REPOST:How Dividend Payments Build Long-Term Wealth

With the right choices, the dream of a wealthy retirement can become a dream come true for the conscientious and diligent investor.  Mitch Tuchman of Forbes talks about the advantages of investing in dividends as a strategy for long-term wealth.

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A lot of investors focus on the price of a stock they might buy, and reasonably so. They hope to buy while the stock is cheap and sell it after it rises by a sufficient margin.

You shouldn’t do that at all. Here’s why: You might or might not be able sell any given stock at a profit down the line. Meanwhile, dividend payments to shareholders tend to be steady and that money is yours to keep and reinvest.

What are dividend payments? Simply put, they are your cut of the company’s profits each quarter, expressed as pennies per share. If the dividend is 15 cents and you own 100 shares, you get $15 a quarter. If you own 1,000 shares, you get $150, and so on.

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When financial advisors talk about return from a stock portfolio, you will hear them say “total return” specifically. By that they mean the return from positions sold at a gain (or loss, as the case may be) plus all of the dividend payments in between.

Income for life

Right now, for instance, the S&P 500 pays about 2%. Some of the stocks in that index pay higher dividends. Some pay no dividends. But the average comes out to 2%.

On a $1 million portfolio, if it were all stock and all in the S&P 500, you would expect $20,000 a year of income just for holding those stocks. Not bad, right?

In fact, some retirees move slowly over time to mostly dividend stocks, favoring steady, even boring stocks with higher-than-average dividends. Utilities companies, banks and drug makers, for instance.

For the retirement investor, dividend income is an important part of the calculation. Reinvested dividends and incoming bond interest payments are part of the reason a well-run portfolio will double every 10 years or so. All of those earned dollars are reinvested and continue to grow for you.

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Automated wealth

Meanwhile, rebalancing automates the “buy low” mentality you need to win the investment game in the long run.

Companies can and do cut dividend payments, but many blue chip firms are quite proud of having maintained and even steadily raised their dividend for decades without a break.

Understanding the power of dividends gives you a leg up on the run-and-gun short-term investor in two ways. You are less likely to panic when a dividend stock declines in face value. After all, a lower price is a chance to get more dividend-paying shares for less cash.

In addition, the active trader is likely to concentrate on new, unproven companies that pay no dividends at all. That’s one the reasons the blue chips are far less volatile. There’s less hot money chasing them.

For a retirement portfolio, chasing returns is a waste of time and very high risk. Instead, consider who is paying you steadily and let that money compound.

Jeff Maroz heads Wealth Management Group, which assists its clients in planning for financial security. Visit this website for more information.

Free tax help for the elderly: What the IRS can do for senior citizens

“Nothing is certain but death and taxes.” While this adage is essentially true, in real life things are not as grim. In fact, the US Internal Revenue Service (IRS) can be an ally to people looking for free tax and financial help, especially those near the twilight of their lives.

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The IRS provides free tax help to the elderly and other beneficiaries through its Volunteer Income Tax Assistance program or VITA. Through VITA, volunteers certified by the IRS can provide for free basic income tax return preparation services to qualified individuals, complete with electronic filing of the documents.

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Aside from the elderly, other VITA beneficiaries include persons with disabilities, taxpayers speaking with limited English, and individuals earning less than $52,000 a year.

The elderly can also benefit from the Tax Counseling for the Elderly (TCE) program, also sponsored by the IRS. This program allows free tax help for individuals 60 years old or older. The TCE is a specialized program that allows individuals to inquire about pensions, retirement plans, and other matters exclusive to seniors. Many of those working at the TCE are seniors themselves; they are IRS-certified, retired volunteers from non-profit organizations.

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For those who are interested in availing these services, visit this IRS site for a list of required documents and information.


Jeff Maroz is the president of Wealth Management Group and a firm believer in helping others make sound financial decisions. Add this Google Plus page to your circles for more information on Jeff and the Wealth Management Group.

REPOST: 7 costly mistakes that can ruin your retirement

Robert Berger, in this Yahoo! Finance article, writes about the many possible pitfalls that might befall older adults as they prepare for retirement.

