Sushi Money

In a long-awaited move, the Federal Reserve is setting out new consumer-friendly regulations intended to reign in credit card companies from overzealous and even unfair lending practices by financial institutions.

 The crackdown on credit card companies is finally taking a proactive approach to protecting consumers and reversing practices that have appeared overly greedy in recent years.  I’m a strong defender of free market economics and fair business practices, but too many credit card companies have lost their way in terms of serving clients’ needs, and instead have appeared nearly predatory in their approach to credit card account management.

“The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate,” said Ben Bernanke, chairman of the Federal Reserve, which regulates many U.S. banks. “Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs.”

And that’s the bottom line for many of consumers, a desire for clarity and a credit card agreement that isn’t changed at will by a company seeking higher profits.   I’ve noticed in some of my credit card statements that they are spelled-out more, and explained a little better than in years past, which is nice to see. But clarity in Disclosures Alone Won’t Solve Credit Card Issues according to Fed Chairman Ben Bernanke. 

“Twenty-five years ago, less than half of all American families had a general purpose credit card. Since then, the number of consumers holding such cards and the amount of outstanding credit card debt has grown significantly. The development of credit scoring and implementation of risk-based pricing have made credit cards available to more people. In addition to serving as a source of needed credit, consumers benefit from the convenience credit cards offer as a payment mechanism.”

“The rapid growth in the use of credit cards, and a corresponding increase in the complexity of available products, has reduced the transparency of the industry, Mr. Bernanke said at an open meeting of the Fed board. For that reason, federal banking regulators need to make improvements to give consumers “greater control” over their accounts.”

 Of course the banking industry and lobbyists do not agree:

“The Federal Reserve’s proposal is an unprecedented regulatory intrusion into marketplace pricing and product offerings,” said Edward Yingling, chief executive of the American Bankers Association.

With any new set of regulations there are some risks.  Government may overstep the bounds of balanced market dynamics and impose too many rules and binding regulations on institutions.  Those banking institutions may simply change their business practices in a negative way, avoiding regulatory issues and not making credit available to consumers as they have done in the past. 

“Card industry representatives have been quick to warn that the passage of new legislation or additional regulation could hurt all credit card carriers.”

“We are deeply concerned that these rules will result in less competition, higher consumer prices, fewer consumer choices, and reduced consumer access to credit cards,” said Yingling, the banking industry advocate. In short, everyday consumers will bear the real cost of these proposals.”

“Americans with shabby credit histories, for example, may no longer have similar access to credit. At the same time, consumers with good credit could soon find themselves facing higher interest rates.”

Do you agree?  I see their point, but I also think the banking industry is protecting its own at this point.  Certainly businesses are in business to make money, and they should do so as they deem appropriate…. within the bounds of the legal and regulatory structure.  But in this case, many consumers and now politicians and leading economists believe that the financial institutions have overstepped their bounds, unfairly targeting consumers.  

We will always walk a balance between too little and too much regulatory structure in business markets.  But in this case, I personally believe it was time that government stepped in to look at consumers’ interests compared to the financial profit incentives of the banking industry.  Sometimes the balance becomes skewed, and perhaps this is a small step to swing the pendulum back toward consumers’ interests.  

Besides, with today’s lending climate during the credit crunch, banking and financial institutions have lost a lot of credibility in terms of managing risk, and consumers are paying the price for their market turmoil induced by many of these same institutions.  By saying “credit may not be available to consumers” is stretching the truth when credit is really no longer available to a certain segment of consumers anyway at this point.  

As Congress examines the issue, time will tell how these regulations impact the banking industry overall.  Somehow I believe they’ll do just fine and find new ways to make money while lending money.

Depending on the rules that are adopted, credit card companies would be prohibited from:

• Making deceptive offers of credit without spelling out terms and limitations;
• Placing unfair time constraints on payments. A payment would not be deemed late unless the borrower is given a reasonable period of time, such as 21 days, to pay;
• Allocating payments unfairly among balances with different interest rates;
• Retroactively raising interest rates on pre-existing balances when a change in credit status occurs;
• Assessing very high fees for exceeding credit limits solely because of a hold placed on the account;
• Unfairly charging consumers security deposits and fees when issuing credit or making credit available;
• Unfairly computing balances using double-cycle billing;
• Prohibit overdraft fees because of additional “holds” when using debit card (such as when purchase gasoline).

