Personal Finance Column

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Treasury Series I Savings Bond Rate Update (May 2013)

With the release of the March 2013 CPI-U figures, we now know the variable interest rate on Series I Savings Bonds for the next six months starting in May and it continues to be low (but it’s an increase from the last six months – so that’s good right?).

The March 2013 CPI-U figure was 232.773 and the September 2012 CPI-U figure was 231.407 so we can calculate a semi-annual increase of 0.590% and we’d expect the variable component of the bond to be 1.18%. The only question is whether there will be any change in the fixed rate, which currently sits at 0.0%. With interest rates so low, no one expects that to change anytime soon.

That said, using the equation:
Bond rate = Fixed rate + 2 x Semiannual inflation rate + (Semiannual inflation rate X Fixed rate)
Bond rate = 0 + 2 x 0.0059 + (0.0059 X 0)
Bond rate = 0.0118

So we’d expect the interest rate on Series I Savings bonds to be 1.18% in May.

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How to Avoid Internal Revenue Service’s 2013 Dirty Dozen Tax Scams

Every year, the IRS publishes a list of twelve tax scams they call the “dirty dozen.” It’s usually a mix of what you’d expect – a little identity theft mixed in with scams that prey on people’s inability to detect things that “sound too good to be true.” Taxes are complex enough that unless you spend a lot of time doing them, it’s easy to believe that an “expert” knows something you don’t. When that something could be a way to save money on your taxes, a lot of folks are willing to give it a try. If you hear about how the wealthy are putting money away in an overseas bank account because you read it in the newspaper, maybe the guy who showed up on your doorstep can do the same for you… even if you have no idea how it works.

Knowing the list itself isn’t all that useful because scammers are always going to find a way to rip people off. How they do it will change every single year. By the time something appears on this list, chances are the scammers have moved on. While it’s good to be aware of the techniques in this list (and some are so broad that they will always be on it… such as phishing and identity theft), it’s even better to understand tax law enough that you are never susceptible to these scams in the first place.

Today, we’ll just list off the twelve and what you need to know to avoid them.

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Should You Outsource Household Chores?

A few months ago, we started using a cleaning service to help clean around the house. We had them come in basically once a month for three hours to clean some areas we often neglect. When you clean your own home, you generally get the major areas – vacuuming carpets, sweeping floors, cleaning the bathroom and the kitchen. You miss some of the little things like dusting, wiping windows, and things that don’t accumulate dirtiness as easily. In doing so, we learned that a lot of people “outsource” cleaning because it’s a labor-intensive task where there is a small range in terms of expertise (and it’s fairly easy task).

It led me to think of other places where we might outsource some work in order to focus on things with greater importance.

7

Retirement Account IRA Cap Proposal in Obama Budget

There were two major headlines (so far!) from President Obama’s budget proposal – using Chained CPI for Social Security and a cap on retirement accounts. Many places have cited the cap as a \$3 million cap but in reality it’s a calculation. The limit is based on how much you could get from your retirement account if you converted it to an annuity. An annuity, if you recall, is basically a series of payments, typically annually. A pension is a type of annuity.

Right now, as far as I know, there isn’t a cap on retirement accounts (Mitt Romney disclosed he had an IRA with over \$100 million). Your cap is essentially on the front end, how much you can contribute, and business owners, including self-employed individuals, have different limits than employees.

4

How to Save Money at Baseball Games

Last week, I shared a few tips on how to save money getting baseball tickets and today I want to talk about how to save money once you get into the ballpark itself. Baseball is a nice casual sport to watch when you want to hang out in the sunny outdoors without being glued to the action going on in the field. It’s basically several hours of casual sport punctuated with periods of anxiety, excitement, and action that really keeps you involved enough to keep going back.

Unlike a movie, which tries to grip you from start to finish, baseball offers plenty of opportunities for you to get up, stretch, and get some concessions. In fact, the concessions often come to you and it’s a pretty slick system they have going. Movie theaters would love it if they could scream “Popcorn!” or “Ice cold beer!” while you watched a movie.

When I saw this CNN Money article about how much stuff cost at ballparks, I thought I’d share my tips for saving. So, how can you save money while inside the ball park?

6

Estate Planning for Young Couples

“Too many people believe that estate planning is simply for ‘old people’ or ‘rich people,’” says Eido Walny. Walny is the founder of Walny Legal Group, a firm that specializes in estate planning and asset protection.

“Regardless of demographic,” he continues, “there are several important parts to an estate plan that would be critically important to anyone over the age of 18. …Estate planning is more than about death.”

15

What is Chained CPI?

If you saw President Obama’s FY2014 budget, one of the biggest pieces of news in it was a change in the calculation of the cost of living adjustment, or COLA. COLA is used to figure out how much to increase many government payments, the most important of which, especially for retirees, is probably Social Security payments. The switch from the current inflation measure to what is known as “chained CPI” is estimated to reduce the federal debt by \$230 billion dollars ebacuse chained CPI is expected to grow between 0.25% – 0.30% slower than the CPI they use now.

As is the case with any small percentage, the initial impact would be small and grow over time. As the years pass, the impact would be greater. “According to the National Women’s Law Center, a retiree who was collecting \$17,520 last year would see 6.5% less, or \$1,139, by age 85, if chained CPI were adopted now. A decade after, their payments would be 9.2% smaller, or \$1,612.”

So what is Chained CPI?

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