Archive - October 21, 2010

1
How To Test Your Plan Before You Make Your Career Change Leap
2
The Lurking Risks of Hidden Inflation
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3 Ways To Reduce The Risk of a Roth IRA Conversion

How To Test Your Plan Before You Make Your Career Change Leap

Analogy junkie that I am, I’ve drawn comparisons between financial planning and bike racing, gardening, cross-country skiing, surviving in the wild, organizing, high school, and personal training.  So it’s surprising that I’ve never drawn on my pre-career change experiences as a software product manager when writing about personal finance — especially since I see parallels between the two often.  No matter, that streak ends now, and here’s why: the concept of “Beta testing”.

Those from the world of software development know that Beta test is the last phase before a product is officially released, and its purpose is to test …

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The Lurking Risks of Hidden Inflation

Hidden Inflation Risks Lurks in Inflation Indexed U.S. Treasuries

There is hidden risk that U.S. Treasury Inflation Indexed Bonds (TIP’s) won’t work as intended and hold their value during inflation. TIP’s are very interesting because they are (hypothetically) a hedge against inflation. TIP’s are indexed to inflation. If inflation returns then interest rates will rise, which reduces the value of a bond. However because TIP’s are indexed to the CPI measurement of inflation then hypothetically they would have their payments adjusted to compensate for inflation. Since (in theory) interest rates go up with inflation, then the bond holder would in …

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3 Ways To Reduce The Risk of a Roth IRA Conversion

With the new conversion opportunity made available by the passage of the Small Business Jobs Act of 2010 (see New Opportunities to Roth), there is one factor that is not available that you normally have when doing Roth conversions: recharacterization.

If you recall, the primary reason that you would want to recharacterize is if you converted funds and then, by the time you pay the tax, the holdings that you converted have dropped in value.  So, instead of paying tax on something that is much less in value than previously, for a Roth IRA conversion you can recharacterize the …

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