MONEY.COM Steps Plus 19 SKILLS THAT WILL to Total MAKE YOU RICHER P

8 SMART WAYS TO CUT YOUR TAXES P. 2 7

MARCH 2015 MONEY.COM steps Plus 19 SKILLS THAT WILL to total MAKE YOU RICHER P. 62 financial OUTSOURCE YOUR LIFE! OR AT LEAST fitness THE PARTS YOU HATE FEATURING OUR EXCLUSIVE P. 70 7-MINUTE MONEY WORKOUTS STARTS ON P. 50 WorldMags.net

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Request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. The principal value of the Retirement Funds is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire (assumed to be age 65) and likely stop making new investments in the fund. If an investor plans to retire significantly earlier or later than age 65, the funds may not be an appropriate investment even if the investor is retiring on or near the target date. The funds’ allocations among a broad range of underlying T. Rowe Price stock and bond funds will change over time. The funds emphasize potential capital appreciation during the early phases of retirement asset accumulation, balance the need for appreciation withWorldMags.net the need for income as retirement approaches, and focus on supporting an income WorldMags.net

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stream over a long-term, postretirement withdrawal horizon. The funds are not designed for a lump-sum redemption at the target date and do not guarantee a particular level of income. The funds maintain a substantial allocation to equities both prior to and after the target date, which can result in greater volatility over shorter time horizons. Diversification cannot assure a profit or protect against loss in a declining market. *©Morningstar, Inc. All Rights Reserved. T. Rowe Price Retirement Target-Date Fund Series Report. 6/30/2014. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. T. Rowe Price Investment Services, Inc., Distributor.WorldMags.net ROTH082810 WorldMags.net WorldMags.net

7YVNYLZZP]L*HZ\HS[`0UZ*V HɉSPH[LZ+PZJV\U[ZUV[H]HPSHISLPUHSSZ[H[LZ MARCH 2015 VOLUME 44, NUMBER 2 WorldMags.net COVER STORY 50 7 Steps to Total Financial Fitness Sculpt your ﬁnances with these targeted exercises. by Kim Clark and Donna Rosato, with Ismat Sarah Mangla 62 19 Skills That Will Put More Money in Your Pocket Use these ingenious life hacks to build your wealth. by Susie Poppick and Daniel Bortz 70 How I Outsourced My Life Delegating everyday tasks to strangers pays off—sometimes. by Cybele Weisser 76 Can You Really Beat the Market? A ﬁnance professor explains why people mistake luck for skill. by Taylor Tepper FEATURES PROP STYLING BY BRIAN BYRNE FOR SET IN ICE SET FOR BRIAN BYRNE BY STYLING PROP

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*Free commission offer applies to online purchases of Fidelity ETFs in a Fidelity brokerage account with a minimum opening balance of $2,500. The sale of ETFs is subject to an activity assessment fee (of between $0.01 and $0.03 per $1,000 of principal) by Fidelity. Starting on 02/01/2014, Fidelity ETFs are subject to a short-term trading fee, if held less than 30 days. ETFs are subject to market fl uctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund. 1 Strategic Insight Simfund/FI Desktop, data as of 01/11/2015. Based on a comparison of total expense ratios for U.S. sector-level ETFs with similar holdings and investment objectives (using the MSCI and S&P Global Industry Classifi cation System — GICS) within the universe of 298 ETFs Morningstar has classifi ed as the Sector Stock asset class. 2 The percentage of fund assets used to pay for operating expenses and management fees, including 12b-1 fees, administrative fees, and all other asset-based costs incurred by the fund, except brokerage costs. Fund expenses are refl ected in the fund’s NAV. Sales charges are not included in the expense ratio. Because of their narrow focus, sector funds tend to be more volatile than funds that diversify across many sectors and companies. Before investing in any mutual fund or exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully. Fidelity Brokerage Services LLC, Member NYSE, SIPC.WorldMags.net © 2015 FMR LLC. All rights reserved. 660907.4.0 MARCH 2015 VOLUME 44, NUMBER 2 WorldMags.net

Plan Retire

27 / 8 TAX-FILING 37 / EASE AWAY FLUBS TO AVOID FROM WORK Experts ﬂag mistakes that Edge toward retirement could cost you thousands. without giving up your career.

32 / ROAD TO WEALTH 42 / THE TROUBLE WITH A Texas couple cope with the WORKING LONGER downside of lower oil prices. How earnings can boost taxes on Social Security beneﬁts, 35 / ASK THE EXPERT and how you can limit the hit. Insuring long-term care, valuing a 75-year-old bond, and putting foreign stocks in a Roth IRA. Invest

45 / FADING, BUT STILL KICKING Of all the ETFs pose a threat, but mutual published papers funds can still play a key role 76 in ﬁnance, over in your portfolio. half are likely 49 / X-RAY: Cover photograph by false.” FIRST GREGORY REID EXXON MOBIL 17 / THE BIG NUMBER Prop styling by Brian Byrne for —Campbell Harvey, Its stock has withstood the Set in Ice Can You Really Beat the Market? global oil crisis—for now. 18 / SOCIAL CURRENCY 20 / FAST TAKES 22 / TRAVEL COLUMNS 24 / THE STATS 34 40 48 84 LOVE AND MONEY THE NEW THE SKEPTICAL MONEY WELL IN THIS ISSUE What to Do RETIREMENT INVESTOR SPENT Before Filing Is This the The Tech Hands-On 6 / Money.com for Divorce Future of Sector’s Secret Learning / 8 Letters & Early planning can Retirement? Sprinters A research project Comments go far in protecting State-sponsored plans Value plays can be the turns into a life skill. 11 / Editor’s Note your ﬁnances. look like a good thing. big winners. by Sushma 80 / The Numbers by Farnoosh Torabi by Penelope Wang by Paul J. Lim Subramanian

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MARCH 2015 money.com WorldMags.net 5 MARCH 2015 VOLUME 44, NUMBER 2 WorldMags.net INVESTOR’S GUIDE 2015 The best moves right now to keep your investing goals on track. money.com/ Money.comMoney.com investorsguide

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TABLET EDITION 8 SMART WAYS TO CUT YOUR TAXES

7 Plus 19 SKILLS steps THAT WILL MAKE YOU to total RICHER OUTSOURCE financial YOUR LIFE! OR AT LEAST THE PARTS fitness YOU HATE FEATURING OUR EXCLUSIVE 7-MINUTE MONEY TAX TIME MADE EASY WORKOUTS …Or at least less of a headache with the help of our 2015 Tax Guide. Find out about changes this year, which tax-prep software will save you the most time, common mistakes to avoid, the best ways to trim your bill, and the answer to the question, “Can I deduct that?” money.com/taxguide BONUS FEATURES PHOTOGRAPHS BY SHAYLA HUNTER (TAX TIME); GREGORY REID (COVER); Get our tablet edition for exclusive content and NEW! RETIRE WITH MONEY bonus video. Find it at CHAD GRIFFITH (WANG); GALLERY STOCK/ALAMY/ISTOCK (ROAD) NEWSLETTER money.com/getdigital. Have a richer retirement with news and advice curated by MONEY’s COLUMNIST retirement expert, Penelope Wang, and delivered to your in-box weekly. money.com/retirewithmoney

TRY THIS AT HOME? ROAD TO WEALTH PHILIP MOELLER If this issue’s outsourcing feature explains strategies to Get personalized advice (page 70) inspires you to order a help you maximize your wherever you are on the path planned meal kit for dinner, watch income in retirement. to ﬁnancial freedom. us test it ﬁrst. @philmoeller money.com/roadtowealth money.com/video

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WorldMags.net LETTERS & COMMENTSWorldMags.netWrite to MONEY: [email protected]

RE: LIVE HAPPILY EVER AFTER [JANUARY/FEBRUARY] TWEETS ABOUT At ﬁrst glance Donna Rosato’s RECENT STORIES article seemed like just another how-to story aimed at retirees. I get better selection Not so. It is by far the most succinct and prices on things and spot-on advice I have had the I would have bought privilege of reading. Two years into somewhere else retirement, I’ve managed, either anyway, plus save through luck or trial and error, time and money. to hit many of the marks she recommends. I’ll start @sdgiant25 on the others now; it’s easier now that I know where Re: “Amazon Prime I should be headed. tim tinley, Jonesboro, Ga. Membership Should Come With a Warning”

BY THE NUMBERS in exchange for a pizza are as good. I hope you’ll Very good points here. Value “Four Season Curb delivered hot. reconsider this year. what you think you’re worth. Appeal” [January/Feb- ron adams rae delvecchio @barefootblonde5 ruary] suggests using Irondequoit, N.Y. Vero Beach, Fla. fancy fonts or letters Re: “The Best instead of numerals for FUND TABLE TALK EDITOR’S REPLY: As the fund Answer to the Question, your house number. In As a longtime sub- business has grown more ‘What Are Your Salary my town it’s mandatory scriber, I look forward to concentrated, we felt we Requirements?’” that the address be vis- the Investor’s Guide could best serve our ible from the street and Fund Tables. Unfortu- readers by devoting space Ha! You couldn’t pay me $35K listed in Arabic numer- nately, you didn’t publish to the most commonly held to go to the Super Bowl. als at least five inches the tables this year. I’ve funds and by providing @thurmzz high. I’m happy with this tried to find other tables of top-performing Re: “Why a Trip to rule, as are police, fire sources for this informa- funds and infographics to the Super Bowl May Not Be responders, and delivery tion—including some explain what happened to Worth the Staggering Cost” people. I’ll gladly give up requiring an expensive your portfolio—and creative house numbers subscription—but none why—over the past year. Let’s hope these GOOD BUSINESS buyers have the I enjoyed “Shifting From balance sheet & down LIVE LONG AND PROSPER Buddy to Boss” [Janu- payment to afford it. Kudos on your Outlook issue [December], ary/February]. Being a Otherwise, here we especially the multifaceted “You Will Prosper boss means viewing go again. Humbug. in 2015.” It was measured, prudent, and based your staff’s successes ILLUSTRATION BY JASON HINDLEY on solid intelligence. I will directly incorporate as your own. If they @_tjld this overarching perspective into my Re: “Why More Home investment plans. excel, you as a manager ken derow, Swarthmore, Pa. will excel as well. Buyers May Be Trading Up to david smolen Bigger Digs This Spring Warsaw, Ind.

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The Skill I Really Wish I Had ceed. It’s in that spirit of conquest that we bring you “19 Skills That Will Put More Money in Your Pocket,” on page 62, part of our three-story cover package aimed at boosting your financial fitness. Rely- ing on expert advice for everything from careers to cars to, yes, what should be in your toolbox, associate editor Susie Poppick and contributor Daniel Bortz have put together a piece that will inspire you to learn a few tricks that can save or make you money—and give you that same sense of accomplishment I feel TAKING A WRONG STEP ON HOME when a level shows that the job just REPAIRS HAS COST completed is perfectly straight. ME PLENTY. Soon I’ll have more time to work on my repair skills. After 17 years at MONEY, including six as editor, I’m HERE ARE A LOT OF THINGS AC units, take care of the lawn, leaving to pursue my second act, a I can’t do. Most of them I’m power-wash the patio. Check. Up- career in teaching. It’s been a privi- more or less accepting of, ping the required skill level a bit, lege to work for you. My deputy, either because of age—a however, can lead to folly. Last year’s Diane Harris, will succeed me here. six-minute mile is no lon- winter prep of the boiler left us with I leave you in very good hands. Tger a possibility—or because my no heat, water jetting from the over- brain has never been up to the de- flow valve, and two leaking first-floor mands of, well, pick any hardcore radiators. The repair of a slowly science. But as you would expect dripping pipe the year before turned the editor of this magazine to be, into a minor flood. The extra holes CRAIG MATTERS I’m a DIY kind of guy, so I’ve always in the basement ceiling from wiring MANAGING EDITOR been particularly frustrated by my the house for speakers remain. ineptitude around the house. Not that I don’t keep plugging twitter.com/craigmatters Chores that rely on brute force away, and I feel especially good are no problem. Install the window when I take on a novel task and suc-

PHOTOGRAPH BY MICHAEL BLANN/GETTY IMAGES BLANN/GETTY MICHAEL BY PHOTOGRAPH MARCH 2015 money.com WorldMags.net 11 WorldMags.net

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adam voorhes MARCH 2015 money.com Photograph by WorldMags.net 17 FIRST WorldMags.netJoin the conversation: twitter.com/money SOCIAL CURRENCY facebook.com/moneymagazine í pinterest.com/moneymagazine

READERS TO THE RESCUE “I’m a new mom. A neighbor I barely know gave me $50 for diapers. Should I accept the money?” SEE 19 Yes, you say whether this is with genuine gratitude SKILLS ) (PAGE 62 should. I think really a gift or a loan. is ﬁne. If things get FACEBOOK WHAT SKILL WOULD it’s a gracious dwight s. weird, you could always QUESTION YOU MOST LIKE TO gesture. Now, Minnesota get him a thank-you OF THE make a point to get to basket of equal value MONTH LEARN THIS YEAR? know this neighbor and I’d say accept and call it even. perhaps you’ll end up it, on the angel with a great new friend- condition that Reno How to restore and repurpose furniture. ship as well! the neighbor —gloria gonzalez adele sliheet allows you to return the If you’re uncomfortable briestensky favor by mowing his accepting the money as Lake Forest, Calif. lawn or something a gift, you could always I’d like to practice more of the techniques from similar. treat it as a loan and Dale Carnegie’s book, How to Win Friends and No, accept money only todd a. berdit pay him back later. Influence People. —mark pavarotti when you know there Enid, Okla. anonymous are no strings attached. To learn a new language. —theresa trimble You don’t know this Unless he seems needy Never turn down person well enough to or creepy, accepting money! Twelve years ago a stranger gave me I love fashion, so I want to $20, and I’m still talking about it. learn to sew and make THE EXPERT SAYS andrew d. designs I can wear. Quite simply, the cash is a gift. It’s not Detroit —kristine weimer intended to imply anything other than “Congratulations! Here is a little Why not? As something to help you buy diapers a mom of two, I want to learn 3-D printing. That’s why (or whatever you need).” Returning I’m amazed I’m taking classes at Berkeley City College. the money would be an insult. Accept by the kind- —derek chartrand wallace it graciously and write a thank-you ness of strangers. Take note. Then, if you don’t need it, pass the money, give thanks, How to stick to a decision! —sidra salman PHOTOGRAPH BY GETTY IMAGES it on to someone who does. and look for ways to pay jacqueline whitmore, founder of it forward. Maybe you manners website EtiquetteExpert.com can return the favor. How to build solar panels and live off the holly perez grid forever. —gabriel colmenero San Jose To use the power of self-affirmation —eva tortora Want solutions to a financial dilemma in your life? and positive thinking. Email your question to [email protected].