It will be interesting to see what rules are ultimately adopted and applied, and how credit card companies react.  In some cases I expect credit card accounts may be cancelled or frozen without additional steps by consumers. But the banking and financial institutions cannot lash out without consequences to their own businesses.  While they are in business to make a profit, they are also in the customer service business.  There will always be another company willing to take customers who are not happy with their current bank or lending institution.    

Is this the long-awaited Credit Card Bill of Rights for consumers?   Not quite, and the Consumer Federation of America is calling for even greater regulation:

“We commend federal regulators for taking an important first step to stop credit card companies from pumping up their profits by using hidden traps and tricks that drive up the amount of debt consumers owe,” said Travis B. Plunkett, legislative director of the Consumer Federation of America. “We urge Congress to focus on enacting a permanent law that curbs abusive practices not addressed in this proposal.”

If I had the ear of the card company executives, I would advise them to jump right onboard this consumer-friendly train, and even make a huge PR effort to show what they are doing to help consumers. Bottom line?  Consumers want a credit card agreement that is fair and steady, and not at risk of changing overnight by a company who can assess fees and charges at will.  Perhaps in response to increased regulation we’ll see a trend toward term limited credit cards, with fixed contracts?   Hard to say, but I don’t think those offers will stop coming in the mailbox anytime soon.

 Even with a challenging economy and dynamic swings in stock prices, the market has begun to advance over the last couple of months.  While the U.S. economy teeters on the edge of recession, is it really that bad out there? That certainly depends on your individual situation, but for the most part we’re managing to get by, even with gas and commodity prices that are out of control.  Interest rates have dropped quite a bit and that’s provided some relief to homeowners with ARM loans.

But is the Fed finished cutting rates?  Many experts believe so, and that from here will be a long pause to allow the economy to work its way back into growth mode.  Maybe the Fed Has Bought Enough Anti-Recession Insurance for now.  But we’ve got to put our money to work somewhere, and for most of us that means staying invested even in difficult times.

The amount of negativity about the economy and markets have been amazing this past year, and Jason Zweig’s near-contrarian view offers some good advice for Why Acting Bearish is a Dumb Move.

“This has been one ferocious stock market. Not only has Wall Street been flirting with a bear market - conventionally defined as a 20% decline in the major indexes - but we’re now in “the second-worst eight-year period for stocks since the 1930s,” says money manager Martha Ortiz of Aronson Johnson & Ortiz in Philadelphia.”

“…a growing chorus of bears thinks that the worst is yet to come and that investors should get out of the market. After all, everyone knows stocks will keep sagging since it’s obvious the economy is sinking into recession, right?”

“Even if the economy is headed for real trouble, don’t assume that your portfolio is too. Larry Swedroe, director of research at Buckingham Asset Management, notes that the U.S. economy has experienced 11 recessions since World War II. From the first day of those economic contractions to the last, stocks still managed to deliver average gains of 7.1% vs. 5.1% for cash.”

Bottom line?  Stay invested, stay long, and focus on living positively each day.  It’s not always easy to do, but I try to tune out the economic noise, and remember what’s important at home and with family.   If there’s something I’ve learned from this almost-recession and high gas and grocery prices, it’s that we really don’t need a lot of the things we spend money on.

Cutting back spending and becoming more frugal isn’t that difficult.  I don’t know about you, but when I save money or do something more efficiently, it really makes me feel good in other areas of my life.  It helps me to focus on the important aspects of life, and the goals I have for personal growth.  I’m not tied to worries or stress about the market, and how my retirement funds are doing.  

It’s about improving the quality of our lives and experience versus the quantity of something that is always changing.  

Laura Rowley describes it very well as feeling blessed. 

“Money can certainly buy us a measure of freedom or security, but money itself is none of those things. If we think money is security, we’ll never amass enough to feel secure. If we think it’s freedom, we’ll never earn enough to be free.”

