussion on “Creative Strategies to Collect More Social Security Income”.  Before jumping into Part 2 of 2, we recommend revisiting last week’s post for an overview of the terms FRA and PIA.
 
Besides 1) Waiting as long as possible to claim Social Security (SS) and 2) Claiming SS benefits correctly the first time, here are a few other creative strategies you could implement to collect more SS income:
 
3)  Harness the power of the little-known Spousal Income Benefit:  Once one spouse is eligible to receive SS benefits, the other spouse may be eligible to get up to 50% of those benefits as well, until claiming his or her own SS benefits.  This option is also available to divorcees as well.

• The Spousal Income Benefit is available to the second partner regardless of whether the first partner is actually collecting benefits or has decided to file and suspend.
• The Spousal Income Benefit will be available to the second partner once he or she reaches the age of 62, but will be available at a reduced/pro-rated amount until he or she reaches FRA.  At FRA, the second partner can receive 50% of the first partner’s PIA.
• It is important to note, once the second partner starts collecting the Spousal Benefit Income, the amount he or she claims is the amount of Spousal Benefit that will be received for the rest of his or her lifetime, until claiming his or her own SS benefits.  Once claiming his or her own SS benefits, the second partner will receive the higher benefit of the two.

4) Plan for the Surviving Partner’s Income Benefit:  Widows or widowers may be entitled to receive a portion of their deceased partner’s SS benefits, which may be increased by using the previous strategies.  Click here to see how much surviving family members would receive.  As a side note, the Social Security Administration should be notified as soon as possible when any family member passes away, because there are several other ways that Social Security can help you when a family member dies.
 
5) Compute your optimal benefit amount:  Rather than picking one or two strategies to increase your SS benefits, finding the right combination of all the strategies discussed for your situation can be advantageous in figuring out how to collect more SS income.  Since Social Security rules are very intricate and every situation for every family is different, meeting with a Social Security specialist would be your best way to use this strategy.

 

This post is for information purposes only. It is not intended for use in determining when or how to claim Social Security benefits, as benefits and strategies vary based on individual circumstances. Our firm is not affiliated with the Social Security Administration. For more information or for help determining a specific strategy for your own situation, please contact our office at (816) 233-4100, or contact the Social Security Administration directly by visiting www.ssa.gov.

Creative Strategies to Collect More Social Security Income (Part 1 of 2)

By Olivia Sandham

 

As mentioned in last week's post, this week we would like to start discussing “Creative Strategies to Collect More Social Security Income”.  Lucky for us, one of our Family Investment Center advisors, Mrs. Elaine Coder, is our designated Social Security Specialist.  I recently worked on an educational presentation with Elaine, and through that experience I gained a lot of insight into how just about anyone, in just about any situation, can use these strategies to incorporate Social Security as a key factor in their retirement plan.

 

Before jumping into Part 1 of 2 of our discussion about the main strategies to collect more Social Security (SS), let’s cover a few terms that we will be using throughout these posts:

 

Full Retirement Age (FRA):  The age at which a person may first become entitled to full or unreduced SS benefits.  Click here to find your FRA.

 

Primary Insurance Amount (PIA):  The benefit amount a person would receive if he/she elects to begin receiving SS benefits at his/her normal retirement age.  At this age, the SS benefit is neither reduced for early retirement, nor increased for delayed retirement.  Once claimed, this PIA is what you will receive for your lifetime.

 

Life Expectancy (LE):  The average period of time that a person can expect to live.  Click here to calculate your estimated LE.

 

Now that we know the terms we are going to use, let’s get started discussing the first couple of “Creative Strategies to Collect More Social Security Income”:

 

1) Wait as long as possible to claim SS benefits:  There are many advantages to waiting to claim SS benefits. First, by the taking time to research and meet with a Social Security Specialist, you ensure that you have covered all strategies and that you will be applying for the maximum PIA when it is time to claim.  Second and third, by waiting to claim until you are past your FRA, your PIA will not be penalized for claiming early, and you will earn delayed retirement credits, which increases your PIA.  Finally, since your PIA is adjusted based for inflation, each year you wait to claim can increase your PIA even more.