18 money.com MARCH 2015 WorldMags.net WorldMags.net

WorldMags.net FIRST WorldMags.netTo see how an insurance claim might affect your FAST TAKES premium, go to insurancequotes.com/calculators.

INSURANCE FILING JUST A SINGLE CLAIM after a car accident raises your auto insurance premium an average of 41%, according to a new study from InsuranceQuotes.com. Small Auto Claims These rate hikes, which usually kick in only if the accident is your fault, range from a high of 76% in Massachusetts to a low of 22% in Maryland. Examining Can Turn Into Big costs for a college-educated, 45-year-old woman with a clean driving record who files a $2,000 claim, the study also found that two accident claims would double Premium Hikes premiums at renewal time. The lesson: After a minor accident, you might want to cover repair costs out of pocket rather than tap your insurance policy. You should file, though, if someone is hurt, says Mi- chael Barry, a spokesman for the Insurance Information Institute trade group. Bodily injury costs, he explains, can reach five times the payout of a property-damage claim. Also file, he says, if your policy includes accident forgiveness—your insurer’s promise to not raise rates after your first fender-bender. —JACKIE ZIMMERMANN

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YOU HAVE A St. Louis chal- top, however, isn’t SHOT AT THE lenges the notion easy. Only 4.5% of QUOTED 1% CLUB that the 1% and the people will be a 1% 99% have little earner for two “You’ve got to beat the New research indi- turnover. Rather, straight years. Just cates that the aver- the authors say, 0.6% will last 10 crooks to the punch… age American has people often move years or longer. a 1-in-9 chance of into and out of Among the They know that the

being in the high- high-income levels. strongest predic- GETTY IMAGES (VELVET ROPE) est tier of earners. For example, 53% tors of high first filer wins.” But only for a year. of Americans are in income, say the A study out of the best-paid 10% researchers: edu- CPA Troy Lewis, on why you should ﬁle your taxes Cornell and Wash- for at least a year. cation, marriage, early: You’ll make it harder for a fraudster to get ington University in Staying at the and race. —J.Z. a refund by submitting a return in your name.

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FOR FAMILIES Find Your Inclusive Resort Don’t get nickel-and-dimed! CLUB MED to 14; younger kids free). vidually,” says Margie Hand SANDPIPER BAY While kids paint in the art of Andavo Travel. Sailing A place with a flat daily rate can Good luck finding a resort studio, swing from the flying classes nearby on St. Lucie mean big savings. —STIRLING KELSO packed with more activities trapeze, or hang out in the River, for one, are $250. For than this sprawling, family- teen lounge, you can take a an extra $85 a day (booked MAYA TULUM friendly Florida Club Med golf or sailing lesson. “You’re in advance), the Sandpiper (from $160 per adult in saving hundreds compared also offers childcare for kids For an escape that combines healthy March; $70 per child age 4 to doing these activities indi- as young as 4 months. living with a healthy dose of pampering, try a package from the 46-cabana FOR Maya Tulum, an hour and a half COUPLES south of Cancún (from $277 per CHIC PUNTA CANA BY person in March, five nights mini- ROYALTON mum). The price, which includes Located on the eastern tip of fresh seafood meals and twice- the Dominican Republic, the daily yoga classes, handily adults-only Chic resort beats other wellness-themed (March rates from $386 for resorts in the region, says two) is the rare Punta Cana Karen Benson of Camelback property to offer a luxury

Travel. The Zoëtry Villa Rolandi getaway at an affordable rate. CLOCKWISE FROM TOP: PHOTOGRAPHS COURTESY OF CLUB MED SANDPIPER on Isla Mujeres, for instance, To save even more, go in April, the gorgeous beach, and BAY; COURTESY OF CHIC PUNTA CANA; COURTESY OF MAYA TULUM RESORT costs $340 a night. Booking when prices drop 23%. Either trying out the slew of bars a full week? The resort will FOR way, you and your signiﬁcant and restaurants. Or just opt throw in two spa treat- SPA other can spend your visit for some alone time: 24-hour LOVERS ments, a $160 savings. playing tennis, lounging on room service is included.

How to Vet SIZE IT UP MIND THE MISNOMER COMPARISON-SHOP What’s your priority? Even at many “all-inclu- Buying an airfare pack- Your Options A resort with more than sives,” you may have to age from the resort Choosing an all- 200 rooms will have more ameni- shell out for extras like golf, spa could save you 5%, says Janet inclusive is trickier than ties—and is likely to be cheaper— treatments, and off-property out- McLaughlin of Provident Travel. picking a regular hotel. whereas smaller properties tend ings. To save up to 15%, try book- That said, always price ﬂights What to consider: to have better service and food. ing those activities in advance. yourself before committing.

money.com MARCH 2015 22 WorldMags.net WorldMags.netemirates.com/us

Introduce flamboyant Europeans to your bold New World friends 4PUNSLH[MLL[HUKZH]VYL_JS\ZP]L]PU[HNLZPUV\Y( 6UIVHYK3V\UNL,UQV`JVTWSPTLU[HY`ZWPYP[Z^PULZHUKHWLYP[PMZ PUL]LY`ZLH[HZ`V\\U^PUKH[UL^OLPNO[Z^P[OZVTLVM[OLÄULZ[ JVTMVY[ZPU[OLZRPLZ -S`,TPYH[LZ[V+\IHPHUKVU[VV]LYNSVIHSKLZ[PUH[PVUZ

Free Wi-Fi on select aircraft (^HYK^PUUPUNPUÅWorldMags.netPNO[LU[LY[HPUTLU[ World-class service FIRST WorldMags.netNext month’s question: Will you save more for retirement THE STATS this year vs. last? To cast your vote, go to money.com.

MONEY READERS WEIGH IN

Absolutely! I’m considering it What to 53% POLL: Expect When DO YOU WANT 23% TO HAVE YOUR OWN BUSINESS You’re the Boss SOMEDAY?

7% 17% STARTUPS THAT GET THE MOST No way I already FUNDING, BY do TYPE (TOP 3) Media and Software entertainment Biotechnology

LARGEST SOURCES OF FUNDING FOR SMALL FIRMS: SELF-FUNDED LOANS LINES OF CREDIT FAMILY & FRIENDS

SALES RACKED UP ON SMALL-BUSINESS SATURDAY (NOV. 29, 2014) AGE BREAKDOWN OF NEW ENTREPRENEURS AN AVG. $162 PER $ SHOPPER 14,300,000,000 30% 23% 24% 23%

MOST NEW BUSINESSES 60% of new jobs generated (WEIGHTED BY POP.) from 2009 to 2013 were BUSINESS OWNERS’ TOP CHALLENGES created by small businesses. 20–34 35–44 45–54 55+ 1. Economic uncertainty MALE VS. FEMALE ENTREPRENEURS’ YEARS ENTREPRENEURS 2. Cost of OF RELEVANT INDUSTRY EXPERIENCE 1. Montana insurance 2. Alaska 3. South Dakota 3. Inability to 4. 20% California 59% 41% access capital 42% 5. Colorado 22% 16%

MORE MONEY, MORE STAFF? In July 2014, 45% of small-business owners UP FROM said they predict an increase in net profits in the next 12 months; 33% said 25% IN More they expect to increase the size of their staff during the same time period. 2012 Up to 1 1 to 5 6 to 10 than 10

NOTES: Online poll conducted in January; 975 responses. Most new businesses and age breakdown of entrepreneurs from 2013. money.com MARCH 2015 SOURCES: 24 WorldMags.netAmerican Express, Fundable.com, Kauffman Foundation, National Small Business Association, U.S. Small Business Administration WorldMags.net TM YOUR TRANSFORMATION BEGINS NOW

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8 Tax-Filing SLIPPING UP on your taxes can exact a high price. Some of the most frequently made blunders— silly things like entering the wrong Social Security Flubs to Avoid number, spelling your name incorrectly, or putting in the wrong account numbers for direct deposit—hold up processing your return and any refund you might be due. That’s bad enough. Other common mistakes cost you more than time. They cost you real money. Just by overlooking deductions, taxpayers give up an average of about $600 at tax time, according to research by

PROP STYLING BY MEGUMI EMOTO EMOTO MEGUMI BY STYLING PROP Youssef Benzarti, an economics Ph.D. candidate at

zachary zavislak MARCH 2015 money.com Photograph by WorldMags.net 27 Plan TAXESWorldMags.net| ROAD TO WEALTH | LOVE AND MONEY | ASK THE EXPERT

the University of California at Berk- One caveat: You can’t take the tions, and sales commissions. eley. He found that many people AOTC for more than four years for Brokerages and mutual fund don’t itemize when they should— any one dependent. So if your kid companies have been required to therefore passing over breaks such takes longer to graduate, you’ll be track cost basis for their customers as the write-off for investment- glad to have the tuition and fees since 2011 and 2012, respectively. related expenses. “Or,” says deduction for year five. But you have to calculate cost basis Benzarti, “they take only the easy yourself on shares bought before deductions like mortgage interest 2. PAYING TOO MUCH TAX those dates. Unfortunately, many and state taxes” and not harder-to- ON INVESTMENTS YOU SOLD investors forget to do that and end prove ones, such as charitable At its simplest, your cost basis for up paying more capital gains than donations and use of a home office. figuring out the tax liability on an they owe when they sell, says Kris With April 15 fast approaching, investment you’ve sold is the Gretzschel, CPA and manager of MONEY consulted with a slew of original price you paid for that the tax and financial planning team tax pros to find out what other investment. It’s subtracted from for Wells Fargo Advisors. savings taxpayers like you the price at which you sell in order Say you purchased 100 shares of typically miss. Review your return to calculate capital gains or losses. a stock for $100 per share and paid to make sure you don’t commit Where it gets thorny is when you a $20 commission; your original any of these costly errors. have to adjust your shares for such cost basis is $10,020. Let’s assume things as stock splits, reinvested you then received a $3-per-share 1. TAKING THE WRONG dividends, capital gains distribu- dividend each year for five years WRITE-OFF FOR COLLEGE that you automatically reinvested. There are two mutually exclusive Your new cost basis is $10,020 plus breaks you can use to ease the pain $1,500 ($300 times five years) for of paying for higher ed. People the dividend, or $11,520. Now say sometimes automatically take the Don’t Get Tripped you sell the stock for $18,000. Using $4,000 tuition and fees deduction Up on Tuition the original cost basis instead of because it sounds like the most the adjusted one, you’d be paying money. But the $2,500 American The $2,500 credit is worth more taxes on $7,980 in gains vs. $6,480. Opportunity Tax Credit is typically than the $4,000 deduction. What Online calculators like the one a better deal, says Melissa Labant, they mean for your wallet: at CalcXML.com can help you tally director of tax advocacy for the up your cost basis. Or you can use American Institute of CPAs. Here’s SAVINGS FOR COUPLE EARNING $125,000 a service like Netbasis.com, which WHO SPENT AT LEAST $4,000 ON TUITION why: The tuition and fees deduction charges $25 per transaction. lowers the portion of your income $2,500 subject to tax. “But a tax credit 3. LEAVING MONEY ON THE yields a dollar-for-dollar reduction TABLE WHEN CHANGING JOBS in the taxes you owe,” says Labant. High earners who had more than You’re eligible for the full AOTC one employer during the year, this if you spend $4,000 on tuition and one’s for you. In 2014 each em- $1,000 fees, as you can slash your taxes by ployer had to withhold 6.2% in 100% of the first $2,000 and 25% of Social Security taxes on the first the next $2,000. Also, your adjusted $117,000 in income (the limit is gross income must be $80,000 or American Tuition $118,500 in 2015). “But that could less if single, $160,000 or less if Opportunity and fees lead the employers to withhold Tax Credit deduction married and filing jointly. (Partial more taxes than you’re required to NOTES: Assumes couple are married, filing jointly, credit is available for incomes up and in 25% tax bracket. Deduction is value for federal pay,” says Suzanne Shier, chief taxes only, not state. SOURCE: Ken Rubin, chair of the to $90,000 for singles and $180,000 AICPA’s Individual and Self-Employed Tax Resource Panel wealth planning and tax strategist for couples filing jointly.) for Northern Trust in Chicago.

money.com MARCH 2015 28 WorldMags.net I HateWorldMags.net Annuities…and So Should You!

Th e Soothing Sound Of Guaranteed Income Many Money investors currently own or are considering annuities. Aft er all, they are sold as safe investments, off ering dependable and predictable returns, no matter what the market does. And that sounds very appealing, especially aft er suff ering through the worst bear market since the Great Depression. So what’s the problem with annuities? What You Might Not Know About Annuities Could Come Back To Haunt You Before you put your hard-earned money into an annuity, or if you already own one, please call 1-800-695-5929 for a special report, Annuity Insights: Nine Questions Every Annuity Investor Should Ask. It could help save you hundreds of thousands of dollars and untold fi nancial heartache. If you own an annuity or if Th e vast majority of annuities are really complicated insurance policies that make someone is trying to sell you it very diffi cult to fully understand the implications and unintended consequences. one, I urge you to call for And once you buy into an annuity, it can be a very diffi cult and potentially very costly your free report. Annuities can lock you into low returns, investment decision to reverse. Th at’s why it is vital you “look before you leap” and complicate your tax situation, ensure that you have “your eyes wide open” before you purchase an annuity. And if tie up your wealth and hit you you already own an annuity, this free report is just as valuable as it can help you sort with high fees. If you have an out the good, the bad and the ugly aspects of annuities. annuity, my team can help you decide if it is right for you. What You’ll Learn From Th is Free Report And if it isn’t, we might be • Th e diff erent types of annuities and the advantages and disadvantages of each able to help you get out of it • Why annuities can be complex to understand and even help you off set some • What you need to ask an annuity salesman when evaluating his product of the annuity surrender fees.* • Th e infl ation risk, tax implications, estate planning considerations and Th is free report could save typical annuity fees you from making one of the Stuck In An Annuity? biggest investment mistakes Because people oft en regret their annuity decision, Fisher Investments has helped of your life. And for owners of annuities, the free analysis many investors extract themselves from annuities. In fact, if you have a portfolio of could be a life saver. $500,000 or more, we may rebate some or all of your annuity surrender penalties. Rebates average over $13,000.* Please call for details and to see if you might qualify.

