I recently authored a book focused on retirement income planning. The book is based on a program I created called The Retirement Fitness Challenge. In financial planning there is plenty of focus on saving for retirement, however it’s hard to find information on what to do once you retire and need to create a paycheck from the assets you saved that you will not outlive.
The book is available now on Amazon - http://www.amazon.com/dp/1478178019/ref=cm_sw_su_dp
Included in this month’s edition are articles on:
Over the past 4 years there have been a lot of attention-grabbing and doomsday-like lines about the housing market similar to these: “Housing Market Crunch”, “Mortgage Crisis”, Double-Dip Recession.” The headlines describe the downturn that the housing market took over the past four to five years. However with the downturn comes opportunity. One such opportunity is investing in Distressed Properties (Foreclosures, Short Sales, and REO’s)
Before you can invest in distressed properties, it is important to understand what the different types of properties are available. This article is a primer on foreclosures and short sales.
Foreclosure Basics
A foreclosure happens when the owner of a property falls behind on their mortgage payments. The most popular reason for falling behind on a mortgage used to be a health even that they were unprepared for, however unemployment is currently the major reason. A foreclosure is actually the process the bank takes to obtain the payments due from the owner or take back the ownership of the property.
The Foreclosure Process
Here is the summary of the steps that happen during the foreclosure procedure
The homeowner has a period of time to respond to the default notice where they can pay off the default payment and make the loan current.
Short Sales
A short sale is a sale of a property in which the proceeds fall short of what the owner still owns on the mortgage. You can negotiate with the bank that holds the mortgage on the property to buy the home at a price that is less than the market value. Banks would prefer not to go through the foreclosure process, nor do they have interest in owning the property.
Let’s take a look at an example where an owner (John) of a home is about to go into default. John lost his job and can no longer make payments on the house. The house John owns is worth $350,000 however on the mortgage he owes $400,000. He knows that foreclosure can devastate his credit and is looking for a way out.
As an investor you can negotiate to buy the property from the bank. From the banks perspective a short sale is the lesser of two evils (the other being going through the foreclosure route).
A lot of times distressed properties sell well under market value however in an as-is condition even when factoring in possible repairs, closing costs, taxes, and fees. Investing in distressed properties can be a time consuming and risky endeavor. One thing you have to be careful of are liens on the property. Many liens will get cleared when you purchase a foreclosure, however tax liens are one that will not. And if the owner was not paying the mortgage on the property, there is a good chance that he was not also paying the property taxes.
Here is a blog post from Realtor Patrick Southern discussing investing in real-estate owned (REO) properties.
I help many small business owners and independent contractors put benefits packages together. One of the benefits that almost everyone considers, especially if they have children is Life Insurance. There is nothing wrong with having life insurance and for most people I recommend it. However the benefit that most people don’t think to add is Disability Insurance.
Your most important asset is not your home, your car, your jewelry or other asset. It’s your ability to earn a living. Think about it: All of your plans for the future-from buying a home, to putting your kids through college, to building a retirement nest egg-are based on the assumption you’ll continue to earn a paycheck until you retire. But what happen if those paychecks stopped? That’s where disability insurance comes in. It provides an income to you and your family if you are unable to work because of illness or injury.
Most people do not consider disability insurance for two reasons
1) They don’t think something will happen to them
2) They think they will be covered through Social Security, state-mandated Worker’s Compensation or employer provided group plans.
There are some holes in taken this approach. For one, you are a lot more likely to become disabled during your working career than you are to die. Over 1 in 4 workers will become disabled before they retire. Only about 39% of the 2.1 million workers who applied for Social Security Disability Insurance benefits in 2005 were approved. And those who are approved get an average benefit of just $1,064 per month – hardly enough to replace your income. Worker’s Compensation covers only work-related disabilities, but according to the National Safety Council, 73% of disabling accidents and illnesses are not work related. Only 36% of full-time employees have access to long-term disability insurance through their employers.
My recommendation: explore your options. If your employer offers disability coverage, take the time to find out if the coverage would be sufficient to meet your income replacement needs in the event of a disabling illness or accident. Another option is to purchase coverage on your own.