“Once we remove the emotional baggage, we can acknowledge that money is just one component to achieve our goals instead of an all-encompassing solution. If freedom is a value, we have to ask which people, qualities, and experiences have made us feel most free in the past: Where do I need to live to be around those people? What should I do for my work, and how should I spend my leisure time? How much money do I need to help me create a life with those qualities and experiences? Being as specific as possible about how to manifest these qualities in our lives will keep us from running on the hedonic treadmill.” 

“… long-term flourishing requires discipline, persistence, hard work, faith, and, most important, pursuing goals that are close to your heart and based on your personal gifts.”

When we take time to appreciate what we do have in our lives, we begin to understand more about ourselves, our relationships and where we want to go.  It’s an essential part of the process of discovery, not only for whatever personal gifts we possess, but for the direction of the journey itself.  

Is money the reason for the journey?   Not by a long shot.  But it certainly helps.  A little balance and reflection helps even more.  Growing our money, like growing our lives, takes time and staying invested.  Money provides a lot of things in life, but it can’t buy long term happiness.  Money is simply a tool to take along the journey.  Sure it’s important, but if we forget our goals and what’s important in our lives, then we really haven’t gone anywhere have we?

When is the last time you’ve had a retirement health check-up?  There’s a lot of information out there to help answer questions we have about saving and investing for retirement (or during retirement).  But if you’re like most people, some of that information is pretty confusing.  Have you considered meeting with a professional to look at where things stand?  Research data shows that more Americans are doing something to prepare for retirement than ever before, which is very good news.   But at the same time, we’re also very concerned about our future retirement.

Concerned about the troubled economy, rising health care costs and falling home values, Americans’ confidence in being able to afford a comfortable retirement fell at a record rate over the past year, sinking to its lowest level since 2001.

”This year’s results show a very dramatic reduction in the public’s confidence about having a comfortable retirement,” said Dallas Salisbury, president of the nonpartisan Employee Benefit Research Institute, which has conducted a comprehensive Retirement Confidence Survey with the research firm Mathew Greenwald and Associates for 18 years.

“In an encouraging sign, this year’s survey found that 47 percent of workers say they or their spouses have tried to calculate how much money they will need for a comfortable retirement. That figure is up considerably from the low point of 29 percent 1996 and slightly higher than 43 percent in 2007.”

“As before, the 2008 survey found that doing a retirement savings calculation - even if it’s just a rough estimate - is particularly effective at changing behavior: 44 percent of those who calculated a savings goal changed their retirement planning, and of those, 59 percent started saving or investing more.”

“Still, savings levels are modest. Almost half (49 percent) of all workers report savings and investments of less than $50,000, and 22 percent have no savings at all, the survey found.”

So we know it’s important to keep saving and investing, and putting money away for retirement.  In fact, that’s the single biggest thing we can do to improve our retirement situation- save more money on a regular basis.

One way to do that is to open your own retirement fund.  More people are doing so than ever before,  and The New York Times takes a closer look at this too in A Stalwart of Retirement Planning: The I.R.A.

So if you’ve already got a retirement plan in place, is it something you can fall back on (i.e. borrow money from) before retirement?  Yes, that’s possible.  But it’s a risky move to borrow from your retirement plan whether that’s an IRA or your 401(k).

In my view that’s the last place you ever consider borrowing money from, and if you don’t have to, then simply don’t do it because many people never pay it back:

“Nearly one-third of adults who have prematurely withdrawn funds from their retirement products said they cannot pay them back, and 45% said they either cannot pay back the funds or have not begun to do so, according to a recent Wall Street Journal Online/Harris Interactive Personal Finance.”

“Even among the highest income earners surveyed—making more than $75,000—more than one-quarter of respondents said they cannot pay back their premature withdrawals.”

“Those ages 45 to 54 are less likely to be able to pay back their premature withdrawals, and those ages 18 to 34 were more likely to be currently making payments.”

Retirement planning is about a lot of things, but most importantly it’s about having enough money to fund our needs when we are older. Sometimes those needs change- especially when our family situation changes. Keeping the retirement money straight can sometimes be a challenge, but it’s important to consider how marriage, divorce, death or job changes impact your retirement plan.

And with new laws, new financial products and a lot of people looking ahead at retirement, it’s no wonder that more of us turn to a financial professional for help.