 

2) Claim SS benefits correctly the first time:  Once you apply for your SS benefits, you only have 12 months to withdraw your application, and you are limited to one withdrawal per lifetime.  There are several other “hoops” to jump through if you withdraw, including paying back the benefits you and your spouse/children received, as well as having anyone who received any of the benefits consent in writing to the withdrawal.  Also, if you miss the 12-month window to withdraw or adjust your claim, you can no longer make any changes and the PIA you claim is the PIA you will receive for the rest of your life.  So, if after applying and claiming your SS benefits, you find out that you missed a step or didn’t capitalize on a claiming strategy, there is nothing else to be done. Claiming correctly the very first time avoids all of these concerns.

 

Next week we will discuss strategies including the living spousal and survivor benefit incomes, as well as how you can combine strategies to be able to compute your overall optimal benefit.  Make sure to stay tuned!

 

This post is for information purposes only.  It is not intended for use in determining when or how to claim Social Security benefits, as benefits and strategies vary based on individual circumstances.  Our firm is not affiliated with the Social Security Administration.  For more information or for help determining a specific strategy for your own situation, please contact our office at (816) 233-4100, or contact the Social Security Administration directly by visiting www.ssa.gov.

AARP Retirement Calculator: Are You Saving Enough?

Are you looking for a fun, free, and easy method to try estimating your retirement? We discovered the AARP Retirement Calculator, a neat online device that can make thinking about your future and retirement a little more enjoyable. Using the calculator can be a great way to check if the plan you currently have for your financial future should allow you to retire when and how you want. Discover all your options and how the choices you make today and in the near future could ultimately affect your retirement finances!

Before using the calculator, we encourage you to read our list of “Pros and Cons of Using the AARP Retirement Calculator”:

PROS:

• Using this calculator can be a good starting checkpoint to see if you are currently on track for retirement, currently way off track for retirement, or somewhere in between.
• After inputting your information, click on “Options” to see what changes you can make in retirement to help you have more income available if needed or desired.
• At any point, you can also go back to the “About You” section and change answers, allowing you to see how different choices starting now could possibly affect how much income will be available to you in retirement. This can be a helpful tool if you are able to actually implement some of these changes in your life, such as how much of your income you and your partner save for retirement each year.
• When deciding your lifestyle in retirement, click on “Learn more about Retirement Lifestyle Assumptions” and you can manually input what percentage of your current lifestyle expenses you plan to have in retirement.

CONS:

• The calculator does take into consideration the multitude of creative ways you can collect more Social Security income (to be discussed in next week’s blog!)
• The calculator cannot substitute for the valuable knowledge and experience of a financial advisor. This tool should only be used for fun to see where you are at now and how different decisions could affect your future outcome, but make sure you discuss any officially changes in your retirement plans with your financial advisor.

Think you’re ready to give it a try? Click here to Get Started.

MoneyRate.com Survey: Best Savings Accounts 2014

 

Reference to any specific commercial product, process, or service, or the use of any trade, firm or corporation name is for the information and convenience of the public, and does not constitute endorsement, recommendation, or favoring by Family Investment Center.

 

Earlier this year, MoneyRates.com Senior Financial Analyst Richard Barrington, CFA, published an online article analyzing a survey that MoneyRates.com performed to find the Best Savings accounts for 2014.

 

"The study indicates that the yields on the nation's best savings accounts have offered more than four times the interest of the survey's average rates, and that the top accounts have been consistently at the front of the pack quarter after quarter,” according to Barrington.

 

Barrington’s article points out the importance of finding savings accounts with consistently high rates. Barrington states, “It is smart to compare savings account rates before choosing a bank, but it is even smarter if you look at a bank's interest rates over a span of time rather than on any one day. Some banks temporarily raise rates in an attempt to draw some quick attention, but the more consistently a bank has featured leading rates in the past, the more likely it is that this is a long-term strategy that will continue in the future.”