About Fisher Investments Ken Fisher Fisher Investments is a money management fi rm serving successful individuals as well – CEO and Co-Chief ** as large institutional investors. With over $58 billion in assets under management Investment Offi cer, and with a track record of over 35 years in bull and bear markets, Fisher Investments Fisher Investments uses its proprietary research to manage money for investors. – Forbes “Portfolio Strategy” columnist for 30 years – Author of 10 fi nancial books, including four New York Times bestsellers

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©2015 Fisher Investments. 5525 NW Fisher Creek Drive, Camas, WA 98607. ® Investments in securities involve the risk of loss. Past performance is no guarantee of future returns. * Rebates are for investors who liquidate an annuity with surrender penalties and fund a Private Client Group account. Average rebates from August 2011 to September 2013 were $13,227. Terms and conditions apply. See www.AnnuityAssist.com/Terms-and-Conditions for further information. **As of 9/30/2014. WorldMags.net Plan TAXESWorldMags.net| ROAD TO WEALTH | LOVE AND MONEY | ASK THE EXPERT

Let’s say you worked for $1,500 with no documentation what- their 1040. As a result, they could Company A for half the year and soever. Unlike the old method of end up paying the taxes twice— earned $62,000, then moved to calculation, no depreciation is tak- and the IRS may or may not catch Company B and earned $70,000. en on your home, which means the the mistake, Gretzschel says. Each company would withhold break will not affect capital gains taxes on your total earnings, but when you sell, says Eric Bell, a CPA 7. OVERLOOKING ONLINE LARGESS you should have paid taxes on only with Jones & Roth in Eugene, Ore. There’s been a big increase in $117,000, not $132,000, and you online charitable giving, but many would have overpaid by $930. 6. OVERPAYING TAXES ON people forget to save emailed Tax prep software should catch RETIREMENT DISTRIBUTIONS receipts as they do ones that come this one, but paper filers may get People 70½ or older and retired in the mail. “If you don’t have an snagged. Luckily, it’s an easy fix: are required to withdraw certain organized electronic life, it’s hard to “You can claim the money as a cred- amounts of money from 401(k)s get receipts together,” says Shier. it on line 71 of your 1040,” says Shier. and IRAs each year. When you She recommends searching begin receiving distributions, you your email in-box for “gift” and 4. BLANKING ON WHAT YOU SAVED have the option to have income “donation.” If you are in the 28% It’s not uncommon to forget money taxes withheld. Call it a senior bracket and discover $250 more in socked away in an IRA the previous moment, but retirees sometimes donations to report, you’ll reap year, especially since your broker forget that they chose to have $70 in tax savings. doesn’t send you paperwork confirm- taxes taken out, says Gretzschel. ing contributions (IRS Form 5498) They don’t look closely enough 8. IGNORING THE WRITE-OFF until after you file your taxes. at the 1099-R forms and therefore THAT IS RIGHT IN YOUR HANDS But if you forget to report a don’t input the taxes paid into Those who itemize can write off contribution to a traditional IRA certain investing and tax and you qualify for a deduction— expenses—including tax-prep see IRS Publication 590-A—you software, financial adviser fees, and will miss a break on your current rent on a safe-deposit box where taxes. If the contribution is Why It’s So Easy you store securities—that exceed nondeductible, you still need to to Make Mistakes 2% of your adjusted gross income. file Form 8606 so that you don’t Bell says that those most likely pay income taxes on a portion of The tax code is long and complex— to overcome the 2% hurdle on your withdrawals during retire- and getting longer and more these “miscellaneous expenses” ment, notes Gretzschel. So call complex by the year. have modest income but a fairly your brokerage to refresh your large taxable portfolio that they PAGES IN THE CCH STANDARD memory about 2014 contributions. FEDERAL TAX REPORTER pay an adviser to manage; many retirees who super-saved fit that 5. MISSING OUT ON MONEY ’74 19,500 bill. If you have an AGI of $100,000 BACK FOR YOUR HOME OFFICE and you have $5,000 in investment- Moonlighters often opt to forgo ’84 26,300 adviser fees (equating to 1% on a the home-office deduction, both $500,000 portfolio), you’ll have to because it’s a hassle to keep track ’95 40,500 exclude the first $2,000, but can of the paperwork and because deduct the remaining $3,000. they’re worried about putting up ’04 60,044 While calculating your costs, red flags to IRS auditors. don’t forget that you can add As of last year, however, an al- subscriptions to professional ’13 73,954 ternative, simplified version of the publications, business magazines, write-off allows you to deduct $5 SOURCE: Wolters Kluwer, CCH and investing magazines—includ- per square foot of office space up to ing the one you’re reading now.

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“Save smart, live well, and leave a legacy.” It’s a great mantra for retirement: eight little words that sum up what is a demanding and, we all hope, rewarding pursuit. A simple mantra fi ts, however, because simplicity still has a place in retirement planning. There are actually only a few distinct, very important MONTREAL retirement decisions that really matter. Those are the ones you need to get right, and we will soon help you plan for them in person aboard the fi rst-ever Money Magazine Cruise, September 27 – October 4, 2015. This is a wonderful opportunity for you to come sail, speak, relax, and exchange ideas with some of today’s foremost retirement planning experts as we QUEBEC CITY explore scenic New England and French Canada in six-star luxury aboard the fabulous Crystal Symphony. Let’s get to know one another as we enjoy impeccable service, the fi nest amenities, and gourmet cuisine. And while aboard, you’ll learn some of the best new ideas for: \ Retirement planning MAGDALEN ISLANDS \ Invaluable tools for smart saving \ Flexible spending \ Income investing, and \ Managing assets throughout all stages of retirement. You’ll also take home some specifi c investment ideas direct from our seminar faculty! Join us in search of the greatest destination of all: secure retirement and HALIFAX fi nancial future! With warm regards,

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Their Goal: To Save More While Earning Less by Paul Keegan

FOUR FIXES

FREE UP CASH Chase Mouchet and Bryan Lee of Strategic Financial Planning of Plano, Texas, say the Robertses can trim $1,300 a month by eliminating impulse buys, putting off college savings, and being more economical. Also, Lonnie should sell his $3,700 in company stock, but keep buying at a 15% discount and selling right away (triggering almost no taxes) to generate $1,300 a year. Directing all this to the credit card, A TOO-TIGHT BUDGET they should pay it off in five months. “Lately we are living paycheck to BUILD IN A CUSHION Next priority: paycheck,” says Lonnie Roberts Jr. (right). an emergency fund of five to seven months’ expenses. Shawn is considering returning to work part-time. If AS A NAVIGATION OFFICER on boats carrying supplies to oil rigs in the Gulf of she does, the added income ($1,600 Mexico, Lonnie Roberts Jr. is experiencing the downside of falling fuel a month after tax) would help them prices. As oil companies look to preserve proﬁt margins, Lonnie’s employer hit the goal in another eight months. cut back his pay 9% and eliminated the 4% match on his 401(k) in January. RETURN TO RETIREMENT Lonnie and Even before that, Lonnie, 47, and wife Shawn, 45, felt behind on retirement. Shawn can then max out his 401(k) Now the Cedar Park, Texas, couple are especially anxious, knowing they and two Roth IRAs. Mouchet and Lee WARDROBE STYLING BY ASHLEY HARGROVE; GROOMING BY KELSEY JAMES need to ﬁnd a way to live on less while building up their $245,000 nest egg. also advise putting $500 a month in With Lonnie on a boat for weeks at a time, Shawn gave up her job as an aes- taxable investments. (College savings thetician to be home with Adison, 13, and Aiden, 11. So the family lives on will have to wait until their pay rises.) Lonnie’s now $127,000 salary, 7% of which goes into his 401(k) and 7% to buy- BOOST RETURNS The Robertses ing company stock. After expenses, they don’t have much left over, and their have 80% of their nest egg in a vari- credit card balances have grown to $9,700. Something has to give. “To retire able annuity that’s grown just 2% in 20 years,” says Lonnie, “we know we need to make the right moves now.” total in 10 years, partly due to fees of 3% a year. Instead, the planners suggest transferring the money to a new IRA invested in low-cost index funds, with 70% in stocks, 20% in TOTAL ASSETS: $466,000 TOTAL LIABILITIES: $215,700 WHERE bonds, 10% in real estate. In sum, THEY these steps should allow Shawn and STAND $245,000 $210,000 $7,500 $3,500 $9,500 $9,700 $13,500 $183,000 Retirement Home 529 Savings A/C Credit Car Mortgage Lonnie to retire at 65 and 67. Says savings value plans loan cards loan Shawn, “It’s a relief to know we can do this.”

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If you suspect your spouse is hiding assets or debt, keep an eye out for unusual withdrawals from existing accounts. And if envelopes from unknown banks or brokerages come in the mail, take photographs (rather than opening them); this evidence could give your lawyer ammunition to ask for records from that institution, says Decker.

BUILD CASH RESERVES Ideally you want to have a year’s worth of basic living expenses in a personal account prior to filing. If all your money is commingled and What to Do Before you have no way of opening your own account and making deposits without raising red flags, open a Filing for Divorce credit card with a low or introduc- tory 0% interest rate. HEADED FOR SPLITSVILLE? A LITTLE EARLY PLANNING This step is important because CAN GO FAR IN PROTECTING YOUR FINANCES. divorce proceedings could take six months or more—during which time you may have to find a new by Farnoosh GATHER KEY DOCS place to live and, if you’re a stay-at- “Once divorce has been initiated— home parent, you could lose access Torabi and if the relationship becomes to spousal support. Also, you’ll need adversarial—financial information to lay out $10,000 to $20,000 for a MARCH IS THE HOTTEST month for can disappear or become difficult retainer if you’ll work with an attor- divorce filings, according to legal to access,” says Carl Palatnik, a ney or financial adviser, says Decker. research database Westlaw— certified divorce financial analyst the peak of a rise that begins in in Melville, N.Y. With that in mind, SEVER CREDIT TIES January after the holidays are begin gathering copies of any docu- Finally, try to separate shared over and people’s “new year, new ments that verify assets, liabilities, credit cards, says Palatnik. If your me” resolutions kick into gear. income, and expenses, like bank, spouse is an authorized user on For those of you who see an end brokerage, and retirement state- one of your cards, ask the issuer to to your union in sight, taking some ments, tax returns, and property remove the person since you could proactive measures can help you deeds—and the prenup, if you have be held liable for any debt that’s run get your fair share of assets in the one. This step can take three to six up. If you’re joint users, freezing breakup and reduce your chances months, depending on how accessi- the cards may be your best bet. of getting socked with surprise ble documents are, adds Decker. But wait until right before the big debt. Plus, “you have the poten- Having a paper trail saves stress announcement. Otherwise, the jig’s tial to save thousands in legal and money. “You won’t be captive up as soon as your spouse swipes. fees,” says Lisa Decker, a certified to your spouse, hoping he or she divorce financial analyst in will provide things to you,” says Contributing editor Farnoosh Torabi is the Kennesaw, Ga. Here’s what to do Decker. Nor will you have to pay author of When She Makes More. Catch before announcing you want out: your lawyer to go after this info. her columns and videos at Money.com.

money.com MARCH 2015 chris gash 34 WorldMags.net Illustration by WorldMags.netTAXES | ROAD TO WEALTH | LOVE AND MONEY | ASK THE EXPERT Plan

LONG-TERM CARE Can my wife and I, 62 INVESTING What forms and 58, afford to self- Q do I need to file if I invest in insure for long-term- foreign stocks in Q care costs? —bob hyde, Flemington, N.J. a Roth IRA? —tom Reducing the annual increase in benefits on a long-term- care insurance policy can dramatically reduce the cost. You told us you Assuming you can buy stocks have $2 million ANNUAL PREMIUMS, BY INFLATION ADJUSTMENT, FOR A A and no debt. POLICY PROVIDING THREE YEARS OF $150/DAY BENEFITS A listed on foreign Based on that, you should exchanges in your Roth 5% inflation adjustment $7,700 be able to self-insure IRA—policies vary by 4% without risking your re- $6,000 brokerage—you’ll need tirement lifestyle, says 3% $3,500 to file IRS Form 8938 to report those assets, says Tom Hebrank, a financial NOTE: For a 62-year-old man and 58-year-old woman. SOURCE: Tom Hebrank, CFP, planner in Atlanta. Even if Advanced Planning Solutions David Lyon, CEO of Main you both need three Street Financial in Chicago. years of nursing-home You can avoid this care—which might cost paperwork by sticking SAVINGS BONDS $500,000—your remain- with foreign stocks avail- My mother has a $1 postal able to U.S. investors as ing portfolio could gener- savings bond dated 1939. How ate significant income. Q American depositary re- much is it worth? —kathy LTC insurance can ceipts (ADRs). Most of make sense for those with the largest foreign com- more modest savings that panies have ADRs, which could be decimated by a Congress estab- Service for examination. trade on U.S. exchanges health crisis. But cover- lished the Postal But the historical value and in U.S. dollars. age is pricey: A couple A Savings System in may be greater than the An even easier way to your age will pay $7,700 a 1911 to encourage immi- redemption value, says get foreign exposure? Via an exchange-traded year for a three-year, grants who were used to Mckayla Braden, a senior fund or mutual fund that $150 daily benefit with a saving via post offices in adviser with the bureau: “A 5% annual increase. their homelands to stash lot of these instruments invests in international It needn’t be all or noth- their cash somewhere stopped paying interest stocks. Lyon likes the ing, though. You could besides their mattresses. by the 1940s.” To see if broadly diversified buy limited coverage— Although the program the document is worth Vanguard FTSE All-World reducing the inflation ad- was in place until 1966, it anything, find an ap- ex-U.S. ETF (VEU). But if justment slightly (see stopped issuing savings praiser specializing in you prefer a targeted graphic), cutting the dai- bonds in 1935. So it historic certificates via approach, you can find ly benefit, or buying few- sounds like you have a appraisersassociation ETFs focused on one er years of benefits—and CD rather than a bond. .org or look for similar sector or one region. plan to pay the rest from You can send a copy to documents on sites like savings, Hebrank says. the Bureau of the Fiscal Scripophily.com. By Donna Rosato and Sarah Max

Read more answers from Ask the Expert and submit your MARCH 2015 money.com own question about your finances at money.com/expert.WorldMags.net 35 WorldMags.net When you take charge of your future, the rewards are endless.