“Over the last few decades, much of the responsibility - and risk - of on-the-job retirement investing has shifted to employees. Fewer workers have traditional defined benefit pensions. And while many employees still have defined contribution plans, such as matching 401(k) plans, they handle their own saving and investment decisions.”

“Here’s the problem: For most of us, do-it-yourself planning leads to needless mistakes and financial loss. That’s because most of us aren’t investment professionals, and we need expert help to reach our goals. This becomes painfully obvious in a rocky economy and stock market, like the one we’re experiencing now.”

“And there’s one other painful truth: Most people just don’t want to be bothered. Only 19 percent of 401(k) plan participants make a trade of any kind in their accounts in a given year, according to research from employee benefits consulting firm Hewitt Associates. That suggests more than 80 percent of us just aren’t paying attention.”

I’m certainly not about frequent trading inside a 401(k) plan per se, but the point is valid in that many people are not even thinking about the choices they have in their retirement plans, or making new choices when life situations change. 

Some of the choices in 401(k) plans are limited, and some plans have too many choices to understand easily.  But some plans do offer a more flexible target retirement option that rebalances automatically based on age.  Do you know what your options are within your 401(k) plan?  Do you know how your retirement funds are allocated?  If you’ve been at your employer for 15 years, is it time to rebalance the investments within your 401(k)? 

So by not paying attention, the article indicates that we might need to make some active choices over the years for how our money is managed within the 401(k) plan.  Can you do that yourself?  Sure, it’s possible.  But if you are counting on that 401(k) plan to be your primary income or supplement during retirement, then maybe it’s worth it to consult with a professional.  A good financial planner or investment professional can help simplify the process and validate the best choices out of the options available.  When it comes to our retirement, that’s a pretty good idea.  After all, most of us get an annual check-up with a doctor.  Why should our financial health be any different?

Is there a subtle change taking place in the direction of the markets, and maybe the economy?  I’ve noticed a few writers here and there that are looking ahead, rather than dwelling on the banking crisis and every negative event that may affect the economy.   During any overzealous expansion there’s going to be contraction.  But there’s still many who have jumped on the doom and gloom bandwagon and are still focusing on what’s “wrong” with everything.  

It’s pretty evident that we face some stark challenges right now.  Between housing, industry layoffs, lending woes, and energy and commodities prices, the American consumer is taking it on the chin.  I tend to be very supportive of our elected officials intentions, even if they don’t get very much accomplished at times.  But with escalting gas and grocery prices, I really wonder if everyone from the President on down really understands how these challenges are affecting families across the nation this year.

Certainly it’s not a typical year.  It’s an election year for the nation’s highest offices, and we’re going to continue to hear what’s “wrong” with the direction of the country for many more months.   But even with the challenges we face, I think smart money looks a little more forward than that, and plans for days of positive growth and opinion once again.

We’ve seen some forward thinking recently with strong upward moves in the markets in recent weeks.  Leading indicators have not been all bad and equity valuations in some areas have become so attractive that investors are looking for bargains and positioning funds for the years ahead.  Donald Luskin says the Recovery is Already Underway and that “the worst is over.”

“Industrial production was reported as rising 0.3% last month, when it was expected to have declined. That’s a key recession indicator — and it’s just not indicating. The high-tech component of industrial production has been especially strong, currently at all-time highs.  And then there are the markets themselves. Since the panic bottom a month ago yesterday, the S&P 500 has returned 7.1%. The best-performing sectors have been financials, energy and materials, indicating that the credit crisis is mending and that fundamental forces of growth are strong.”

“The bears hang onto every little scrap of evidence coming out of the financial and housing sectors to bolster their case that we’re already in a recession and headed for a depression. Doesn’t any of this good news count for anything?”

Laura Rowley takes a more historical look referencing economic research that sees the current economic downturn as a normal response to a financial crisis.  While she indicates we may have some time still to get through it, long term investors should stay the course:

“What does history imply for individual investors, who are more worried than ever about making it through retirement? “If you’re there for the buy-and-hold, long-term view, it’s a very different world,” says Reinhart. “These booms and busts do happen, but unless you really invested very poorly you do have the ability to ride these things out.”

