Monthly Archives: June 2010

The True Cost of College

Published college sticker prices have indeed been far outstripping the inflation rate for years. Parents and financial professionals, however, aren’t clued into this critical fact: Millions of families aren’t paying retail prices for college.

In reality, when you factor in the widespread tuition discounts that colleges routinely award students, the prices have plummeted.

Take a look at the published prices and the average net price that families actually paid for the 2009-2010 academic year, according to the College Board:

Community college: Published Tuition $2,544; Average Net Price $0

State university: Published Tuition $7,020; Average Net Price $1,600

Private college: Published Tuition $26,273; Average Net Price $11,900

Here’s the Bottom Line: The price breaks that colleges are offering are considerable, which is why your clients should not initially cross any schools off their list because they look too pricey. For many families, the schools with the most outrageous price tags can be the cheapest because they typically offer the best financial aid packages.

Read the full article by Lynn O’Shaughnessy  a financial journalist, college consultant, speaker and the author of The College Solution, an Amazon bestseller at http://registeredrep.com/wealthmanagement/collegeplan/true_cost_of_college_0623/?cid=nl_wm

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5 Steps to a Healthier Bank Account

5 Steps to a Healthier Bank Account

By RealAge

When it comes to money, the YOU Docs aren’t going to tell you what investments to make, but they do want to try to steer you toward making choices that will help you feel better and live longer.

1. Take your financial temperature. While we know that financial burdens can weigh us down, a lot of us would like to ignore the issues until a crisis happens. As you know with your body, the smartest approach is to think about your health all the time — not a few minutes before the ambulance arrives. So instead of burying your head, apply some standards of health to your financial attitudes. Overspending is like overeating (serious aging or a serious price to pay, with no easy answer if it gets out of control). On the other hand, a retirement account is like exercise (do a little bit along the way and the long-term benefits will be exponentially greater than the investment). The fact is, if you treat your money with the same respect and care you ought to treat your body, you simply decrease the chance that you’ll need financial CPR.

2. Score a perfect 10. Of all the financial decisions you’ll make over your lifetime, this one is a no-brainer. Every time you get paid, take 10% of that check and put it into an emergency account. It doesn’t count for retirement, it’s not used for bills, and it’s not something you tap into when you decide that you really, really need an automatic lollipop maker. It’s something that will give you peace of mind. Having an emergency backup account to use if the car dies, or your spouse needs an extra hand to help with an illness, or you need to change jobs, or the roof leaks — while still being able to pay bills, save for retirement, and make investments — is the thing that will relieve your day-to-day financial stress as much as anything short of winning the Super Six.

3. Save up. Take the second 10% of your paycheck and put it in a retirement account — nothing gives you the freedom to follow your passions and to relieve stress more than having a retirement fund (often added to by an employer) and the 10% emergency account. But this plan means you have to live below your paycheck, and it means you may need to budget carefully, so you can enjoy these freedoms.

4. Write it down. Carry a small notebook or diary in your purse or bag, and record your daily purchases for one month. At the end of the month, sit down and look at your purchases, and then consider how to cut back. You’ll probably be amazed at what you can live without.

5. Ask for an increase. Face it: Your boss doesn’t want to give you a raise. It’s more money away from his or her bottom line. But does that mean you ought to roll up into a ball of dough when talking about making more dough? No way. The truth is, women earn about 11% less than men with equivalent education and experience. In one interesting study, researchers told participants that they’d be paid anywhere from $3 to $10 to play Boggle. At the end, they were paid $3. And guess what happened. Eight times more men than woman asked for more money. Similarly, four times as many men as women report that they negotiate for more money during a job offer. The message: Ask, ask, ask.

Test Your Savings Knowledge

Test Your Savings Knowledge with this Savings Quiz which  will reveal how much you understand about the realities of saving in America.

With defined contribution (DC) & 401k plans now a primary source of retirement income, it is incumbent on employers to ensure that their employees are saving and investing effectively within those plans.

•Over one-third of all eligible employees do not participate—at all—in their company’s retirement savings plan.

•More than 90% of those who do participate fail to take full advantage of the legal maximum contribution limits.

•Nearly one-fifth of participants are invested in a single nondiversified investment option.

•About 20% have outstanding loans within their DC accounts, risking a smaller balance and less earnings potential if the loan is not repaid.