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The state of retirement readiness is on shaky ground. In a recent report by the Transamerica Center for Retirement Studies, only 39 percent of those surveyed reported they were building a large enough nest egg for retirement. More than half of the survey respondents plan to work past age 65, with nearly as many planning to work after they retire.

The good news is that preparing for retirement is not complicated. In fact, if you can avoid these seven costly mistakes you will be well on your way to a comfortable retirement:

1. Paying off debt before saving for retirement. Some popular financial pundits urge people to pay off credit card and other non-mortgage debt before saving for retirement. Such advice is arguably the most costly mistake a future retiree can make. While every situation is unique, such blanket advice misses the mark for two reasons.

First, the vast majority of a retirement nest egg does not come from the money you save. It comes from the compounding returns earned off of the money you save. Compounding requires time. Delaying retirement savings by even a few years can significantly reduce your savings decades later.

Second, with today's interest rate environment, it's easy to lower the rates on most debt. From mortgage refinancing to credit cards with 0 percent introductory rates, the cost of debt can be dramatically reduced while you work to pay it off.

2. Putting your child's education first. Helping your child through college is an admirable goal. However, it should not take priority over retirement savings. Like the advice flight attendants give us to put on our oxygen mask first before helping others, wrecking your financial future to help somebody else can have devastating consequences. Education financing at low rates is available, and college graduates have decades of working years ahead of them to pay off school loans and save for their own financial future.

3. Avoiding stocks. The stock market often feels risky because it's unpredictable in the short term. But over the long run stocks handily beat the returns of bonds. An asset allocation for retirement investing that's decades away should favor stocks. Even Warren Buffett suggests a portfolio heavily weighted in equities.

4. Paying excessive investing costs. How much do your mutual funds cost? If you don't know the answer, it's critical to find out. There are free online investment management tools that can show you your costs and how they affect your nest egg. All mutual funds report an expense ratio, which represents the percentage of your investments the fund will charge each year for managing your money. For low cost index funds, aim for expenses to be no more than 0.25 percent.

5. Treating your home like an ATM. One key to a financially sound retirement is to be debt-free when you retire. For many, the home mortgage and equity lines of credit are the stumbling block. While low-rate second mortgages and refinancing that extends loans back out to 30 years can be attractive, they come with long-term costs. Manage your home loans so they will be paid off when you retire.

6. Spending too much on cars. While this may seem out of place in a discussion about retirement, the cost of transportation can be a huge drag on savings. Simply driving a car for five years after it is paid off significantly reduces your lifetime cost of ownership. Investing that savings for retirement can increase a nest egg by six and even seven figures over decades of savings.

7. Not enrolling in your 401(k). Enroll in your company's 401(k) or other retirement plan on the first day of your new job. If the first day has passed you by and you're still not enrolled, sign up today. Even if you contribute a small amount each month, just getting started will get your money growing on your behalf.

Approximately 30 percent of eligible workers do not participate in their employer's 401(k). According to the Department of Labor, automatic enrollment (where your employer signs you up automatically) could reduce this number to 15 percent. If you were auto-enrolled, stay in the plan. If not, sign up today.

Jeff Maroz and Wealth Management Group provide older adults with a varied set of investment options for retirement. Visit this website to learn more about the company’s services.

REPOST: Creating a plan for the right retirement income

People can expect to live long past their retirement age, and it stands that they must plan for their finances when they finally retire. Rodney Brooks of USA Today highlights the importance of financial planning for older adults.

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It's pretty well established that we can live another 30 years after a "traditional" retirement at 65 — just about as long as we did in our working years.

While that's good news in one sense, it presents a whole set of new problems, many of them money-related — like just about everything else in life.

Let's tackle one of people's biggest concerns about retiring: How do you know exactly how much money you need every week, or every month, or, for that matter, every year? Once you figure that out, how does that compare with how much you've saved?

For example, you're living on income of $5,000 a month now. That's what you think you'll need when you retire. How can you make sure that you'll have enough between your savings, pension (if you have one) and Social Security?

James Nichols, head of advice for ING Retirement Solutions, says people spend a lot of time focused on building a big pile of money for retirement. "But the reality is when you're moving into retirement, a big pile of money doesn't do you much good unless you know how to turn that into income," he says.