May is Disability Insurance Awareness Month, the perfect time for a disability insurance “reality check.” Take this opportunity to make sure you’d be OK financially in the event that a disability keeps you out of work for an extended period of time.
Families nowadays confront a financial quandary that most families did not face 30 or 40 years ago. Families must simultaneously plan for both their retirement and their children’s college tuition.
National studies reveal that most Americans are at risk of running out of money in retirement; this is thanks to a combination of factors which include record unemployment, declining wealth, low savings rates, investment losses and falling home values. A dilemma arises when all of these factors are taken into account and then add in the staggering rising college costs
In the December and January issues of the Personal Finance magazines (Money, Smart Money, Forbes, Kiplingers, etc) feature articles about what stocks, bonds, and sectors to invest in for 2012. Here are some of the common themes that they recommend.
Dividend Paying Stocks – Turned off by the paltry yields that treasuries offer, some people are turning to stocks to pick up the slacks for income generation. On a few occasions in recent months, the average dividend yield on the Standard & Poor’s 500-stock index has exceeded the yield on the 10-year Treasury Bond; this is something that’s happened very rarely in the past 60 years. The yields on some well-regarded firms are much, much higher than the yield on the treasuries.
Marc’s thoughts – I’ve been on the Dividend Paying Stock bandwagon for a couple of years now, and I’m not jumping off in 2012. Here is an article
I wrote about what to look for when selecting dividend payers
Gold Miners – What’s gold going to do? Is a question that almost every investor has to grapple with these days. Smart Money magazine advises investors not to focus on the metal itself, but on the firms that dig it out of the group. Traditionally, when the price of gold rises then gold mining stocks rise faster. A miner’s costs are mostly fixed, so if the metal’s price goes up nearly all of those extra dollars go right to a miner’s bottom line. But over the past year, as gold’s price has jumped 15 percent, gold mining stocks, as a group are down 1%
Marc’s thoughts – The value of mining stocks in relation to the price of gold makes sense however one thing to take into account is that investors at the first sign of inflation or fear in the markets flock to the physical metal and not the stocks of gold miners. With volatility expected to continue into 2012 having some investment in actual gold and some in gold miners may not be a bad idea. The following illustration hits home the point that investors flocking to physical gold because that’s where they feel safe, versus flocking to gold mining stocks, where more value may actually be acquired.
High Yield Bonds – Another value play for 2012 is investing in high yield bonds which have generally underperformed the safety of treasuries and corporate bonds all of 2011. Some professionals think that high yield bonds will outperform equities in 2012. A weak outlook in the US and Europe, coupled with slower growth in China, means that the global economy will likely “muddle through” the next 12 months, making high yield bonds a defensive investment class with equity like upside.
Marc’s thoughts – While I do believe there is a place in most portfolio’s for high yield bonds you have to tread lightly with this asset class as there is substantial risk in these types of investments. If you are going to invest in high yield bonds, I recommend doing it through a fund like Symbol: JNK so that you spread the credit risk amongst many securities. The second thing to consider is that in a worst case scenario, such as a double dip recession, high yield bonds will get clobbered. I would not bet the farm on them even though their 10-12% yield is very appealing.
These are just a few of the asset classes that are being recommended for 2012. And if you read enough magazines and books you will find that every asset class is recommended by someone. Every investment, including cash has risk, which is why I recommend doing a thorough analysis on the risk of your investments to ensure you are comfortable.
Included in this month’s edition are articles on:
In an effort to start the New Year off on the best foot possible, I’m sending you a very handy reference card that I use. It’s called the 2012 Key Financial Data card and it can be quite helpful whenever you need to make informed financial and investment decisions.
Key Financial Data Card 2012
The Key Data card gives you many of the numbers investors need on Social Security, taxes, health savings, Medicare, retirement, college planning and more. Of course, you can always call me when you have questions or concerns or want to dig deeper into the numbers, however the 2012 Key Financial Data card will serve as a quick reference can be very practical in checking an assumption or marshaling your facts.
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