What’s your personal savings rate?

July 22nd, 2010 . Posted in budget help, retirement planning | Comments Off

Here’s how to calculate it:

Disposable Income = Personal Income - Personal Current Taxes

Personal Savings = Disposable Personal Income - Personal Outlays

Personal Savings Rate = (Personal Savings / Disposable Income) * 100

Note: Disposable Income includes things such as your rent, house payments, utilities, etc.   (Don’t confuse disposable income with discretionary income.)

Are people saving enough?

Here are some metrics.  In 1959, the average personal savings rate in the United States was 8.3%.   By 1975, it had risen to 14.6%.   It fell to 12.2% in 1981, attributable to the recession.   But it fell even more during the 1990’s, because of unbridled consumer confidence.  By year 2000, it was only 3.5%, and it’s 4% now in year 2010.

Are you saving enough?   That depends on when you want to retire, and what your objectives are.   See a fee only financial planner if you want an unbiased assessment.

Mike Dayoub is a fee-only planner in Alpharetta/Milton. 770 361-3139 website

Do you think you can “work till you drop”?

May 11th, 2010 . Posted in retirement planning | Comments Off

According to the Employee Benefit Research Institute most Americans expect to work to age 65 or older.  But 40% of all retirees leave the workforce earlier than planned.  (LINK)

What’s the price paid for this unrealistic expectation of working forever?  Low savings rates.   A poorly funded retirement and emotional stress.

If your financial advisor allows you to plan to work forever, he/she’s not doing you any favors.  Find some discipline.

Mike Dayoub is a fee-only planner in Alpharetta/Milton. 770 361-3139 website

4 out of 5 Americans aren’t saving enough for retirement

May 5th, 2010 . Posted in retirement planning | Comments Off

“less than one in five (19 percent) will be able to meet 100 percent of their estimated needs in retirement. “  source: Hewitt & Associates study

The economic trauma of 2008 certainly led most Americans to recalculate their retirement age, which might be a good thing considering how many had  low savings rates and over-optimistic predictions for investment returns.

One of my primary jobs as a financial planner is to provide some realism to your retirement plan and some discipline to your savings rate.

Read the article if you want to know what retirement spending categories Americans underestimate.  Or call me if you want an unbiased checkup.

Mike Dayoub is a fee-only planner in Alpharetta/Milton. 770 361-3139 website

Big jump in Georgia college tuition. Prepay?

March 1st, 2010 . Posted in college planning | Comments Off

With Georgia’s education budget shortfall, it’s looking likely the Board of Regents will consider a major tuition increase this year (2010) for Georgia’s public colleges.

If you’re sure you’ll send your son or daughter to a Georgia school, now would be a good time to pre-pay tuition.   Unfortunately, you can’t do that for Georgia public universities.   I guess you have to hope the Hope Scholarship will remain in effect and your child will keep a 3.0 GPA in college to remain eligible.  Call me if you want to discuss tradeoffs of using a 529 savings plan versus other college savings methods, for Georgia public schools.

So what about Georgia private schools?   There is a prepaid tuition plan available for many of them.   Agnes Scott, Emory, Berry, Clark Atlanta, Mercer,  Spelman, and others.   Even though these schools aren’t under the budget pressures Georgia public colleges face, pre-paying makes sense to avoid any future increases — as long as you’re sure your child will be attending.

For out of state, you can pre-pay at schools such as Furman, Vanderbilt, Wake Forest, Notre Dame, Stanford, Johns Hopkins, Samford, Duke, Rollins,  and many others.   The university itself makes the tuition guarantee.   Call me if you want more details.

Mike Dayoub is a fee-only planner in Alpharetta/Milton and a tax preparer at H&R Block. 770 361-3139 website

Life Insurance: if you see it on TV, you’re paying for the ad

December 18th, 2009 . Posted in insurance | Comments Off

Wow. I just got a quote for an engineer who previously carried term insurance through IEEE’s program with NY Life.   My broker found A+ rated coverage for the same terms at 50% of the price. That’s incredible.  If you think you’re getting a great deal via group rates, I may be able to help you find twice as good a deal.

The caveat?  You may not be familiar with the brand  name of your new insurer.   It will be an A+ rated company (A.M. Best’s ratings), but these companies don’t advertise on TV.

If you look at the financial strength of these A+ insurers, it’s stronger than the companies you see on TV.  My conclusion?  That’s how they save you money.  (Plus they don’t have commission salespeople in every neighborhood.)

Note: I am not licensed to sell insurance.  I am not an insurance salesman.  I get no commissions.  I help my clients find insurance.  This is one service I provide as a part of financial advice for a fee.

Mike Dayoub is a fee-only planner in Alpharetta/Milton and a tax preparer at H&R Block. 770 361-3139 website

Asset allocation: needs to reflect your risk profile

December 14th, 2009 . Posted in investments, life planning | Comments Off

You think you know your risk profile.   Some combination of time constraints and how averse you are to volatility, right?   Not exactly.

True, time constraints play a big part of it.   The farther out your time-frame, the more you need to be concerned about inflation and longevity risk.

And true, we need to match your emotional makeup and be risk averse if you are.