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1 National savings rate courtesy of Bankrate.com’s 2014 Passbook & Statement Savings Study, as of 10/8/14; survey is compiled semi-annually April 15 and October 15 of current year 2 Barclays Online Savings Annual Percentage Yield (APY) is valid as of 01/06/2014. No minimum opening balance or deposit required to open. Fees could reduce the earnings on the account. Rates may change at any time without prior notice, before or after the account is opened. No minimum balance to open, but for interest to post to your account you must maintain a minimum balance that would earn you at least $0.01. * From MONEY Magazine, November 2014 © 2014 Time Inc. MONEY is a registered trademark of Time Inc. and is used under license. MONEY and Time Inc. are not afﬁ liated with, and do not endorse products or services of, Licensee. © 2015 Barclays Bank Delaware, member FDIC. WorldMags.net WorldMags.net ed

Ease Away THE YOUNGEST BABY BOOMERS have just turned 50, bringing retirement within sight for the entire generation. But many boomers don’t expect to From Work work at full throttle until the last day at the office. More than 40% want to shift gradually from full- to part-time work or take on less stressful jobs before retiring, a recent survey by Trans- america Center for Retirement Studies found. It’s a concept called phased retirement, and it’s catching on. Last November the federal government okayed a plan to let certain long-tenured

PROP STYLING BY MEGUMI EMOTO MEGUMI BY STYLING PROP workers 55 and up stay on half-time while getting

zachary zavislak MARCH 2015 money.com Photograph by WorldMags.net 37 Retire WorldMags.netDIALING DOWN AT WORK | THE NEW RETIREMENT | INCOME ADVISER

half their pension and full health Price. That’s only slightly less than Devise a plan with your boss, benefits. Says Sara Rix, an adviser the $69,500 you would have had if focusing on how you can solve at AARP Public Policy Institute: you kept working full-time and problems, not create new ones “The federal government’s saving the max until 66. with your absence. Perhaps you program may influence private can mentor younger workers or companies to follow their lead.” START AT THE OFFICE share client leads. “Don’t expect to Formal phased-retirement If your employer has an official arrange this in one conversation— plans remain rare (see graphic phased-retirement program, your it will be a negotiation,” says Dallas below). Informal programs are job is easier. Assuming you’re financial planner Richard Jackson. easier to find—roughly half of eligible, you might be able to work Without a formal program, employers say they allow older half-time for half your pay and still you’ll have to have a conversation workers to dial back to part-time, keep your health insurance. about part-time or consulting Transamerica found. But only 21% Then ask colleagues who have work. To make your case, spell out of employees agree that those made that move what has worked how you can offer value at a lower practices are in place. “There’s a for them and what pitfalls to avoid. cost than a full-time employee, big disconnect between what says Phil Dyer, a financial planner employers believe they are doing in Towson, Md. and what workers perceive their Giving up group health employers to be doing,” says insurance will be less of a financial Transamerica Center president Easy Does It blow if you are 65 and eligible for Catherine Collinson. Medicare, or have coverage So you may have to forge your Two out of five boomers would through your spouse. If not, you own path if you want to downshift like to ease into retirement… can shop for a policy on your in your career. Here’s how. state’s insurance exchange. “Even HOW DO YOU ENVISION TRANSITIONING INTO RETIREMENT? if you have to pay health care

RESIST RAIDING YOUR SAVINGS Work until Not Keep working premiums for a couple of years, Before you do anything, ﬁgure out save enough sure but cut hours you may ﬁnd it worthwhile to 5% what scaling back will mean for reduce the stress of working 12% your eventual full retirement. As a 28% full-time,” says Dyer. part-timer, your income will drop. 16% Ideally you should avoid dipping DO AN ENCORE ELSEWHERE 24% 15% into your savings or claiming This wind-down could also be a

Social Security early, since both Work Take less chance to do something completely will cut your income later. If you’re until a Work as long as demanding/ different. Take advantage of online specific can in same or more satis- eligible for a pension, the formula age similar position fying job resources for older job seekers, will heavily weight your final years including Encore.org, Retired- of pay. So a lower salary may make …But cutting back is still an Brains.com, and Retirement- phased retirement too costly. uphill battle in many workplaces. Jobs.com. You can find low-cost Cutting back your retirement training at community colleges, COMPANIES OFFERING saving, though, may hurt less than PHASED RETIREMENT which may offer programs specifi- you think. Say you were earning cally to fill jobs for local employers. 54% $100,000 and split that in half 18% Or, if you want nonprofit work, from 62 to 66. If you had saved volunteer first. Says Chris Farrell, $500,000 by 60, and you delay author of Unretirement, a new book For at least some For all or tapping that stash or claiming workers most workers about boomers working in retire-

Social Security, your total income SOURCES: Transamerica Center for Retirement Studies, ment: “It’s a great way to discover Families and Work Institute/Society for Human would be $66,700 a year in Resources Management surveys, 2014 what the organization really needs retirement, according to T. Rowe and how your skills might ﬁt in.”

Sign up for a weekly email roundup of top retirement news, insights, and money.com MARCH 2015 38 WorldMags.netadvice from editor-at-large Penelope Wang: money.com/retirewithmoney. WorldMags.net

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Obama proposed again in his most recent State of the Union address. Obama did introduce the myRA last year, which will allow savers without employer plans to put Is This the Future away as much as $15,000 in Treasury securities. But without auto-enrollment, the myRA’s of Retirement? effectiveness will be limited. The Illinois program may STATE GOVERNMENTS ARE STARTING TO STEP IN TO HELP prove to be an appealing proto- WORKERS SAVE. HERE’S WHY THAT’S A GOOD THING. type. (First it will need approval by the Department of Labor and IRS.) Still, each state is crafting by Penelope building a nest egg (see below). its own version. In Connecticut, So states will face a huge drain on the automatic IRA may be paid Wang their budgets as workers with no out as a lifetime annuity or in a savings reach retirement and need lump sum. Indiana is looking at A RARE INNOVATION in retirement services such as Medicaid and setting up a voluntary plan with saving is taking shape right now food assistance. “If Washington a tax credit. “States are a great in, of all places, Illinois. In January were moving faster on this, the laboratory for experimentation,” the state became the first to okay states wouldn’t have to,” says says Kathleen Kennedy Townsend, an automatic IRA for workers at Illinois state senator Daniel Biss, founder of Georgetown University’s certain small businesses that don’t who sponsored the new IRA. Center for Retirement Initiatives. offer retirement plans. Those No question, Congress has long Of course, it’s far from certain companies will be required to dodged addressing the looming that state savings plans will make funnel 3% of their employees’ retirement crisis; it has failed to fix much headway—at 3%, Illinois’s paychecks into a state-run Roth Social Security or create a federal minimum contribution is far below IRA, though workers can opt out. automatic IRA, which President the 10% to 15% of pay that retire- It may seem surprising that ment experts generally recom- Illinois is breaking ground in this mend. And a hodgepodge of state area—after all, the state’s pension IRAs would be less efficient and plans are among the worst funded more costly than a national plan. in the nation. But Illinois is You Need a Plan That said, states can some- actually part of a broad move- times get it right. State-run 529 ment. Some 30 states, including Just having access to a retirement college savings plans have helped plan through work makes a huge California and Connecticut, are countless families with tuition difference in whether you save. developing similar savings bills. The Massachusetts health programs. Says Sarah Mysiewicz % WHO HAVE SAVED FOR RETIREMENT care plan was a model for the Gill, senior legislative representa- national plan that has meant tive at AARP: “We’re reaching a 90% coverage for millions. Perhaps critical mass of states.” the states’ efforts will push retirement savings higher up the 20% A LOCAL APPROACH federal government’s priority list. Why are states taking on retire- If Illinois can lead the way on ment planning? Half of private- Workplace plan No workplace plan retirement, anything’s possible. sector employees don’t have an SOURCE: Employee Benefit Research Institute, 2014 employer plan—a crucial tool for Editor-at-large Penelope Wang tweets about retirement at @PennyWriter.

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earns another $1,000, his so-called combined income rises by that much too, subjecting another $500 of Social Security income to taxes. So the tax bill on that The Trouble With $1,000 won’t be $150 (15% of $1,000) but $225 (15% of $1,500), Working Longer for an effective rate of 22.5%. YOUR WORKAROUNDS EARNING MONEY AFTER YOU START COLLECTING SOCIAL Beefing up your tax-free holdings, SECURITY CAN BE A TAX HEADACHE. by Philip Moeller especially Roth IRAs, can mean money coming in that won’t trigger more taxable Social Security THE QUESTION OF WHEN and how to If the total is less than $25,000 income. (Working less lowers your file for Social Security is a tough ($32,000 on joint tax returns), you tax bill too, but you’re usually one for many retirees—I’ve been owe no income taxes on your better off earning the money.) regularly fielding questions on the Social Security benefits. If the If you can live on just your topic on Money.com. Recently a total is between $25,000 and salary, deferring Social Security reader wrote to say he’d like to $34,000 ($32,000 and $44,000 on until age 70 also helps. Your taxes draw Social Security benefits at joint returns), you may have to pay should be lower while you wait. age 66 yet keep working until 75. taxes on half of your Social And delaying benefits will increase What are the tax implications? Security that’s over that threshold. your monthly Social Security When you continue to work and Above that, 85% of your benefits payments by 8% a year (plus draw Social Security, your benefits may be taxable—the top rate. annual inflation adjustments). are reduced temporarily if you’re Here’s how that could play out. 65 or younger and your outside Take a retiree in the 15% federal HEDGING YOUR BETS income exceeds certain levels. tax bracket who is taxed on 50% Single retirees should think After 65, these reductions do not of his Social Security. When he about one other option: filing for apply. You may, however, owe taxes and suspending Social Security on your Social Security income. benefits at age 66. By doing so you will be able to request a HOW EARNINGS CAN HURT lump-sum payment for all the Not all of your Social Security Working Late suspended benefits anytime income is taxable. Social Security until age 70. uses a measure it calls “combined The downside of earning money Even the best of plans can later in life may be higher taxes on income” to determine how much change, so that payment could your Social Security benefits. of your benefit is taxable, and it come in handy if you face an can be tricky to understand. WORKERS 65 AND OLDER (MILLIONS) emergency cash crunch. But To determine your combined 8 there’s a downside: Once you income, take your adjusted gross 7 request a lump sum, your payout income (check last year’s tax will be valued as if you took return), then add any nontaxable 6 benefits at 66, as will your regular interest income and half of your 5 monthly benefit going forward. Social Security benefit. (If you 4 haven’t started claiming, you can ’04 ’09 ’14 Philip Moeller, a research fellow at the get a projection online by setting SOURCE: Bureau of Labor Statistics Center on Aging & Work at Boston College, up an account at ssa.gov.) is co-author of Get What’s Yours: The Secrets to Maxing Out Your Social Security.

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IN MANY INDUSTRIES, new competition is disrupting the way business is conducted. Think department stores and cable television. Now the $12 trillion mutual fund industry is threatened too. Since 2007, mutual fund assets have grown less than 50%, while the collective amount invested in exchange-traded funds—baskets of securities that can be traded like individual stocks—has more than tripled, to $2 trillion. Traditional mutual funds are suffering from the growing popularity of low-cost passive investing.

PROP STYLING BY MEGUMI EMOTO EMOTO MEGUMI BY STYLING PROP Last year investors poured nearly 10 times as

zachary zavislak MARCH 2015 money.com Photograph by WorldMags.net 45 Invest WorldMags.netMUTUAL FUNDS | THE SKEPTICAL INVESTOR | STOCK X-RAY

much money into index portfolios, until ETMFs arrive in full force— traditional index funds and ETFs. which simply buy and hold all the here are ways you can still put Those portfolios are obliged to securities in a sliver of the market, traditional funds to good use. load up on what are now the most as they put into actively managed expensive parts of the fixed- funds. And the vast majority of SATISFYING YOUR CORE STOCKS income market: U.S. Treasuries ETFs are index portfolios, many When it comes to the bulk of your and agency-backed mortgage debt charging lower expenses than equity portfolio, it doesn’t matter that the Federal Reserve bought in mutual funds. if you use index ETFs or index droves to stimulate the economy. Meanwhile, ETF-like invest- mutual funds as long as you pick a Jeff Layman, chief investment ments could gain traction in the cheap option. “Low cost is low cost, officer at BKD Wealth Advisors, realm of active management. So period,” says Dave Nadig, chief says his firm has switched from far, few actively managed ETFs investment officer of ETF.com. passive core bond funds to active have been launched because the Case in point: MONEY 50 pick managers, who have the leeway to Securities and Exchange Commis- Schwab S&P 500 Index mutual fund diversify into less frothy parts of sion requires them to divulge their (SWPPX) charges 0.09% annually, the market. With few exceptions, holdings in real time—something the same as SPDR S&P 500 ETF (SPY). most actively managed high-grade stock pickers are wary of doing. Keep in mind, though, that not bond portfolios are mutual funds. However, the SEC recently all index mutual funds charge A good option is MONEY 50 pick greenlighted an ETF-like vehicle rock-bottom prices (see chart). Dodge & Cox Income (DODIX), which that solves the disclosure problem. charges just 0.43% in annual fees. Exchange-traded managed funds, FIXING THE BOND PROBLEM or ETMFs, will be required to MONEY has warned of the risks of FILLING A NICHE reveal their holdings only a few putting all your bond money into For narrowly focused assets, times a year, like traditional Samuel Lee, editor of Morningstar mutual funds. Eaton Vance, which ETFInvestor, says you can find won approval for its NextShares traditional mutual funds with ETMF structure and is licensing it deft active managers who have to other money managers, expects the flexibility to “avoid horrendous to launch its first ETMFs this year. Mutual transaction costs.” Surprisingly, Because ETFs and ETMFs are Disadvantage some of these funds charge lower traded on an exchange and don’t expenses than ETFs. For example, require back-office and marketing The rise of indexing and ETFs he prefers Vanguard High Yield functions, they can charge less. highlights the higher costs of Corporate (VWEHX), an actively Eaton Vance expects that on actively managed mutual funds. managed fund that charges 0.23% average a NextShares ETMF could a year, over SPDR Barclays High AVERAGE ANNUAL EXPENSE RATIO cost about 0.63 percentage points Yield ETF, which charges 0.40%. less than a mutual fund version. U.S. stocks Taxable bonds Commodities are another area So while the average actively 1.33% where mutual funds may make managed mutual fund charges $133 1.01% more sense. ETFs that invest in a year for every $10,000 you invest, physical commodities or futures 0.74% ETMFs may cost just $70 a year. 0.52% contracts are less tax-efficient Still, mutual funds have been 0.29% 0.29% than a regular fund that owns around for 91 years and aren’t going commodity-related stocks. the way of the dinosaur tomorrow. Collectively these investments Actively Index Exchange- A big reason is that 401(k) plans, managed mutual traded represent just a minority of your which control more than $4.4 tril- mutual fund fund fund overall portfolio. Still, it means the lion in assets, have yet to embrace SOURCE: Morningstar death of the fund may be exagger- ETFs. Until that happens—and ated—for now.

money.com MARCH 2015 46 WorldMags.net WorldMags.net Get your free guide to tax-free municipal bonds.