"It takes 17 of us easily 40 hours of work — MBAs, CFPs, CPAs, lawyers — to create a business plan for the rest of your life," says Ron Weiner, president of RDM Financial Group in Westport, Conn. "It is incredibly complicated." When you retire, you're not making more money to make up for mistakes, he says.

An adviser can help you sort out some of the challenges you face, says Nichols. "There are so many risks and challenges, it's very hard to be an expert on your own," he says. "Building a plan ... is key. And understanding what sort of compromises you may or may not need to make to make sure you income lasts a lifetime. We talk about individuals' needs, wants and wishes."

As every financial planner will tell you, the first thing you and your adviser have to do is create a budget.

Understanding that budget is the first step in the process, says Lena Haas, senior vice president and head of investing product management and retirement at E-Trade Financial. Start with your real needs. "What are your fundamental needs to survive each month — mortgage, rent, utilities, food, medical expenses," she says.

You also need to figure out your wants, geared toward the lifestyle you're seeking. "Do you want to travel? Are your children far away?" Haas says. "Start thinking about special buckets, like heath care, college expense if you still have children, or maybe taking care of older parent or relative." Then, she says, figure out how those expenses jibe with your retirement income.

To make sure you're not caught short by unexpected bills, Mark Fried, president of TFG Wealth Management in Newtown, Pa., says you should have three to six months' income and expenses in reserve. "It's a ballpark of bank statements and health care bills," he says.

Once you have your reserves, start looking at your cash flow in retirement — the actual cash that ends up in your pocket, not your current salary. Say your annual salary while you're working is $150,000. "What you need to realize is, after taxes, after deductions, after your 401(k) contributions, you may be living on only $80,000. What is that actual cash flow coming into the house? That's where we start," Fried says.

Andrew Rafal, founding partner of Strategy Financial Group, a Phoenix-based financial advisory firm, says that the next step is to look at Social Security, and when the client should take it. If they make the wrong choice, there they can miss out on hundreds of thousands of dollars.

Haas says you need to look at all your sources of income. "Many people have, in addition to Social Security, a 401(k) from various employers, or pensions or annuities. It is helpful to understand all those streams of income. You can manage all of those and simulate that paycheck."

Then you must look at how much money is coming in, and how much is going out. If you have a monthly shortfall, you can look at your investment portfolio to make up the difference. "The traditional way of looking is no longer true — invest in a conservative portfolio, so we don't lose principal. People live longer, and interest rates are quite low and will probably stay low for some time. Instead of keeping money in cash, it is important that they have a diverse portfolio, but not overly aggressive."

"What a financial plan really does is take all your hopes and dreams, figure out what that costs, apply some tax and inflation assumptions, look at what you have, and it's not that hard to figure what rate of return you need to achieve all that," says Weiner. "If it turns out that 2% is all you need, you can be in bonds. If you need 26%, people's feelings about markets and money have to be considered. You can't just say, 'I don't want to take risks.' "

Finally, Fried adds, you can't just write a plan, and set it on the shelf. "You will have to make corrections," he says. "If you don't do it enough, you may have to make dramatic changes later."

Retirement planning specialists such as Jeff Maroz of Wealth Management Group are called upon to help older adults plan their post-retirement financial future. Visit this website for more updates on retirement planning.

REPOST: Car insurance when you have no car

Even when you don't have a car, you might still need auto insurance if you so much as borrow or share someone else's vehicle. Michele Lerner of Bankrate.com writes.

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Car ownership is declining, particularly among younger Americans. Many people, especially in urban areas, now prefer to use a car-sharing service or occasionally borrow or rent a car if they need to drive somewhere.

The challenge is that drivers must always have car insurance coverage when they're behind the wheel. For some drivers, a "nonowner car insurance" policy may be the most economical way to protect themselves and their assets in case of an accident.

These policies typically offer only liability coverage, says Dan Ramsey, an independent insurance agent with Brandt, Ramsey and Associates in Alexandria, Va.

"Nonowner car insurance provides protection for an accident when you're at fault, so it covers the other driver's car, but not yours, and the other driver's injuries, but not yours," he says.

The policies generally don't include comprehensive or collision coverage for damage to the car because you don't own the vehicle. Ramsey says the insurance will cover you in any car you drive during the policy period.