These results are alarming when we consider that the work-place savings plan is the primary retirement savings plan for most working Americans. Each of these missed opportunities can be costly and can devastate an employee’s chances to enjoy a financially secure retirement. One potential solution for achieving retirement readiness is if the plan sponsor leverages automated savings techniques so that a DC plan, by default, can work to maximize retirement savings for all employees: automatic enrollment, automatic deferral increases, and automatic default into an age-based lifecycle option or managed account.

Hard to stomach but not unexpected

In our view (and SEI’s), the market correction that occurred during the month of May was hard to stomach but not unexpected. The global economy should continue to fight its way forward, but it won’t be uniform across regions. Full discussion below:

Investment Update: Market Volatility Continues By: Kevin P. Barr, Head of SEI Investment Management Unit.

From a market perspective, the month of May had more than its fair share of challenges. The Dow Jones Industrial Average fell 7.92% for the month, the worst percentage decline for the month of May since 1940. In addition, markets have been highly volatile, as shown by the Chicago Board Options Exchange Volatility Index (VIX), a measure of implied volatility in the S&P 500 Index that is also known as the “fear index;” it rose from 22 at the end of April to 33 by the end of May. From continued gloom cast by the sovereign-debt crisis in peripheral Europe to the “Flash Crash” on May 6, when U.S. blue-chip stocks made a staggering 1,000-point decline before recovering a majority of the drop by the end of the day, it is easy to see why investors remain cautious.

Our View

In SEI’s view, the market correction that occurred during the month of May is hard to stomach but not unexpected. The global economy should continue to fight its way forward, but it won’t be uniform across regions. Although the U.S. economy is demonstrating resilience and emerging markets are continuing to lead in terms of economic growth, European economies are struggling due to the ongoing problem of large levels of government debt. The sovereign debt crisis in peripheral Europe remains a major risk to our outlook. This situation still needs to be resolved, as it has contributed to the dramatic fall of the euro and poses problems for large U.S. companies, which have on average 25% of their revenues with direct exposure to Europe. We expect that problems in Greece and other southern European countries will persist as these nations work to cut government spending and increase their competitive advantages. Yet, even in Europe, positive economic reports are emerging from France and Germany.

SEI Investment Strategy Positioning

At the beginning of the year, we began positioning many of our portfolios toward high-quality securities in anticipation of changing market dynamics. The ability to tilt our portfolios in accordance with where we believe the global markets and economy are headed is intended to produce consistent returns for investors. An overview follows regarding how each of SEI’s major asset classes is positioned: •

In our U.S. equity portfolios, we remain bullish on equities while favoring higher-quality stocks. These types of companies normally fare better in periods of downward market pressure because they generally have less debt and have better capabilities for capturing and keeping market share. In our non-U.S. equity portfolios, our managers continue to positions in quality companies and countries. Selection is key with respect to both geography and currency.

In our global fixed-income portfolios, we are generally cautious, with an underweight to both the euro and debt issued by the eurozone. Like our equity portfolios, we are emphasizing high-quality securities. As global spreads have tightened over the past year, we have used this opportunity to reduce risk in our fixed-income portfolios.

In our alternative investment portfolios, we remain focused on maintaining overall low beta and seeking alpha without taking on meaningful directional market exposure. The next phase of the economic cycle is likely to result in increased dispersion between winners and losers, creating relative value opportunities. We actively manage our portfolios to take advantage of these opportunities across asset classes. In the short term, our significant exposure to tactical trading is designed to take advantage of higher volatility and exploit market dislocations during periods of uncertainty.

Summary

At the beginning of the year, the market favored riskier assets, so our high-quality focus was not rewarded. When the markets rebounded sharply in March 2009, risk appetite soared and deeply discounted, lower-quality names led the way. Although this trend continued in the first few months of 2010, investor uncertainty has recently increased, meaning greater market volatility. In the current environment, we expect low-quality assets to lag; therefore, we have transitioned our portfolios to hold securities issued by high-quality companies. SEI promotes an approach to investing that uses diversified asset allocations in an effort to generate consistent returns over a certain time horizon in accordance with an investor’s risk profile. We do not believe the month of May is a harbinger of a bear market; instead, we believe that the market correction should be viewed as an opportunity to buy at a lower price. We continue to monitor day-to-day events while looking towards a longer horizon.