 

But where can this information be found, and why is comparing it so significant? “Every quarter MoneyRates.com lists the top savings accounts, based on their average rates throughout the quarter, in its America's Best Rates articles. Then, once a year, MoneyRates.com [calculates] which savings accounts had the best rates over the course of the prior year,” says Barrington. “Identifying the banks that offer the best interest rates is important [because] if you chose the wrong bank to open a savings account a year ago, you would have earned less than a quarter of the interest you could have at one of the higher-paying institutions. At a time when bank rates are generally low, shopping for that kind of edge is more important than ever.”

 

Based on the mentioned survey, MoneyRates.com created this list of the top rate performers of the past year (2013). According to Barrington’s article, “Their strong performance over the last four quarters places these institutions as the current favorites to offer the best savings accounts in 2014”:

 

1) Ally Bank. “With its user-friendly web site and welcoming policies, such as free ATM use anywhere in the country, Ally has become something of a model for how online banking should be done,” says Barrington. “Ally also delivers some substance to back up its customer-centric style, in the form of the highest average savings account rates over the past year.” While savings account rates at the banks MoneyRates surveyed throughout the past year averaged just 0.186 percent, Ally's average was 0.883 percent. According to Barrington, “Whether it is the style or the substance, whatever Ally Bank is doing, it is attracting customers.” The most recent FDIC figures available show Ally Bank's total deposits up 15 percent year-over-year.

 

2) American Express Bank. With savings account rates that averaged 0.869 percent over the past year, Barrington claims American Express Bank to be “a strong runner-up to Ally Bank.” Barrington continues to state that the savings account rates at American Express Bank “edged out those at Ally Bank during the two most recent quarterly surveys, so this could be a fun competition to watch over the next year.” Like Ally Bank, American Express Bank demonstrates that offering competitive rates helps attract business, with its deposits up 22 percent year-over-year.

 

3) Sallie Mae Bank. Sallie Mae Bank's savings account rates averaged 0.867 percent over the past year, putting it behind American Express Bank by a miniscule margin, just two one-thousandths of 1 percent. “Though considerably smaller than Ally and American Express, Sallie Mae Bank is coming on strong,” claims Barrington.  Its deposits were up by 48 percent year-over-year.

 

4) Discover Bank. Discover Bank's savings account rates averaged 0.800 percent over the past year, and “it showed true consistency by having the same average rate through each of the last four quarters,” states Barrington.

 

5) EverBank. Savings account rates at EverBank averaged 0.717 percent over the past year. Barrington says, “This is another bank whose high interest rates are helping it attract customers, [since] its deposit base grew by 27 percent year-over-year.”

 

6) Capital One Bank. Capital One kept its savings account rates above the 0.500 percent mark all year, averaging 0.508 percent. Also, Capital One Bank's new online arm, Capital One 360, has been offering even higher rates “and might be a competitor to watch,” claims Barrington.

 

7) Zions Bank. Zions Bank's savings account rates averaged 0.495 over the past year. “Zions Bank is a bit of a throwback compared to most of the institutions on this list, in that it still has a fairly extensive branch network, albeit one that is limited to Idaho and Utah. For consumers in those states who want decent rates and traditional, branch-based banking, this might be an option worth looking into,” according to Barrington.

 

Barrington also includes his list of Honorable Mentions:

 

“It should be noted that besides the consistently strong performers listed above, a number of banks that were added to the MoneyRates.com survey during the course of the year made the top 10 in their first two quarters.” These banks included Barclays, GE Capital Bank, FNBO Direct and CIT Bank. “With these banks having shaken up the leader board so quickly, it will be interesting to watch if they can continue their strong rate performance in 2014,” writes Barrington.

 

Barrington summarizes: “Given the recent strengthening of the economy, it seems likely that bank rates will move upward in 2014. Though rates may change, it is reasonable to think that banks that offered the best rates at the bottom of the interest rate cycle are likely to lead the next upward phase of that cycle as well.”

 

Barrington finishes his analysis and recommends, “Looking for even higher deposit rates? Check out the CD offerings from GE Capital Bank, Barclays and Ally.”