Of course if you’re facing great changes in your life such as trying to pay for the mortgage, looking for a new job, or looking at retirement sooner than later, then it’s hard to sit on the side of optimism right now.   But I think it’s important to be rational and pragmatic, as opposed to letting the stress of worry and fear of the unknown influence your life.

The media doesn’t help with all the catastrophic announcements of doom and chaos, and story after story of people going through hard times.   Is it really that bad for everyone?  No.  But it is bad for some people, and we empathize and try to help where we can, while doing our best to keep our own financial lives in order.

For those of us facing retirement in the short term, keeping the financial house in order may take more effort than we thought.   Laura Bruce from Bankrate.com provides a good overview of the retirement perspective in Retiring in a Bad Economy: Are You in Trouble?   While the intro is a little alarmist, it probably increases readership.  That’s actually a good thing because this article has some excellent insight for both younger and older workers.   The article focuses on the fear and concern that many people have while seeing the banking crisis or a possible recession unfold.  What is a typical reaction for most of us?  We either use our savings to get by, increase our savings if we can, or try to put some extra cash in our retirement accounts to help support us in case we need it.

“But many people don’t have the money needed to give them that cushion; whether due to a lack of income or financial planning. Juetten, who doesn’t require people to have a certain amount of money before he’ll take them on as clients, estimates that only about one in five of the people who come to see him have done a really good job of planning for retirement.”

“First, we deal with the human side. Fear and concern are normal. The news is all around us and it’s hard to ignore. People going into retirement are the ones who are most aware of their financial situation because all of a sudden it’s right in front of them. Second, we talk about the short-term cash needs and, third, we look at the portfolio.”

“If you haven’t done a good enough job preparing for retirement, your options are fairly limited. You can work longer, live on less or work in retirement.”

And that’s a tough pill to swallow.  As we get older, we may have less time to accumulate financial assets.  One troubling statistic shows that 401(k) loans are on the rise.  If more people are borrowing from their retirement plans while working, what are they going to do when it’s time for retirement?  Do you just throw in the towel and assume you’ll keep working?   While working longer is a constructive option, it’s important not to have a deafeatist attitude because there are things we can do.  Living on less is very important, as many of us are finding out with higher gas and grocery prices.   (I don’t know about you but we’re really cutting back in some areas, and we just aren’t splurging on some of the convenience items we may have purchased in the past).

But some of the biggest lessons that financial planners and clients have learned is to save enough money during the working years to provide necessary cash flow in times of trouble.  Some view this as saving for an emergency fund to support three years of living expenses- whether before or after retirement.  Does your 401(k) count as this emergency fund?  Nope.  Those are retirement funds.  We need to save money in other accounts to serve as that emergency fund. 

As we get close to retirement we may find ourselves increasing our savings and investments to provide a stream of cash flow that can support us if desired.  Many retirees don’t use the cash flow that their portfolio could provide, investing it back in the portfolio instead.  But if something does happen to challenge your ability to make ends meet, a portfolio that generates income can be the foundation that carries the day.  Getting there financially is what it’s all about. And that’s a lesson that younger workers should really take note of.

“Younger people who have time to save for retirement have an opportunity to learn from these economic cycles and avoid the frayed nerves that so many older people are experiencing.”

A lot of us look back 10-15 years and realize we could have done a lot more to increase our financial position.  Without beating ourselves up or giving in to fear however, we can also use that knowledge to make new goals and take positive, constructive steps to improve our financial futures.   We may not win the lottery or invent the next million-dollar gizmo, but with disciplined effort, we can patiently accumulate savings and investments that will help support a sound retirement. 

And there’s another realization that many are just waking up to:   As the nation goes tumbling through the economic briar patch, we’ve got to pull ourselves up and work our way out of the tangle.  Nobody else is going to do it for us.

Do you worry about how your IRA is doing these days? If so you’re not alone, but what exactly you do about that is an entirely different question. Walter Updegrave discusses one reader’s concerns about this very issue in IRA freefall: Cash out or hold pat? .

