Friday, May 20, 2011

Poll: How Much Time Do You Spend on Investing?

Sunday, May 15, 2011

Zero tax payment

Zero tax payment. I'm sure that most small business owners and individual investors would love to here those words from their accountants come tax time.

Recently, GE made headlines for their 2010 tax payment (or lack thereof - click here for the details - G.E.’s Strategies Let It Avoid Taxes Altogether).

Let me start by stating that tax law is ridiculously complex, and I do not claim to know all the in's and out's.

What I do know, is that GE received part of the government bailout, so it seems totally unfair that they can earn almost $6 Billion from US operations without paying federal taxes.

Click on the image for a full size version.
GE Tax Strategy

But as we all know, life isn't fair. And let's be honest; if there were a way for you and I to use to do it, we would also use the tax code to our advantage.

In fact, we all could have purchased GE stock, in which case few people would complain about fairness as long as they made a profit.

Rather than harp on GE specifically, take a look at the "how"; how corporations are able to pay zero federal income taxes.


Hat Tip to Business Pundit, and The Big Picture.

Blaming GE is akin to shooting the messenger. GE is the messenger; they told us that the rules of the game allow them to operate a certain way. They did not break any laws, and gamed the system while staying competitive (but that doesn't mean I like it).

If we don't like the results, then we must change the rules. And if we want to change the rules, the graphic above suggests that the first step is to resist the efforts of lobbyists.

Maybe giving American corporations a significantly lowered corporate tax rate would work...if it came with the price tag of no more lobbying!


Monday, May 2, 2011

Someone is Stealing from Your 401k!

Do you know that right now, someone is stealing from your 401k? And you are letting them!

Cost control is an important concept for safe investing. But when it comes to your 401k, a majority of the fees and expenses are not "in your face" so to speak.

Your 401k probably doesn't have a huge billboard advertising commissions (like a discount broker), and you won't get a statement of how much you pay in fees every month (like a credit card statement).

Just like your personal expenses have a HUGE impact on your personal finances, hidden fees and transaction costs can make or break your ability to invest profitably over a long period of time.

As reported by Penelope Wang from CNN Money:
"As the GAO has reported, a plan charging 1.5% annually is likely to return 17% less over 20 years than a plan that costs just 0.5% — a difference that can amount to a $100,000 or more for a typical retiree."

So what can you do? How do you find out more about those hidden 401k fees?

You might find something digging though your 401k provider's website. But since I'm also here to save you time, that doesn't seem like a good choice.

Wang goes on to discuss a start-up called BrightScope. This company offers a free report that grades the 401k plans of many companies on things such as expenses and fees. Using the site is pretty straightforward, and I've always found it interesting to see how I compare with other companies.

But the real question is: what can you do if your plan has high expenses?

You could petition your company to switch to a new provider with lower fees. But I'm guessing that creating extra work for the HR department won't go over well.

The path of least resistance is to move your money to a low-cost retirement investment account.

Moving your money around has some risk, because if you don't do it correctly, you could end up with a large tax bill next year! So be sure to check with your tax consultant or accountant beforehand.


Finally! Your hidden 401(k) fees revealed
Penelope Wang - CNN Money

Discount Brokers

Retirement Investment Accout

The Falling Dollar