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Municipal Bonds Offer Three Big Advantages. Advantage #1: The potential safety of principal. Here’s just some of If you’re a prudent investor in need of investment income, you don’t want what you’ll learn . . . to gamble with your precious nest egg. If you’re nearing retirement or Why municipal bonds may are already retired, you want to do everything you can to make sure your deserve a place in your investments can support your retirement. That’s why our free Bond Guide portfolio. (Page 1) makes “must” reading. Why insured bonds often Advantage #2: The potential for regular, predictable income. provide an extra degree of When you invest in municipal bonds, you typically get interest payments security. (Page 2) every six months unless they get called or default. Because default rates for the investment-grade-rated bonds favored by Hennion & Walsh are Why municipal bonds can historically low (according to Moody’s 2012 research,*) you can enjoy a potentially provide safety of regular income stream in retirement. Please note that if a bond is called, any principal. (Page 3) bond you may buy in the future with the proceeds, may earn more or less How municipal bonds can than the original called bond. potentially provide tax-free Advantage #3: The potential for tax-free income. income. (Page 3) Good news! Income from municipal bonds is NOT subject to federal Strategies for smart bond income tax and, depending on where you live, may also be exempt from investing. (Page 4) state and local taxes. Municipal bond facts every About Hennion & Walsh investor should know. (Page 4) Since 1990, Hennion & Walsh has specialized in investment grade tax-free municipal bonds. The company supervises over $2 billion in assets in over Plus lots more! 15,000 accounts and provides individual investors with institutional quality service and personal attention.

Dear Investor, FREE We urge you to call and get your free Bond Guide. Having Bond Guide tax-free municipal bonds as part of your portfolio can help get your investments back on track and put you on a path to Without Cost or Obligation achieving your investment goals. Getting your no-obligation guide could be the smartest investment decision you’ll make. CALL Sincerely, (800) 316-1837 (for fastest service, call © 2014 Hennion and Walsh. Securities offered through Hennion & Walsh Inc. Member of FINRA, SIPC. between 8 a.m. and 6 p.m.) Investing in bonds involves risk including possible loss of principal. Income may be subject to state, local Hennion & Walsh, Bond Guide Offer or federal alternative minimum tax. When interest rates rise, bond prices fall, and when interest rates fall, bond prices rise. *Source: Moody’s Investor Service, March 7, 2012 “U.S. Municipal Bond Defaults and 2001 Route 46, Waterview Plaza Recoveries. 1970-2011.” Past performance is not guarantee of future results. Parsippany, NJ 07054 WorldMags.net Invest WorldMags.netMUTUAL FUNDS | THE SKEPTICAL INVESTOR | STOCK X-RAY

catalyst was the return of Steve Jobs, which signaled an overhaul of how Apple did business. Jobs immediately negotiated his company’s survival by getting a $150 million investment from rival Microsoft, and then jump- started research and development, which led to 1998’s hit iMac.

CASE 2: CASH SAVES DELL In the early ’90s, PC maker Dell made big missteps, including a failed launch of notebook comput- ers. At one point in 1993 the stock had lost two-thirds of its value. Dell still had a decent amount of cash on its balance sheet, though, allowing it to fight another day. The Tech Sector’s That was key for Westwood Holdings’ buy decision in 1993, says chief investment officer Mark Secret Sprinters Freeman. In 1997, Dell reached Westwood’s target price with gains FAST-GROWING HARES GET THE ATTENTION IN TECH, of about 1,700%. BUT SOMETIMES THE STODGY VALUE PLAYS WIN THE RACE. BARGAIN HUNTING IN 2015 A cheap stock that passes both the CASE 1: APPLE’S DECISIVE TURN catalyst and cushion tests today by Paul J. Today Apple is the world’s biggest is the enterprise software giant Lim company, worth $683 billion. In Oracle (ORCL). Investors fear that 1997, though, Apple was a $3 bil- new cloud-based services, which TECH INVESTORS swing for the lion computer maker bleeding allow users to access software fences and often ignore price, market share. It traded at around online, will eat into Oracle’s hoping to get in on “disrupters” that six times earnings, vs. 20 for the business. That’s held the stock at can overturn an industry. Compa- S&P 500. 13 times earnings. But Edward nies don’t need profits to get steep A cheap stock price wasn’t Jones analyst Bill Kreher argues valuations (see Twitter, Tesla, and enough to make it a deal. “In tech, that Oracle’s own cloud push could Box). The mood now resembles that you have to have some semblance be a catalyst, allowing the company of the first dotcom era, which ended of a catalyst, because investors to cross-sell more to its customers. 15 years ago when the bubble burst sooner or later demand revenue This will “bolster ongoing in March 2000. But the lesson of growth,” says Paul Meeks, a port- maintenance revenues,” he says. that episode isn’t just “don’t go folio manager for Saturna Capital. Meanwhile, Oracle has $40 billion there.” There were smart ways to His firm purchased Apple in 1998 in cash, a strong defense against buy tech in the 1990s. Price did at a split-adjusted price of $1.17, would-be disrupters. matter, combined with two other which it still owns today at $117. factors: a catalyst or a financial Saturna couldn’t have seen the Assistant managing editor Paul J. Lim is cushion. The same is true now. iPod or the iPhone coming. Its the author of three books on investing.

money.com MARCH 2015 taylor callery 48 WorldMags.net Illustration by WorldMags.netMUTUAL FUNDS | THE SKEPTICAL INVESTOR | STOCK X-RAY Invest

X-Ray: Exxon Mobil ITS STOCK HAS WITHSTOOD THE GLOBAL OIL CRISIS—FOR NOW. by Ryan Derousseau

While consumers have delighted in plummeting prices at the pump, the same can’t be said for Big Oil. Energy stocks have sunk 24% since last summer, when crude prices peaked before being cut in half. Shares of Exxon Mobil, though, have held up well, falling just 10%. That’s because the country’s biggest oil company has worked hard to diversify from drilling—to natural gas and businesses that beneﬁt from falling oil prices, like reﬁning. Yet some of those ancillary endeavors face their own challenges, and analysts don’t expect oil to stay this low forever.

Surviving the Slide A Different Crisis The Rebound Diversification has helped Exxon Attempts to diversify into natural While Exxon loses less when oil Mobil shares weather oil’s fall. gas, though, have backfired. slides, it lags when prices recover.

ENERGY PRODUCTION FROM OIL NATURAL GAS PRICE ($ PER MIL. BTU) STOCK PERFORMANCE Exxon Mobil Chevron 66% $6 53% 57% 90% $4 37%

$2 –11% –20%

Since oil’s peak When oil surged Exxon ConocoPhillips Chevron 2/14 12/14 in June 12/08–6/14

Exxon isn’t immune to oil price In June 2010, Exxon bought Being a safe haven cuts both ways. fluctuations. As crude has slid to natural-gas producer XTO for When oil prices fall, diversification under $50 a barrel, the company has $35 billion, in part to hedge against shields Exxon’s stock. But when lost nearly $25 billion in potential the possibility of a weak oil market prices rebound, says Youngberg, net income over the past six months, such as this one. At the time, natural- Exxon shares will underperform. according to Oppenheimer analyst gas prices were sinking because of Already, U.S. suppliers have begun Fadel Gheit. Yet the country’s the global financial panic, and XTO slowing the growth of production. second-most-valuable corporation was willing to sell. Ever since the So global supply should begin to can take it. Unlike other oil giants, transaction, though, natural gas has ease, pushing oil prices up modestly, Exxon remains a big player in refining. continued to slide, and prices are analysts say. The U.S. Energy Infor- The company also produces plastics now down 40% since the purchase. mation Administration forecasts from its oil. These businesses benefit Fracking technology has boosted that crude oil will rise to more than from low oil prices and account for natural-gas production faster $55 a barrel this year, and Raymond 22% of Exxon’s profits. “If one than demand has grown, creating James predicts that it could reach business isn’t doing well, the other a supply glut that is expected to $75 a barrel next year. This is likely side is,” says Gheit. keep prices low for years. In re- to boost shares of Exxon’s oil-centric Exxon also buys back a lot of its sponse, Exxon has kept a lid on its rivals like Chevron more. For conser- shares, letting it acquire competitors own gas production. “So far the XTO vative investors, that may be a small using stock without hurting existing deal hasn’t paid the dividends they price to pay for peace of mind. And shareholders. With oil sinking, many originally thought,” says Edward Exxon’s dependable 2.9% dividend firms could be for sale, says Gheit. Jones analyst Brian Youngberg. yield doesn’t hurt either.

NOTES: Energy production is based on liquid sources. SOURCES: MARCH 2015 money.com Edward Jones, company ﬁlings, EIA, YCharts WorldMags.net 49 money cover story WorldMags.net plus 19 Skills That Will Put More Money in Your Pocket P. 62 How I Outsourced My Life 07 P. 70 steps to total financial fitness

A six-year bull market, rebounding real estate prices, and improving job prospects have helped you get in better shape. Don’t become complacent. Even dedicated exercisers have weak spots and bad habits. To raise your game, follow this plan.

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PHOTOGRAPHS BY GREGORY REID

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WorldMags.net WorldMags.net 01 see just what shape hen you think about what kind of shape you’re in your finances are in nowadays, you may be EVEN IF YOU’RE a dedicated exerciser, W you could be ignoring whole muscle feeling downright buff. groups, leaving yourself susceptible to Retirement plan balances are at injury. For example, 39% of people earn- record highs, home prices are back to pre-recession ing more than $75,000 a year wouldn’t levels in most parts of the U.S., and the job market is be able to cover a $1,000 unexpected expense from savings, according to a the strongest it’s been since 2006. No wonder Ameri- 2014 Bankrate survey. So the first step cans are more optimistic about their finances. is to establish your baseline by asking Given that, it’s understandable that some bad habits yourself these questions. How are my vital signs? Tick off may be creeping back into your routine. Americans, the basics: Check your credit (see overall, are slipping into a few: Household debt is at a right), tally up your emergency fund (aim for six months of living ex- record high, fueled by an uptick in borrowing for cars penses), look at how much you are and college and more credit card spending. Vanguard contributing to your retirement plans, reports that investors are taking risks last seen in the and get a handle on how you’re split- ting up your savings between stocks pre-crash years of 1999 and 2007. and bonds (see page 55). What’s more, the financial regimen that’s been working well for you of late may not cut it anymore. In this slow-growth, low-interest-rate environment, both stock and bond returns are expected to be below average for several years to come. 02

To pump up your ﬁnances in 2015, you need to shake WARDROBE STYLING BY CHARLOTTE SIMS; up your routine. The seven-step plan that follows can GROOMING BY CLAUDIA ANDREATTA help you do just that. Plus, we’ve added six quick work- find your PROP STYLING BY MEGUMI EMOTO; outs, inspired by the popular exercise plan that takes just seven minutes a day, that will push you to raise your motivation game in no time at all. What are you waiting for? OKAY, YOU’VE CHECKED your vitals, and you’re probably feeling pretty good about your starting point. According

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Less than half of workers have of Northstar. As a young saver, you tried to calculate how much money shouldn’t be worried about high 7-MINUTE CREDIT WORKOUT they’ll need for retirement, EBRI’s debts due to a house and education, 2014 Retirement Confidence Survey Farrell says, as long as you can han- found. Take five minutes to use an dle the payment, will be debt-free by online tool that will show you if you’re your sixties, and are using debt only on track, such as the T. Rowe Price to fund investments in a low-cost or check Retirement Income Calculator. high-earning future, such as a low- your What’s my day-to-day maintenance home or new score routine? The very first thing READER MOVE: job skills. Farrell suggests in Rochester, N.Y., CPA David HOW I MADE your twenties and thirties Young does with his clients is A BUDGET you should limit total mort- Grab a credit go over their spending. Bud- I laid out every gage debt to less than twice card and start the clock. geting apps, he notes, “make payment I made your family income. In your the invisible credit card last year in a fifties, you should have a 0:00 charges visible” (see page 58). spreadsheet. mortgage no higher than There’s only one of information on Now I have a As important as the “how what you make. At any age, legit site to get your your borrowing and very precise report: annual- credit history. Save much” is the “on what,” says total education debt should idea of what I creditreport.com. a copy to scan for Fred Taylor, president of should budget not exceed 75% of your pay. Click “Request errors later. Northstar Investment Advi- What’s my biggest weak yours now!” for in 2015. 3:00 sors in Denver. Divide your spot? You need to guard —BOB CORWIN, 0:07 Now you’re ready expenses into the essential PUNTA GORDA, FLA. against familiar risks, like The form is super to get your actual costs of living, investments in insufficient insurance (see easy: Enter your score. Some card your future (savings, education, a page 60). But David Blanchett, head name, date issuers, including home), and the discretionary spend- of retirement research for Morning- of birth, Social Citibank and Dis- ing you have the flexibility to cut. star, says you should also think about Security number, cover, offer it free, Am I juicing my finances too less obvious threats. Will new tech- and address. (Don’t so start there. worry: Using your much? In other words, how toxic is nology put your livelihood at risk? 3:37 SS is safe here.) your borrowing? Your total debt mat- Are you counting on a pension from No luck? Surf over ters. But the kinds of debts you have a financially shaky firm? Do you live 1:03 to myfico.com, and the implications for your future in an area, such as Northern Califor- When you’re fin- where you can buy are crucial too, says Charles Farrell, nia, where home values hinge on the ished, hit “next” to it for $20. Pick pick which reports “FICO standard” author of Your Money Ratios and CEO success of one industry? you want. You’re and check the box eligible for one free next to the agency report per year from you picked for each of the three your credit report. agencies, Equifax, See that promo to Gallup’s annual Personal Financial tiger even when you’re doing great. Experian, and Trans- code box? Google Situation survey, 56% of people in Make a specific goal. When you Union. Opt for just “myfico promo one for now. code.” Enter the households earning $75,000 or more show up at the gym without a plan, 1:55 best discount say they are better off financially now there’s a good chance you’ll shuffle on you find: We Next, verify some than they were a year ago, up from the treadmill for a half-hour and call snagged 20% via personal info. The 44% who felt that way in January 2014. it a day. Your financial life is no differ- retailmenot.com. questions vary, but But just as even the most devoted ent. To boost your performance, start expect to confirm 4:51 gym-goer can get complacent, your by zeroing in on a goal. A study by details like names of Check out and financial confidence could stop you Gail Matthews, a psychology profes- previous employers you’ll be prompted from reaching the next level. “In good sor at Dominican University, found or your bank. to create a profile. economic times people save less and that you’re 42% more likely to achieve 2:02 6:30 spend more,” says Dan Geller, a behav- your aims just by writing them down. Hit submit and Fill in your credit ioral finance expert and the author of Indeed, people with a written finan- presto: your credit card info, hit “sub-