Basically the reader’s question showed that he/she really had no idea about what their IRA was even invested in, or what strategy they had for investing in the first place. This is not uncommon, especially for most people who begin an IRA without the help of a professional advisor. For many of us, the IRA is the second place we save money for retirement after the employer’s retirement plan at work. Because it is a retirement fund though, we often worry about how it’s doing. It’s not very much fun to get statements in the mail showing the IRA value has declined over several months, especially if you’re close to retirement.

Do You Really Want the Money Now? There are many better options than to simply liquidate the IRA, take the money and plunk it in a bank or CD account. Doing that could be a very costly mistake, and result in a bundle in taxes and penalties with the IRS next year if it’s a traditional, deductible IRA. First, if it’s not a qualified withdrawal or rollover, you’ll have to pay a 10% penalty on the amount withdrawn if you’re younger than age 59 1/2, and then you’ll have to pay taxes on the withdrawal amount as well. Depending upon the size of your account, that could be a lot of money, could set you back years, and basically you may be starting all over with far less than you had if you had just left things alone.

If it’s a Roth IRA, you should be able to take out tax-free distributions anytime, as long as you are only withdrawing contributions that you have made to the account. This is not true for a traditional, deductible IRA. But even with a Roth IRA, if you take out excess contributions or earnings, you may be taking an unqualified distribution, and may owe taxes or penalties. But the beauty of the Roth IRA is that you can take out money that you have put in just about any time you want. You just cannot take out any earnings or gains on the money you have deposited over time.

* If you are considering closing your Roth IRA or taking out earnings, there are special rules for distributions. And the distribution rules for Traditional (deductible) IRAs are different.

But I Want My Money! In either case, let’s say you became really worried and closed your IRA account- within the last 60 days. In that case you may be in luck- you’re entitled to one rollover each year, as long as you do so within 60 days. So yes, technically, you can take out all of your IRA money, look around for a good long while, and then re-deposit it in a new account in less than 60 days and you won’t owe any taxes or penalties. Some folks even do this as a short-term loan. But you better make sure to get that money back in a new account in less than 60 days!

But guess what? If you close your IRA outright, financial institutions are normally required to deduct 20% automatically for federal taxes. And if you get busy and don’t find or receive the new IRA paperwork in time to get that money back in a new account within 60 days, you just may have taken an unqualified distribution, and won’t be able to complete a rollover. But at least a good chunk of the taxes are paid already, right? Ugh. That’s a less than ideal way to loan yourself money or try to keep it from losing value in the market. And you just started over- while you do have most of the money, your IRA is gone. You’ll have to start a new one if you want another IRA.

What’s a rollover really for? Usually a rollover is used to move retirement money from an employer’s plan into your own IRA. Or from one compan’s retirement plan, to your IRA and then to a new company’s retirement plan. It can also be used if you are moving IRA money from one institution to a new IRA at another institution to develop a new or different portfolio and investing strategy. Keep in mind that IRA rollovers are reportable transactions for IRS tax purposes, and you can only do this once per year. Some professionals believe that employers retirement plans may offer better options than an IRA over the long term. But it’s too easy to say that one is better than another outright. If you are comfortable with your employer’s plan, that’s great. Just make sure it is diversified over time. I like the option of spreading the wealth around, and having my own IRA at another institution such as Vanguard. Plus if you have your own IRA established, it can serve as a transfer vehicle if you move from one job to another throughout your career.

If you are just trying to move your IRA from one place to another, there’s a better way. Simply work with the new institution first, and you can transfer your IRA to a different bank, brokerage company or other financial institution.  An IRA transfer is different from an IRA rollover. With a transfer you are simply moving some or all of your money to a different institution. This is often called a trustee-to-trustee transfer. You can make unlimited transfers each year, and a transfer is a non-reportable transaction for income tax purposes. The new institution will simply help you fill out the required forms and paperwork to transfer your IRA directly to a new account, and you will never see the money personally.  A little paperwork and you’re done!

What Can I Do With My IRA?  So back to our original discussion: Why do people transfer IRAs and what else can we do with them? Even though IRAs have been around for many years, many people are just now realizing the power of an IRA. Your IRA can hold just about any type of assets in it. It’s just an account- and what you keep inside of it is up to you. You can have a money market fund for your IRA, or a mutual fund, or a basket of stocks. Your IRA can be with a bank, or a mutual fund company or as a brokerage account. Just because you opened the IRA with the bank down the street doesn’t mean you have to keep it there. You can move and re-establish that IRA with a new financial institution, and develop an entirely new strategy for investing for retirement.