Who needs nonowner car insurance?

People buy nonowner car insurance to make sure they're insulated from the potentially high financial hit from an at-fault accident, says Steven Visco, president of C.H. Edwards Inc., an insurance agency in Farmingdale, N.Y. "For instance, one client is a wealthy attorney who lives in Manhattan and doesn't own a car, but he has assets to protect," Visco says. "He's renting a place in the Hamptons this summer and will regularly rent a car."

"This policy offers extra liability protection and is cheaper than buying the liability policy from the rental car company," he adds. And don't expect to rely on your credit card because liability coverage is not included in the rental car insurance that cards provide.

You may want to consider nonowner car insurance if you have no car of your own and:

You rent cars often."If you pay $10 per day for a rental company's liability coverage and rent cars for 50 or 60 days or more every year, a nonowner insurance policy could be less costly," Visco says. But you'll still need to buy the other coverages sold at the rental counter.

You belong to a car-sharing service, such as Zipcar. The service will provide some insurance coverage, but, "If you hurt someone in a car accident, the liability lawsuit is likely to be against both you and the car-sharing company," says Visco. "You may want to look into protecting your assets from a lawsuit with your own liability coverage."

You borrow other people's cars often. When you borrow a car from a friend or a relative, the car owner's insurance covers you, says Ron Moore, senior product manager for MetLife Auto & Home in Minneapolis. However, if you're borrowing a car from someone you don't know well, you may not know if their liability coverage is adequate to protect you. "If you're at fault and the other driver's injuries exceed the car owner's liability, then you may be stuck paying the bill," Moore says. That's where a nonowner policy would help.

You have a problematic driving record. "In Virginia, the state mandates nonowner car insurance coverage for drivers who don't own a car but have had a major problem driving, such as a DUI or DWI, or some other major violation like driving on a suspended license," says Ramsey. He adds that the premium for this mandated liability coverage is about $600 for six months.

Usual cost of nonowner car insurance

Nonowner car insurance typically doesn't carry a deductible, says Moore. Premiums can be very low, based on your driving record and the amount of driving you do, he says.

"Normally the minimum premium is about $250 for six months or even a year," says Visco. "The premiums are higher for drivers with a bad driving record, and they may not qualify at all."

Moore says premiums for nonowner car insurance are typically about 50 percent of normal car insurance premiums, but they vary from company to company and state to state.

If you don't own a car but still drive regularly, you may want to get a nonowner car insurance quote to find out if this coverage is appropriate and affordable for you.

Jeff Maroz and his company, Wealth Management Group, focus on insurance and retirement fund strategies. Visit this website for more on insurance planning.

Create a Life Insurance Policy for High Net Worth Individuals

While life insurance and estate planning may not be the priority of many families, figuring out the future for wealthy families is important in order to avoid potential problems after a death. Life insurance policies are often seen as investments for wealthy families, and selecting the right policy and managing the finer points can be an intricate process. As completely understanding life insurance and estate planning requires years of experience and in-depth expertise, most families will benefit from working with a counselor or life insurance expert when managing policies.

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Life insurance is important for anyone, but families or individuals with a net worth of greater than $3 million need to seriously consider the implications of their assets and how their life insurance policy will work after the death. Spouses and family members may need to be brought into the conversation or at least informed of decisions made by the policy holder to avoid problems after a death and potential probate court issues. Furthermore, life insurance policies and premiums may change throughout the course of the policy, which may affect any potential payouts and ultimate settlements.

As life insurance has such a profound effect on multiple people, life insurance experts are often needed when dealing with a larger amount of assets. Policy holders should be prepared to explain their goals and how they want their policy to be constructed, and then work with an expert in order to find the right policy. Experts such as Jeff Maroz and his LA based company Wealth Management Group work with policy holders to find the right solution for their families. Wealth Management group and Jeff Maroz can also help policy holders create policies that can ultimately become investments, which is attractive to many families across the industry.

Anyone with a substantial net worth needs to consider how their life insurance policy will affect their family during and after their lives. For more information and to design the best policy, start working with a counselor and life insurance expert to ensure the best future for family members and other loved ones.