But there’s another dimension to your risk profile.  It’s your actual savings behavior.   If you habitually maintain a good 6-9 months “emergency funds” in case of job loss, then you can afford to be riskier with your investments.   But if you’re the type who doesn’t have a good cushion, then we need to be more cautious with at least part of your portfolio.

That’s why a good financial planner wants a clear picture of your expenses and your savings rate.  That’s why I like to put you on Quicken.com or Mint.com so we can get a good snapshot of your lifestyle, where the data is collected automatically by the software (it queries your credit card and bank accounts.)

Your risk profile is a composite drawing.  A good planner doesn’t just go by age and your own self-assessment.  The real picture is more complex.

Mike Dayoub is a fee-only planner in Alpharetta/Milton and a tax preparer at H&R Block. 770 361-3139 website

To Roth or not Roth? 44% are undecided.

December 10th, 2009 . Posted in Taxes, investments | Comments Off

In January investors in retirement plans with incomes over $100,000 will for the first time have the opportunity to convert their individual retirement accounts, or IRAs, to Roth IRAs.  Have you figured out whether it’s right for you?

A survey by TD Ameritrade of 1,000 retail investor clients found that 44% of those with a retirement savings account that could be converted to a Roth IRA said they are still undecided on whether they would convert.

From my perspective, the decision should be based on whether your taxes will be higher in retirement or higher now.    The first hurdle is that it takes a fairly knowledgeable forecast to predict your future taxable income so you can predict your tax bracket.   (What other sources of income will you have in retirement?)  Then you need to guess what the tax rate will be at that bracket.

I have software that makes the guesswork more manageable.  Give me a call if you’d like help working through this decision.  We’ll set a fee before the work is started, and I won’t pressure you to move your assets to my management.

Mike Dayoub is a fee-only planner in Alpharetta/Milton and a tax preparer at H&R Block. 770 361-3139 website

How to save money on your Long Term Care Insurance Premiums

December 9th, 2009 . Posted in insurance | Comments Off

Couples can cut the cost of long term care insurance by purchasing policies at the same time and thus be entitled to a “couples discount” that is often 40% of the full premium.

Example.  Susan already has a decent policy but her employer can’t help her get better coverage for her husband.  When applying for a policy for her husband, they should make it a “couples” policy with for a very small benefit (like $50/day for 2 years) for Susan.  The “couples discount” will be far greater than the cost of Susan’s additional coverage.

With Georgia’s implementation of the Deficit Reduction Act, it’s tougher to transfer assets as a part of Medicaid planning, so LTCI has grown in importance as part of your financial plan.  Call me and I’ll help you shop for policies and compare apples to apples from the different insurers.

Mike Dayoub is a tax preparer and financial planner in North Fulton, Georgia.  770 361-3139 website

A surprise tax payable because of the stimulus package?

November 17th, 2009 . Posted in Taxes, Uncategorized | Comments Off

You might want to check your work if you think you’ve planned correctly for the reduced withholding instituted via the “Making Work Pay Credit” of Obama’s stimulus package in February.

MWPC was implemented using new income tax withholding tables. However, the changes to the withholding tables did not take into consideration the dependents who receive wages; single taxpayers with more than one job; and joint filers where one or both spouses have more than one job or both spouses work.

The IRS worked assiduously to address those cases, but did not eliminate the potential for some taxpayers to be surprised they did not withhold enough.

If you think this applies to you, see a tax preparer now or buy a preliminary copy of tax software to plan now for your 2009 tax bill.

There is one bright spot in this situation: the IRS says they will waive penalties if you underpaid withholding due to the above gaps in the tables.

Mike Dayoub is a tax preparer and financial planner in North Fulton, Georgia.  770 361-3139 website

Amnesty for offshore accounts

August 12th, 2009 . Posted in Taxes | Comments Off

The IRS is bearing down on tax evaders who hid investments (and income) in Switzerland. Today UBS AG agreed to give the IRS about 10,000 names. (LINK)

If you’ve decided to get into compliance, get it done soon. The IRS amnesty program ends on Sept 23, 2009.

If you decide to take the amnesty program, here are some caveats:

1) The amnesty program reduces the penalties, it does not eliminate them. The penalties for tax due are reduced from 75% down to 20%. And the FBAR penalty is reduced from 50% down to a single 20% penalty on your maximum 5 year balance. So there are still penalties, but at least there’s an incentive to disclose now, voluntarily.

2) Don’t call the IRS until you talk with a tax attorney. Notice I did not say accountant. That’s because your attorney cannot testify against you on this matter, but a CPA is obligated to do so. Let the attorney hire the accountant who will work through the tax issues.

3) Clean up the rest of your taxes. The amended return you file for amnesty must be 100% correct on all other matters. Any other hidden items on the amended return can exposie you to possible prosecution for a fraudulent return.

4) There are several other requirements needed to be eligible for amnesty. (The income cannot be illegally obtained, you cannot be currently under criminal investigation or under IRS audit, for example).

There are lots of reasons clients “fall into” hidden accounts. Inheritance, immigration, marriage, etc. Your attorney can help you minimize the penalties.  Have a friend call me if you want a pointer to a good tax attorney.

Mike Dayoub is a tax preparer and financial planner in North Fulton, Georgia.  770 361-3139 website

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