Let’s say you completed the paperwork for the transfer- it may take a few weeks to get to the new institution. But once your money is in the new account, you can begin to implement your new goals and strategy.  For example, you may have transferred an IRA from a bank to a mutual fund company like Vanguard.  You can choose the type of mutual fund you want your money transfered to when you open the new account.  After the money is in that account, you can also re-allocate or direct some of that money to new mutual funds.

That’s basically how I approach it.  I prefer a well diversified portfolio of mutual funds in my IRA, along with a money market fund- what I call my Super Charged IRA. Why? Each year when I make my IRA contribution, it goes right into that money market fund. Then I can decide when and where I want the money in that money market fund to go. Then I divide it, or allocate that money into different mutual funds. All within my one single IRA. If I want to, I can even move money from the more aggressive stock mutual funds back into the money market fund. Normally I work on finding the right mutual funds, allocate the money, and then leave it alone. I try not to worry about the ups and downs of the market. It’s a strategy that works for me.

And that’s an important aspect of the article cited above: Implement an IRA strategy that builds upon a portfolio of diversified investments over time. And then leave it there to grow. As you get closer to retirement, that portfolio of stocks, mutual funds, etc, can be adjusted to fit your risk tolerance and other needs. Setting it up takes a little paperwork at first, but that’s about it.

What’s the hardest part? Having the patience and discipline to stick with it over time. Especially when the markets show the IRA as losing value. But if you’re having a hard time sleeping at night, that might tell you to think about changing your strategy, or maybe that you really don’t have a strategy to begin with and need one. You’re not alone- just read a few of the comments on that article. Most importantly however, it’s never too late to start.

* Investopedia has a great IRA information center for reference. There are countless different situations involving IRAs and retirement planning. If you are considering moving a lot of money around with IRAs, be sure to consult with your financial planner and tax professional. It might just save you a ton of money in taxes!

* Here’s a short review of some Common IRA Rollover Mistakes to avoid.

* Are you inheriting an IRA from someone? There are special rules for that too, and it may be time to sit down with a professional to review the best option for your situation.

* Here are some FAQ’s from the IRS regarding IRAs and Retirement Plans.

Now there’s a proposal that just might help the family budget across the nation- give Americans a gas-tax holiday this summer, and double the child tax credit. Of course after yesterday, our tax consciousness is about at its limit right now, but for those with children this could really reduce taxes going forward.

Senator John McCain’s proposal isn’t as strange as it sounds, especially with the price of gallon of gas pushing past a national average of $3.30. And with fuel prices continuing to rise, it’s about time somebody does something to lessen the cost. Something else needs to give, and if we could find a way to lessen the speculative fever that might help.

But do you know how much you pay in taxes for each gallon of gas in your state?

The federal government charges 18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel.  And where I live our state charges us 18 cents tax on each gallon of both gasoline and diesel. Which is not too bad considering that some states charge as much as 31 cents or more!

API is a national trade association representing the oil and natural gas industries. Remember all those API specifications for oil and such? Lots of useful info if you’re in the industry, but it’s mumbo-jumbo to most of us. But they have some really nice charts regarding the taxes we pay for fuel in America.

Total Gasoline Taxes by State

Do you drive a diesel engine vehicle? With clean-diesel technology becoming a lot more popular, expect more demand there as well. I remember when diesel was much cheaper than regular gasoline, but not any more.

Total Diesel Taxes by State

If you live where gas prices are the highest, then you probably pay some of the highest fuel taxes too. It’s no wonder fuel costs so much in California!

Senator McCain has a few other ideas about reducing taxes for Americans, but I wonder if he’ll try to keep the Bush tax cuts in place instead of letting them expire in 2010? He voted against them in the past, but now says the middle class in American needs more help and lower taxes. Maybe he’s finally coming around. I just wish a few more Democrats would see the light on lower taxes as well.