ILLUSTRATIONS BY BEN MOUNSEY BY ILLUSTRATIONS Money Anxiety. Keep the eye of the cial plan save more than twice as report, with pages mit,” and there’s your credit score. WorldMags.net WorldMags.net

WorldMags.net WorldMags.net7 steps to total financial fitness much as those without a READER MOVE: search found that bank plan, says a Wells Fargo HOW I FIXED account holders who got MY MIX survey. The more specific reminders about their 03 the goal, the easier it is to I switched my savings goals put away investments tackle. Rather than plan more cash than people from 60% stock to “cut costs,” focus on, who didn’t. It’s easy to and 40% bonds work on say, paying off your mort- into 60% bonds set recurring calendar gage five years early. and 40% index reminders on your PC or Buddy up. Much as a funds. As a phone, or try a service your core workout partner pro- result, I’m like FollowUpThen.com, vides motivation to get to seeing pretty which lets you schedule the gym, recruiting a steady growth emails to your future self. THE KEY TO lifetime fitness is a powerful family member or friend and fewer wild Stickk it. Need some- core—strong and flexible abdominal to hold you accountable days with huge thing with more teeth? and back muscles that help with every- fluctuations. is a good way to stay on The website Stickk.com thing else you do and protect against —LARRY PACE, track. In another study OAK ISLAND, N.C. allows you to pledge a aches and injuries as you age. In your by Matthews, some par- sum of money toward a financial life, your core is your long- ticipants shared their goals with goal, sign a commitment con- term savings, and strengthening it is a friend via weekly updates— tract, and pick a friend to moni- simple: Settle on the right stock/bond achieving their aims 33% more tor your progress. Achieve your mix, favor index funds to keep costs often than those who did not. aim, and you get the money back. low, fine-tune your approach periodi- Get a nudge. Sometimes you Miss it, and you lose the money, cally, and steer clear of gimmicks such just need a reminder. A study by which is donated to as “nontransparent ETFs” or “hedge the Center for Retirement Re- charity or a friend. funds for small investors”—Wall Street’s equivalent of workout fads like muscle-toning shoes. Push yourself when you’re young. 7-MINUTE PORTFOLIO WORKOUT Investors 35 and under seem to be so concerned about a market meltdown that they have almost half their portfolios in cash, a 2014 UBS report found. perfect your Being too conservative early on—put- investment mix ting 50% in stocks vs. 80%—reduces the likely value of your portfolio at age 65 by 30%, according to Vanguard re- Here’s your warm-up: Dig out statements for index funds, but you can 5:10 search. For starting savers, 90% is a all your investment use the categories to Clicking “Show Instant commonly recommended stock stake. accounts—401(k), IRA, shop anywhere. X-Ray” will give you a Do a U-turn at retirement. Accord- spouse’s 401(k), old full analysis, including 2:00 ing to Wade Pfau of the American Col- 401(k), any brokerage a detailed stock/bond lege and Michael Kitces of the Pinnacle At Morningstar.com, find allocation, a geographic accounts. Advisory Group, you have a better shot “Instant X-Ray” under breakdown of your 0:00 Portfolio Tools. Enter the holdings, and your port- at a secure retirement if you hold lots If you don’t already have ticker symbol of each folio’s overall dividend of stocks when you’re young, lots of a target allocation for fund you own, along with yield and price/earn- bonds at retirement, and then gradu- your age and risk toler- the dollar value. Oops. ings ratio. ally shift back to stocks. Their studies ance, steal one from the Your 401(k) has sepa- found that starting retirement with pie charts at T. Rowe rately managed funds 5:50 Price’s Asset Allocation that lack tickers? Use Look deeper to see how 20% to 30% in stocks and raising that Planner. Or take one the index fund that’s concentrated you are in by two percentage points a year for 15 minute to fill out Van- most similar to your cyclical stocks, say, or years helps your money last, especially guard’s mutual fund rec- fund’s benchmark (this tech companies—a sign if you run into a bear market early on. ommendation tool. You’ll could result in a you might not be as get a list of Vanguard 10- minute delay). diversified as you think or taking risks you didn’t MARCH 2015 money.com WorldMags.neteven know about. 55 7 steps to total financialWorldMags.net fitness 04

found that households earning READER MOVE: average of 25%. To see what $80,000 or more must save HOW I SAVED your post-work payments will bulk up MORE 15% of earnings to live a simi- look like, check out Putnam’s I paid off my lar lifestyle in their post-work calculator (you must be a cli- student loans years. While that assumes ent to use it) or try the one your and refinanced you’re saving consistently by my mortgage in offered by T. Rowe Price. 35 and retiring at 65, it does 2014. Now I’ll Take advantage of wind- savings include your employer match, save that extra falls. Don’t let all your “found so in reality, you may be pitch- money and money” get sucked into your ing in only 10% or so. grow my emer- checking account. Instead, IT’S BEEN A great ride. But the bull If you weren’t so on top of gency fund. make a point to squirrel away market that pumped up your 401(k) it by 35, you have a couple of —E. KING, at least a portion of bonuses, over the past six years won’t last for- options: Raise your annual VIA FACEBOOK savings from cheap gas, FSA ever. Indeed, as of early February the number (Pfau puts it at 23% if reimbursements, and tax re- market was down so far this year. you start at age 40) or catch up by funds. Eight in 10 people get an aver- Stocks should gain an annualized 7% saving in bursts. Research firm Hearts age refund of $2,800; use it to fund over the next decade, while bonds will & Wallets found that people who your IRA by the April 15 deadline, says average 2.5%, says the latest outlook boosted savings for an eight- to 10-year Christine Benz of Morningstar. from Vanguard—the firm’s most sub- period (when mortgages or other big Free up cash. Interest rates remain dued projections since 2006. expenses fell away) were able to get low. If you’re a refi candidate, you may While you can’t outmuscle the mar- back on track for retirement. be able to unlock some money that ket, you do have one power move at Think income. New data show that could be better used. (See The Big your disposal: ramp up savings. people save more when they see how Number, page 17.) Tom Mingone of Find your saving strategy. So how their retirement savings translates Capital Management Group of New much should you sock away? This into monthly income, says Bob Reyn- York suggests using your refi to pay year Pfau launched Retirement- olds, head of Putnam Investments. off higher-rate debt. Say you took a Researcher.com, a site that tests how The company found that 75% of people PLUS loan (now fixed at 7.21%, though different savings strategies fare in who used its lifetime income analysis many borrowers are paying more) for current economic conditions. He tool boosted their savings rate by an your kid’s tuition: Pay that down.

7-MINUTE SPENDING WORKOUT

find Buying on the web is con- into your bookmarks bar. 3:49 venient—maybe a little too Skip the lengthy explana- 1:03 bargains convenient! Using smart tion video and try it out Take it for a spin. Recently, apps and browser add-ons yourself. Use the “TrackIf” online by scrolling to an HDTV on will help you score deals. button to see a three- BestBuy.com and clicking month pricing history of 0:00 on the yellow InvisibleHand any item and request an Surf to getinvisiblehand banner at the top of the email if the price drops. .com. This browser exten- page, you would have seen 5:58 sion scours the web for the links to ﬁve other sites sell- best price on whatever item ing the TV for less. Grab your smartphone and you’re looking at online. search for “PriceGrabber” 3:06 in the app store. This app 0:33 Head to TrackIf.com, a site lets you scan barcodes Adding it is simple. Scroll to that monitors price changes when you’re out shopping “Download Now,” and in two on millions of products. and see comparisons on money.com MARCH 2015 56 WorldMags.netclicks InvisibleHand pops Click “Install TrackIf.” in-store and online prices. WorldMags.net

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05 7-MINUTE BUDGET WORKOUT

camera from BorrowLenses.com or track your burn see if your area has a tool-lending spending library where you can borrow a rototiller or other item for free. the fat Take a “financial health” day. To cut regular expenses such as cable, phone, or insurance bills, set aside a EVEN IF YOU hit the gym regularly, few hours to compare rates from dif- you can probably still pinch an ferent firms or to ask your current inch here and there. provider for a discount, says Joe Seven minutes is a Your spending, too, is bound to Ridout of advocacy group Consumer little tight to create have a little flab. But here’s the Action: “A lot of companies rely on a budget, but it’s it right. To fix that, good news: If you haven’t combed your inertia to keep business they no enough to tackle click the “Transac- through your budget in a while, longer deserve.” the first step: pull- tions” tab. ing together all you may be surprised to discover To really dig in, take a day off to 3:34 your spending info how new technologies, shifting devote to haggling with insurers, See those “uncate- using Mint. You’ll business models, and other recent banks, and more. Robert Brokamp, gorized” charges? need your credit You can select them developments can help you find a financial planner and writer for and debit cards to to choose a correct more money to save. Motley Fool, persuaded his firm to get started. Join the sharing economy. Are set aside a day for employees to deal label. This is pretty 0:00 tedious, so tick the there any big-ticket items with finances. “A lot of these Surf to Mint.com box that says “al- you could get away with READER MOVE: things have to be done dur- and register for a ways re-categorize renting rather than buy- HOW I CUT ing work hours,” he says. free account. X as Y.” That way, MY BILLS ing? For instance, maybe Tap technology. Sites Mint will put all 0:42 now that the kids are in I dropped my and apps that monitor your future transactions Mint asks for your college or you’ve retired cable company spending are great for from that retailer in and started credit card provid- you could do without that catching expenses that the right place. watching tele- ers and bank. As second car, which, accord- could fall through the 5:02 vision online. you type in each ing to AAA, costs almost cracks. BillGuard, for one, one, a list of possi- When you did that, —CHRISTINE FILIPO- $9,000 a year to own and VICH, VIA FACEBOOK flags mistaken or duplicate ble matches will you probably also operate. Consultancy Alix- charges and allows you to pop up. Select the noticed some right one and enter charges Mint tried Partners found that by 2020 more challenge them right from the app. the online login and to identify but than 1 million families will use car- Technology can also help rein in password you use placed into the sharing services to avoid buying a impulse purchases and find deals on for that account. wrong bucket. second ride. In some areas, Zipcar the things you do buy. To avoid the (Mint is a secure Scroll through and Enterprise Car Share charge daily deluge of online shopping site and cannot get those and correct less than $50 a day for fully insured temptations, use Unroll.me to pull to your money.) them the same way. cars with gas, while a one-way car- all retailer emails into a single mes- 3:02 6:30 pooled ride with Uber or Lyft can sage. Out in the real world, try the Mint will need a Grab your phone cost as little as $2.25. GroceryIQ app before you hit the minute to pull in and download the For vacations, how about trying market. Create a shopping list using all of your transac- Mint app. Having a home-swapping service such as the app and it will search for coupons tions, which it the program handy automatically slots will help you keep Intervac or HomeExchange.com to for those specific items. Finally, gas into categories like on top of charges. chop that hefty hotel bill? Then may be cheap, but don’t just fuel up “Cellphone” and 7:00 there’s the pricey item you need willy-nilly; use an app like GasBuddy “Groceries.” Prob- Now you’re ready to only once or twice. Rent that fancy to get the best price possible. lem is, the app click the “Budgets” doesn’t always get tab and create a spending plan. money.com MARCH 2015 58 WorldMags.net WorldMags.net7 steps to total financial fitness 06

ful and valued at their cur- READER MOVE: performers, simply asking rent jobs. Interested? Get on HOW I’M goes a long way. A new study switch up IMPROVING hiring managers’ radar by MY 401(k) from Payscale found that 75% peppering your LinkedIn of employees who requested I joined the your profile with keywords relat- 401(k) com- an increase got one, with 44% ed to the type of job you mittee at work landing the exact figure they want (see box below for and made two asked for. The odds of receiv- routine more). You can also sign up proposals: adding your requested amount with the website Poachable, ing target-date are even better if you’re and get the Poacht app. List funds and a already a high earner: Those WHEN YOU HIT a fitness plateau, tak- your dream job and résumé Roth 401(k) op- with a salary of $150,000 or ing a new class or picking up a sport for recruiters to browse. tion to our plan. more had a success rate of can be the key to breaking through Be bold. That said, maybe —STEPHEN PINTAR, 70%. Before you ask, get a GREENDALE, WIS. to the next level. The same concept you love your job or just can’t sense of the budget. You have applies to your career. Landing a move right now. That doesn’t more influence when you new job will likely result in a salary mean settling for a middling raise. show you see the boss’s side, says 18% to 20% higher than what you’d While the biggest bumps do go to top career coach Lee Miller. get via an internal promotion, according to a study by Wharton professor Matthew Bidwell. 7-MINUTE CAREER WORKOUT Thanks to a rapidly rebounding job market, this is the best year since the recession to get a new gig. More flex your linkedin muscles than one-third of employers expect to add full-time employees in 2015, according to CareerBuilder’s annual Your profile is 14 times as change it, LinkedIn lets page. You’ll be transported likely to be viewed if it has you peek at what others in to the Public Profile page, job forecast, up from one in four last a picture. So find a profes- your industry are using. where you can create your year. Here’s how to stand out. sional-looking photo and own. Stick with something 2:34 Get the inside scoop. Employee upload it to your computer simple, like your name. Check out your profile referrals generate a full 40% of new before you start the clock. summary. Are you hitting 5:35 hires, according to the JobVite 2014 0:00 all the keywords you’ll Bulk up your recommen- Recruiting Survey. So rather than Log in to your LinkedIn need to show up in re- dations—politely. Write a scouring the job boards, talk to peo- account and select “Edit cruiter searches? Take sincere post for one of ple you know and ask about open- Profile.” Click on “Add a minute to scan some your contacts, and then ings at their firms. Love a certain Photo” to upload the pic job descriptions in your email asking if she’d mind company but don’t know anyone you’ve selected. You’ll see profession to make sure doing the same. there? Reach out to your personal a yellow square that you you’re using the right can drag to change the language. network or tap your LinkedIn con- position and size of the 5:00 tacts to see if anyone can connect picture. Make sure you’re Nothing says you to an employee. centered and hit save. Make yourself poachable. Em- LinkedIn novice 1:05 like an alphabet- ployers are increasingly courting By default, LinkedIn uses soup URL. passive job seekers, says John Hol- your job title as your Create a cus- lon, editor of TLNT.com, which cov- profile headline. Instead, tom version by ers HR trends: “These are employed write your own bold word- clicking the LinkedIn URL workers who may be willing to ing. Stumped? When you listed right beneath your switch jobs but aren’t actively highlight the field to photo on the Edit Profile searching.” Recruiters like these candidates because they’re success- WorldMags.net WorldMags.net 07

