Archive - July 3, 2012

1
Why You Should Avoid Variable Annuities
2
The Rule Of 72
3
Annual Gift Tax Exclusion Increases in 2013

Why You Should Avoid Variable Annuities

Suze Orman doesn’t like them. Some journalists are suspicious of them. Fee-only advisors (advisors who don’t sell products) generally avoid them. I believe the public generally gets ripped off when they buy them. What are we talking about? Variable annuities. Guess who love variable annuities? Folks who earn sizzling commissions selling them. A 7-8% commission split with a firm still yields a tidy 3-4% commission for the seller. That’s $7,500-$10,000 on a $250,000 annuity – often with very little time or effort.

Advisors and agents emit howls of protest when criticized for pushing variable annuities but there are few …

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The Rule Of 72

The Rule of 72 is a mental shortcut to estimate the effect of compound interest. Simply, by dividing 72 by an interest rate, you can estimate how long it will take for funds to double. In formula form:


Years to Double = 72 / Interest Rate

For example, if an investor currently has their nest egg invested in certificates of deposit (CDs) yielding 2%, it will take that individual 36 years (72 / 2) to double their retirement account. By comparison, if the person invested in a diversified portfolio earning 8% over time, their funds would double in 9 years

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Annual Gift Tax Exclusion Increases in 2013

All individuals have the opportunity to give gifts annually to any person without having to file a gift tax return.  For 2012, the amount of the annual exclusion is $13,000.

This means that anyone can give a gift of up to $13,000 to any person for any reason without worrying about possible gift tax implications.  A married couple can double this amount to $26,000.

In 2013, this annual exclusion amount will increase to $14,000 ($28,000 for couples).

For amounts given in excess of the annual exclusion amount, every individual has a lifetime exclusion amount, against which the excess gifts are …

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