For a daily picture of the national average for fuel prices, check out AAA’s Daily Fuel Guage Report. If you’re thinking about moving or close to retirement, the Retirement Living Information Center has some great tax-related info and can give you an idea of each state’s tax burden. And here’s a list of the national averages by state for gas prices from GasBuddy.com.

A beautiful spring morning today after a week of cold and rain. Finally, the sun is shining and the days are warming. The spring season has come and nature is busy renewing the cycle of life. Amazing how just a change in the weather can beget a sense of hope and optimism. I think it presents a good case for all those naysayers about the economy, the dollar and the U.S. in general. All is not lost, we are just riding through a tough patch right now. One of these days very soon, we will find more signs of hope and optimism, and the media will begin extolling the virtues of positive living instead of how awful everything is.

As usual, Ben Stein gets it right, and reminds us that a little effort goes a long way:

“…even in a recession, there’s always a shortage of talented, hardworking people in every field. Be one and, even if the recession gets really bad, you can whistle past the graveyard. You may have to move locations. You may have to learn new skills. But a willingness to work will get you everywhere you want to be”

A willingness to work. Is that all that’s necessary? Even in the face of great financial challenges? Well yes, the challenges are there. Gas and grocery prices are through the roof and people are questioning themselves and wondering what they could do to better prepare for this situation.

I think what bothers many people is that regardless of how much we prepare, plan and work to reach a certain point- it seems like something can come along and whack us alongside the head when we least expect it. But isn’t that always true? After all, it happens every day with accidents, problems at work, and even challenges at home with family.

Some politicians even think we’re so bitter about it all that we’re clinging to our beliefs instead of embracing them for who we are and how we choose to live. I don’t know, are you really bitter? I’m sure there are more than a few folks that have been laid off, and are struggling to find a job, and bitter might be a descriptive word at times.

But if we’re walking around in a bitter frame of mind, how helpful is that going to be to get us out of our funk and improve our lives? I don’t think it’s helpful at all, and more than that it borders on being self-destructive. Let’s face it, everybody has challenges. Just when we think we’ve got it bad, we meet someone else who has it a lot worse. Like the old expression where “I used to feel bad about having no shoes, until I met a man who had no feet.”

It is so often a matter of perspective. How many of us even consider the challenges that other people may face each day? I received a stark reminder to that question the other day when the husband of an acquaintance passed away suddenly in the night leaving little-to-nothing behind for the family. No insurance, no pension. Maybe a little social security, but he was only 42. This woman is a hard-working individual who gives much of her personal time volunteering and helping others, while raising two children at home and working part-time. Now her husband is gone, and she is trying to find full-time work and is struggling to figure out how to support her family. Most of us never knew how financially challenged this family was until after the children’s father passed away. People are now coming together to donate and help her, and contribute to the children’s college funds.

Rather than let feelings of frustration or anger or bitterness govern my attitude, I am reminded to appreciate what we have each day. We may not be able to control the price of gas, or the price of our stocks. We may not be able change the price of milk or a loaf of bread. Sure we can influence those things with our opinions and our ability to vote for leaders we believe in.

But even if we can’t control the external things we encounter in our lives, I think we can control our response to them. And by being aware of our response, ultimately we influence what comes into our life. Sounds like a bunch of hooey perhaps. But if I know anything about the last several decades of my life, it is that my attitude determines my outcome.

What we put in to something, and the mindset we take with us ultimately influences what we’re going to get out of it. We can choose to participate in the growth and success of our lives, or we can choose to ride the bus of our emotions, and go along for a ride to a destination unknown. Sometimes that bus carries a lot of other folks emotions as well. Me? I prefer to drive myself when it comes to my growth and life goals.

It all starts with attitude and a willingness to consider alternatives.

At one point in my life I was bagging groceries and cleaning bathrooms. With a college degree. Was that a horrible, awful, humiliating experience? Absolutely not. Some folks thought so perhaps. But it gave me cash and the freedom to work towards other goals. Cleaning the bathrooms was part of my job as a lifeguard that also let me swim and stay in shape for free. Through those jobs I met people that led me in directions I might never have considered before, and ultimately to a career doing what I loved.

Even with the challenges we face today, it’s important to have a positive, constructive attitude, to be open-minded and to consider alternatives. You never really know where they might lead.