Let your scale motivate you. Uni- lose 1o pounds … and not versity of Minnesota researchers found that dieters who weighed themselves daily lost an average of 12 pounds in two just for your waistline years; weekly scale watchers lost only six. The once-a-day group was also less likely to regain the weight. Need help? YOUR PHYSICAL HEALTH and your finan- and regular checkups. Here’s how to Our sister publication, CookingLight- cial health go hand in hand, especially make it easier to do the right thing. Diet.com, offers healthy-eating cus- as rising deductibles and increased Don’t pass up freebies. Under tomized meal plans. cost sharing leave you on the hook for Obamacare, annual physicals and a Make tracking a no-brainer. Peo- more expenses when you get sick. long list of valuable preventive care, ple who count their steps are more Plus, your pocketbook takes a hit from cholesterol tests to colonosco- motivated to work out. But the novelty when you’re overweight: The annual pies, are fully covered by insurance, of fitness trackers like the Fitbit can cost of carrying extra pounds—includ- with no out-of-pocket costs. quickly wear off. More than half of ing medical expenses, sick leave, and Be your own doctor. Not quite, but owners stop using them, a recent Uni- even gas for the car—is $524 for wom- tech has made staying on top of your versity of Pennsylvania survey found; en and $432 for men, according to a health easier—especially important a third bail within a month. 2010 study by the George Washington with a chronic condition such as high If that’s you, add a tracking app such University School of Public Health blood pressure. The Health app that’s as RunKeeper or Moves to your phone and Health Services. And Fidelity es- part of the new Apple operating sys- instead. “Many people carry smart- timates that a couple who retire in tem unveiled last fall and the Health phones everywhere,” says Mitesh S. good health will spend 20% Tracker app for Android devices Patel, an internist and researcher at the less on medical care than allow you to upload, input, Wharton School. “If we really wanted a couple in poor health will. and share health and to improve the health of the population, You know what helps: exer- fitness data. smartphone trackers are an easier cise, sleep, a healthy weight, place to start.”

7-MINUTE INSURANCE WORKOUT

make sure 0:00 your clan won’t need to a suggested amount of Visit lifehappens.org, and replace 100% of your coverage. This is a good you’re fully select “Start calculating income, you will want to starting point but may your life insurance needs.” cover regular expenses. miss some details. Say covered you’d like to cover a por- 0:21 4:19 tion of your kid’s tuition; The first part asks about Step 4 asks for an esti- the calculator doesn’t You’ll need some finan- the expenses your family mated inflation rate (pre- allow for partial payment. cial info for this one. Pull will incur if you die. Life- populated with 3%) and 5:59 together an overview of Happens suggests bud- after-tax net investment 2:30 your investments, what geting $15,000 or 4% yield (pre-populated with Go to intelliquote.com for you owe on your mort- of your estate. A funeral Next, you’ll calculate the 6%). To be more conser- instant quotes on term- gage, the amount of life typically costs about money your family would vative, decrease the yield. life policies from a range insurance you currently $10,000, so if you won’t need if you died today, of insurers. (Don’t be have, as well as saving leave major debts, and how much your 5:00 surprised if you get some and debt numbers. $15,000 is fine. spouse might earn. While Now the site will spit out sales calls.) WorldMags.net WorldMags.net7 steps to total financial fitness

Pagel, a finance professor at Columbia whim of the market and make poor tim- don’t weigh Business School. One reason: Pagel ing decisions,” he says. “If your process says savers who train themselves not is sound, you don’t need to panic.” yourself to peek are more likely to invest in stocks. And research by Dalbar finds Put your energy into what really every day that investors’ tendency to panic sell in matters. Once you’re in good shape bear markets has cut their average moneywise, don’t lose sight of why annual returns to 5% over the past 20 you’re working out. Numerous studies CLOSELY MONITORING years, while the S&P 500 earned 9.2%. have found that once you have enough BONUS your progress may help income to cover a moderate lifestyle, STEP! with an actual fitness Change your mindset. Settle on a spending money won’t make you plan. For financial fitness, stock/bond mix, and keep investment happier. Spending your time well will. it’s better to lay off looking at how costs low. When you have the urge to Notes Tampa financial adviser Holly you’re doing. A growing body of sell, remind yourself that your time Thomas: “Where you wake up. The research finds that well-diversified horizon is at least 20 years, says Eric things you do. The people you spend investors who check their balances Toya, a financial planner in Redondo time with. These lead to more experi- infrequently are more likely to end up Beach, Calif. “Outcome-oriented inves- ences of happiness than anything you with bigger portfolios, says Michaela tors agonize over every up-and-down buy.” That’s a plan you can stick to.

MARCH 2015 money.com FEEDBACK: [email protected] WorldMags.net 61 WorldMags.net

WorldMags.net WorldMags.net 19 skills that will put more money in your pocket

Some of the best investments you can make aren’t financial. Master these techniques and secret shortcuts to earn more on the job, cut down needless costs, and grow your wealth over a lifetime. by daniel bortz and susie poppick

ILLUSTRATIONS BY BEN MOUNSEY

MARCH 2015 money.com WorldMags.net 63 WorldMags.netskills that make get techy Computer-science grads earn $700,000 over the average BA holder in a career, but those of us with English and psych degrees aren’t out of luck. you Learn new tech tricks to leverage skills you already have.

activity, being the office EASY Excel guru makes you valuable. Two skills to money Google better. Seriously. focus on: building charts Say, for example, you (great for presentations) need stats about a prod- and pivot tables (to sum- uct’s market share: Use marize lots of data). The “OR” (in caps) to Google ExcelIsFun YouTube chan- for different words that nel is loaded with lessons. meeting room is where we might capture the same know the exert leadership and develop thing (like “percent” and ADVANCED credibility,” says corporate “proportion”). And check the image search results: trainer Dana Brownlee of Want to compete with secrets Professionalism Matters. The data you need may be true techies? Codecad- Don’t dominate—nudge the in a chart someone has posted. Go to support. emy.com can get you group toward concrete goals. started for free learning of career If someone can’t let go of a google.com/websearch for more power tips. code for building web- point, try saying, “Good idea! sites. Expertise in Ruby I’m writing it down.” You’ve on Rails—certiﬁcation ninjas now freed a room of grateful INTERMEDIATE testing is $150—snags co-workers to move on. an average salary of If there’s any need to $110,000, says data UEXCHANGE FAST FAVORS quantify your business’s crunched by qz.com. Research by Adam Grant at the Wharton School has shown that successful people do more favors at work. But don’t be afraid to ask for tiny favors too. We may feel more warmly toward people after lending pick the right language them a hand—our brains figure we must have done so because It’s easier than ever to dip a we like that person. It’s been toe into languages with free called the Benjamin Franklin tools like Duolingo, a site and effect: The Founding Father app that make learning like recalled winning over a a game. If you then want to legislative rival after borrowing a book from him. ramp things up, real-world classes run UMASTER THE MEETING “Our attitudes often follow our about $300 for 20 hours of instruction. The average pay bump from behavior instead of vice Invest your time and money wisely: PHOTOGRAPH BY AP IMAGES a promotion for managers or versa,” says David McRaney, The payoff is in less commonly studied upper-level executives is 7% who writes about such languages. A Wharton/LECG Europe study or more, according to Mercer. psychological quirks in his book found that speaking German translated But how do you get one? “The You Are Now Less Dumb. into a higher wage premium than for second languages overall. Ambitious? money.com MARCH 2015 There’s a big market for Mandarin. 64 WorldMags.net WorldMags.net19 SKILLS THAT WILL MAKE YOU MONEY

(No-frills rules for business) get social with your customers If you run a business or work in marketing, social media like Twitter seem like a great way to get your message out. But remember that WRITE users have zero interest in following companies that clutter their BETTER feed with ads. Use social to establish your expertise or spark ideas; then when people are in the market for what you sell, they’ll remember you. An example from Hannah Morgan, co-author of Social Networking for Business Success: This is a great A clear, unfussy writing style tweet. will get your ideas heard at work. (HR pros ranked writing second, behind only computer aptitude, among skills applicants most often lacked.) Harvard professor Steven Pinker, author This is of the new book STEVEN PINKER a bad The Sense of tweet. Style, gave us these tips for better writing. 1 take back your AVOID FANCY WORDS YOU GET YOUR RÉSUMÉ DON’T NEED OR UNDERSTAND. THE ATTENTION IT “Fulsome” (as in “fulsome workday DESERVES praise”) does not mean full; it means insincere. If you use “Ten years ago job seek- hoity-toity words to sound If you get paid a flat salary, ers would write a full- posh, you will look pompous turning a 10-hour day into page cover letter,” says and may say the opposite of nine more-productive executive résumé writer what you mean. hours is like giving yourself Wendy Enelow. A better an 11% hourly raise. approach now is an email designed to cut through UHANDLE EACH EMAIL 2 the electronic clutter. JUST ONCE. Reply, file, or Use the subject line to CUT UNNECESSARY WORDS. trash—don’t come back to it note your key selling John Kerry once said, “The later, says former Fidelity points. Instead of “Direc- President is desirous of trying president Bob Pozen, author tor of sales position,” to see how we can make our of Extreme Productivity. write “Director of efforts in order to find a way Sales—10 Years of Ex- to facilitate.” What he meant UHIDE THAT EXTRA CHAIR. ceeding Sales Quotas— was, “The President wants You’ll discourage chatty MBA.” In the body of the to help.” Much better. co-workers from lingering. email, spotlight a major UTIME YOUR BREAKS. accomplishment. Follow 3 Research shows your brain up with three big career loses focus on a task after wins in bullet points. REVISE. And better still, show about 90 minutes. it to someone. What’s clear to you may not be clear to someone else. MARCH 2015 money.com FEEDBACK:[email protected] 65 WorldMags.netskills that save get more from your home garden you You can pay $5 a pop for salad greens in those clamshell packages; seeds cost pocket change. If you like getting your hands dirty and you eat three or four salads or two packs of berries a week, you could save hundreds over a money summer. Try these tips from Mike McGrath, host of You Bet Your Garden, a WHYY radio show and podcast.

GET IT OFF THE GROUND THE SCENARIO

You know what car you want, Although “flat earth” WIN ON THE and you want to compare gardening was popular CAR LOT (BEFORE prices at different dealers. hundreds of years ago, YOU GET TO THE PICK THE RIGHT PLANT modern gardeners know CAR LOT) SEND AN EMAIL THAT SAYS ... they have to protect their Raspberries require little plants from weeds by “I’m looking for an out- care and tend to be growing them in contain- the-door quote on the 2015.” expensive at the store, at ers or raised beds. This Then specify the trim, options, $3 for a 6-ounce pack. has several benefits. It and color. Plan ahead before you haggle You can freeze leftovers prevents grassy weeds with a salesperson who does for the winter too. Give from spreading roots and this every day. There’s plenty WHY IT WORKS less of your garden to allows excess water to up for grabs: According to If you call around, dealers may plants that require a lot drain. And you can create Kelley Blue Book, the fair price try to draw you into the shop of time to develop, like lanes between the beds for a new Toyota Camry is without giving you the info you bell peppers. so you aren’t walking on $2,000 less than the manufac- are looking for. By specifying and compacting the soil turer’s suggested retail price. all the details and making sure around your plants. ROTATE SALAD GREENS to get a price that covers every- Plants thrive in fluffy, aerated soil. THE SCENARIO thing, you’ll be able to make GARY OMBLER/GETTY; COURTESY OF PIPPA CALLAND; SHAYLA HUNTER

Mixed salad greens, such CLOCKWISE FROM TOP LEFT: PHOTOGRAPHS BY DAVID COOK/ALAMY; apples-to-apples compari- You see an ad for a specific as baby leaf lettuces and sons, says Joe Wiesenfelder, car at a great price. arugula, are tough and BECOME A WATERING GURU executive editor of Cars.com. grow quickly—even after And you’ll have neutralized a you cut them all off. The One of the most common CALL AHEAD AND SAY ... salesperson’s big advantage— best technique for har- errors of novice garden- “I want to see if the 2013 the gift of gab. vesting greens is the “cut ers is overwatering and preowned hybrid SUV is still and come again” method: drowning plants. If it available. It is? Great! Can you Start from one end of rains at least an inch a have it ready to test-drive your plot of greens and week, you may be able to when I get there?” cut the plants about one skip watering. The best inch above ground level. tool for keeping track of WHY IT WORKS The same plant your plants’ water diet is Car dealers may advertise one may grow a rain gauge (about $10 car to get you to the lot and back four at gardening-supply then avoid showing it to you so or ﬁve stores) to clue you in to you buy a pricier one, says times in a how much or little extra Philip Reed, senior consumer season. water your garden needs. advice editor at Edmunds.com. WorldMags.net WorldMags.net19 SKILLS THAT WILL MAKE YOU MONEY PIPPA CALLAND 6 tricks great home cooks know BUILD THE PERFECT TOOLBOX Chris McGuire of design-build firm Vujovich recommends these: Ideas from Pippa Calland, a 2008 winner on claw hammer, 11-bit cordless screwdriver, utility knife, adjust- the Food Network chef competition show able wrench, slip-joint pliers, level, hacksaw, combination Chopped. She runs Mid St8 Taco at the West square, and tape measure. Total cost: $130 Shore Farmers Market in Lemoyne, Pa. BUY THIS NOT THAT ULEARN “FORGIVING” TECHNIQUES: Pot roasts and other braises give you room 25-foot tape measure 35-foot tape measure for error, and you can use less expensive meat cuts. Bone-in chuck roast is $7 a pound, vs. boneless rib eye at $13.

UKEEP A SHARP KNIFE: Good knives reduce waste when you trim fat. The best tool is a simple sharpening stone (about $40); keep the blade at a 20-degree angle. McGuire says, “I like the 25-footer because it fits every standard- UPLAN AHEAD: A few days before size room. A 35-foot tape measure becomes cumbersome when you plan on cooking, write out a list of you have to use it for a smaller project.” ingredients so when you go the store you buy only the amount of each item you will actually need. Cooking from home saves you money only if you use your purchases completely. snag travel bargains UWORK WITH WHOLE SPICES: Ground Outsmart the airline reservation spices are quicker to go bad. It’s easy to system: Try shopping for each toast and grind spices yourself—you’ll passenger separately, says Rick Seaney need a cheap coffee grinder. Using coarse salt instead of salt from a shaker of FareCompare.com. When you buy two allows you to season more accurately. or more tickets in a single online transaction, most airlines require the seats be sold at the same price. If you’re UPREHEAT PANS: Always let that cast- iron skillet heat up before you put fat in shopping for two people and there’s only the pan. You’ll be able to use less butter one seat left at the $150 promotional or oil to create a nonstick surface, and offer, you’ll pay a higher amount for each the food you cook will absorb less of it. ticket unless you do two transactions. Price-shop hotels online, but then call USKIP STORE DRESSINGS: They cost the front desk: You may be able to nab a $3 to $5 a bottle, and who knows what’s better deal, says Robert Firpo-Cappiello, in them? Easy recipe: one tablespoon of editor-in-chief of Budget Travel. olive oil, juice from half a lemon, salt, and pepper. Toss with cherry tomatoes and arugula. MARCH 2015 money.com WorldMags.net 67 WorldMags.nethelpskills that PAINT A ROOM YOURSELF you Rich O’Neil of Masterwork Painting & Restoration in Woburn, Mass., explains how to get professional results: USTART RIGHT AND STAY SMOOTH: A pro could easily charge $1,600 for grow a big job, vs. up to $400 in materials on your own. Dust surfaces and tape up edges and moldings you don’t want painted. Painting should go in two types of strokes. First apply a money Don’t forget to pick thin layer for coverage. Then paint any loose fuzz off the roller! over it to even and smooth. never lose a receipt VET ANYONE The key to never losing track of important WHO WANTS TO receipts for expenses and taxes is to keep HELP YOU … just one bin and make sure to empty your pockets and purse into it every night. Then set a regular date on your calendar to empty the bin and organize the receipts. … INVEST YOUR MONEY “If you wait too long, you may not even printouts of their latest sales. remember your purchase,” says Beware of lots of unfamiliar Pay attention to the average professional organizer Andrew Mellen. credentials. Some, like number of days their homes certified financial planner, are sit on the market. Also, look well-recognized. Others, not online at the descriptions they so much.“People try to create write for houses. According an impression of specialized

to data crunched by Zillow CLOCKWISE FROM TOP LEFT: ISTOCK; SAWAYA PHOTOGRAPHY/GETTY; expertise that often isn’t .com, longer descriptions tend

backed up by educational or MARK BASSETT/ALAMY (SIGN); CRAIG MITCHELLDYER; ISTOCK getting it at a parts to get higher prices. The testing requirements,” says store. words “investor,” “TLC,” and REPLACE Barbara Roper of the even “nice” pull prices down. YOUR CAR’S Consumer Federation of ENGINE FILTER AIR FILTERS America. Finra.org has a list of … START A BUSINESS designations, with details on It’s in a housing in the how much (or little) it takes to Looking for a partner? Here engine compartment; get one. Also use Finra’s you have to think differently You can do it yourself in most cars there’s a BrokerCheck tool to see if an about someone’s track record: every 12,000 miles on cover you can unlatch adviser has a disciplinary Failure is part of the startup newer cars. You’ll save with your fingers. record. And look at fees—they game, so it’s not always a red about $50 in labor add up (see the second flag, says Nathan Beckord of costs, says Mike For- CABIN FILTER equation on the opposite page). startup consulting firm sythe of Haynes, an VentureArchetypes. To find a auto-repair guidebook You’ll typically find this partner beyond your circle of …SELL YOUR HOUSE publisher, and pay 25% inside the car, behind contacts, check out online less for the filter by the glove box. Interview at least three matchmakers CoFoundersLab WorldMags.netpotential agents and ask for and Founder2be. WorldMags.net19 SKILLS THAT WILL MAKE YOU MONEY ROBERT ZAGUNIS

professor Jordan Ellen- learn how to size berg, author of How Not THREE to Be Wrong, says that EQUATIONS over many years “ex- up a tenant THE SAVVIEST penses add up—or, more INVESTORS mathematically precisely, UNDERSTAND they multiply up.” Put With low mortgage rates and a strong rental market, real estate $100,000 into a fund with investing may look attractive. But being a landlord means dealing a 1.5% expense ratio, with a complex human variable: the person you rent to. Besides making clear that “pets allowed” doesn’t mean “zoo,” W EQUATION NO. 1 assume a 6% underlying return, and you’ll get here are three more ways to keep away trouble: S&P 500 DIVIDEND YIELD about $560,000 after + 40 years. With the same ABOUT 4.5% ULOOK FOR LONGEVITY: = pre-expense return in a Having lived three years or THE EXPECTED LONG- very low-cost index fund TERM RETURN ON STOCKS charging 0.1%, you’d have more in the previous $990,000. To see for apartment is an indicator of This formula, known as the yourself the true long- responsibility, says Mike Gordon equation, assumes term costs of a fund you Butler, author of Landlording stocks get their ultimate are considering, use the on Auto Pilot. Use this along value from being able to mutual fund fees calcula- with a credit check. one day return earnings to tor at Bankrate.com. UVERIFY INCOME: Tenants investors. (That’s true should be willing to let you call whether or not a company W EQUATION NO. 3 their employer. currently pays a dividend NET INCOME / or reinvests in the busi- SHAREHOLDER EQUITY UTRIP UP FAKE REFERENCES: ness.) Anything above or = When you get on the phone, below that is a result of RETURN ON EQUITY Jeffrey Taylor, a property investor sentiment. You manager and founder of can look up the current Return on equity is a classic MrLandlord.com, suggests S&P 500 dividend yield, measure of a company’s making a “mistake” in your one year,” says Taylor, “ask to which is 2% now, at multpl ability to put shareholders’ questions, to be sure you’re confirm if they’ve been .com; the 4.5% is how money to good use. (Equity talking to a real supervisor. “If working there three years much you can expect is roughly the cash they’ve only worked there for and see if you’re corrected.” dividends to grow based on investors put into the the past. So today the business, plus retained expected long-run return earnings.) Calculate is 6.5%. Adviser and au- a stock’s ROE using thor William Bernstein the balance sheet says thinking about this and income number brings you down statement. and keep a good to earth in boom years, Looking for and can reassure you consistent ROE tenant happy If you’re when the market is down. of 15% or more “helps steer you getting new renters every six months W EQUATION NO. 2 toward profitable to a year, you may be losing up to $2,000 A 1.5% EXPENSE RATIO companies and for turnover, says Taylor. You might = away from reward your tenants with an anniversary OVER 40% OF YOUR speculation,” says gift, like a bottle of wine. MONEY AFTER 40 YEARS Robert Zagunis of the Jensen Funds, which Mutual fund and adviser screen for stocks with expenses seem so tiny— 10 years of high return just 1% or so. But math on equity, like 3M (MMM). MARCH 2015 money.com WorldMags.net 69 WorldMags.net

WorldMags.net WorldMags.net by cybele weisser how i ILLUSTRATIONS BY CHRISTINA UNG outsourced

I tried out a spate of new services that promised to my life take over my most hated chores. Some of them bought me a lot more time for myself; others cost me a lot more than they were worth.

WorldMags.net WorldMags.net shipping

onday morning. I sit down at packages my desk and turn on my com- THE CHALLENGE: My love for Internet puter, and up pops the per- shopping is greatly eroded by my hatred sonal to-do list that makes for its inevitable byproduct: having to me want to head back to bed: pack up returns and take them to UPS, Plan the week’s meals, buy USPS, and FedEx. Sending toys my kids outgrow to their cousins results in the groceries, figure out summer- same time suck and then some, since camp options for my 4- and we never have the right size box. M 7-year-old sons, buy a birthday gift for my mother-in-law, ship back the growing pile of things bought online we didn’t end up liking, dispute a medical bill…and so on. Sigh. Then my in-box flashes with a magical email from my editor admin at MONEY: Would I be willing to test-drive some outsourcing assignments services? Would I ever! I picture my list practically crossing off itself. After all, these THE CHALLENGE: When it comes to mak- days you can hire someone to do even the most mundane chores— ing plans and decisions, I like to be well- at a price point that isn’t out of reach for the average Joe. And a informed about all my options. Perhaps too informed. Online research and phone host of new web-enabled services have made the process a snap. calls can easily eat up a couple of hours of Not that I needed more convincing, but it turns out there’s also my workday. If only I had a personal an economic rationale to employing someone to do your dirty secretary… work. Sure, it’s clearly beneficial for a highly paid lawyer to bill OUTSOURCING OPTIONS: Through sites more hours while someone mows his lawn, says Justin Wolfers, like Fancy Hands and Tasks Everyday, a professor of economics at the University of Michigan. But even you can hire an online assistant who, in theory, can do anything a regular assistant if you use the extra time not to pad your income but simply to could do via Internet or phone. do something productive or to relax in some way that will make WHAT I TRIED: Fancy Hands. Examples you more efficient at work tomorrow—I see reality TV in my of tasks listed on its site included schedul- future!—“there’s a kind of hourly wage in that,” Wolfers says. ing, restaurant selection and reservations, I go back to my to-do list and find six categories of chores to complex Internet research, and bill outsource. For privacy’s sake, I decide not to fob off jobs that negotiation. require giving out very personal info like Social Security and COST: Monthly billing plans range from bank-account numbers, so I’m stuck with that medical bill— $30 for five tasks to $150 for 50. I paid $60 for 10 requests. Most jobs take about 20 though I could have easily found a way to delegate it. minutes of work, says CEO Josh Boltuch. Undoubtedly your cost-benefit analyses will be different from If you request something that takes much mine. But my experiences can help you decide which jobs are longer, you’ll be billed for additional tasks. worth outsourcing… and hopefully buy you more time for you. TIME SAVED: Less than 30 minutes.

HOW IT WORKED: On the FancyHands dashboard, I entered instructions for several tasks, which included ﬁnding a trendy money.com MARCH 2015 72 WorldMags.net restaurant for a party of six—including one WorldMags.netOUTSOURCE YOUR LIFE

OUTSOURCING OPTIONS: Shipping and TIME SAVED: 45 minutes total—15 to find to allow for a profit margin). Another half- delivery apps, such as Shyp, Postmates, and pack a box, 15 trekking back and forth hour later, I got a text with a link to a USPS and Shipster, have proliferated in urban to USPS, 15-plus minutes waiting in line. tracking number and a receipt. centers like New York City and San Fran- HOW IT WORKED: I pressed “add ship- WOULD I DO IT AGAIN? Definitely. cisco. Those outside metro areas can use ment” on the app, gave my address and de- I might have been able to send the all-purpose outsourcing site Taskrabbit livery info, and uploaded a photo of what package a bit cheaper if I’d gone to (see “Odd Jobs,” below) but will pay more. I wanted to send. Within 30 minutes a bike USPS on my own ($10 according to an WHAT I TRIED: Shyp courier arrived at my door with a big white estimate I got), but I didn’t have to buy bag, placed my goods inside, and left for a a box and I saved a lot of time. Shyp COST: $5 fee to pick up, pack up, and central van where Shyp packs up the goods says it guarantees shipments up to ship 10 pounds of toys to the cousins, plus and finds the best price among shippers (the $1,000, but I might still hesitate if my a $13 charge from the U.S. Postal Service. company gets bulk discounts, then marks up items were precious or personal.

who doesn’t eat gluten—on an upcoming Saturday night, compiling a detailed list of odd jobs the range with good re- summer camps nearby, haggling with my views. And since they’d be cable company for a better price, and at home in my house with me, I helping me find a gift idea for my mother- picked individuals who in-law based on her interests. looked like they probably The results? The tasks were completed THE CHALLENGE: Some WHAT I TRIED: Task- weren’t serial killers. in anywhere from 30 minutes to a few items on my to-do list rabbit, which has the WOULD I DO IT AGAIN? hours by four separate assistants. I got a have been there for years largest national network Maybe. Both Taskers, fairly table for six on Saturday at a sort of hip because they seem so of contractors. young folks who did the health food restaurant—though when I endlessly procrastinate- COST: $75 for the re- work to fund other pur- asked for a menu with one gluten-free able. Two examples: cata- suits, were friendly and option, I didn’t mean we all wanted loguing the several hun- cord cataloguing; $88 to polite. However, I didn’t quinoa and kale. While I received a nice dred vinyl records my clean out the fridge. You love spending hours in my rundown on four local camps, at least spouse acquired during pay by the hour, from $15 home with strangers. Also, four more I knew of were missing. My college into a spreadsheet to $35 for unskilled labor the price seemed high. cable bill didn’t budge (instead, I was so that he’d know what he depending on the person, And I think I could asked if I wanted to add a movie channel has (and what he could, I location, and task. hope, one day toss), and have done both jobs for $5 more). And I opted not to buy my 1 TIME SAVED: 3 ⁄2 hours faster myself (though in mother-in-law any of the 15 generic pres- deep-cleaning the gunk the case of the fridge, less ents the assistant suggested, nine of out of the crevices of our HOW IT WORKED: I en- thoroughly—who knew which were from Gifts.com. decade-old refrigerator. tered a description of my masking tape would ex- job on Taskrabbit.com, WOULD I DO IT AGAIN? No. I ended up OUTSOURCING tract crumbs?). I won- and the site popped up having to complete many of the chores OPTIONS: Taskrabbit and dered whether getting myself. To be fair, this probably wasn’t Agent Anything help you profiles of dozens of paid hourly may have the best route for meaningful gift ideas. find pre-screened inde- “Taskers” available in the caused the Taskers to But the other jobs should have been pendent contractors time window I chose. Each work less efficiently. Still, more up their alley. Boltuch told me the willing to execute almost profile showed the Task- since I would have other- company usually excels at administrative any odd job. Zaarly er’s bill rate (each sets his wise put off these jobs tasks. Maybe I’m just picky. Or maybe is similar for home own), a photo, and cus- infinitely, it was probably part of the problem is that the site can’t services; Thumbtack, for tomer reviews. I looked for worth the money to actu- give you the benefit of a real assistant— home repair. people on the lower end of ally get them done. that is, someone who gets to know you and whom you can come to trust to serve money.com as your proxy. WorldMags.netFEEDBACK: [email protected] 73 WorldMags.net grocery shopping

THE CHALLENGE: The black hole that is my family’s refrigerator seems to need restocking every ﬁve to seven days. So my husband and I spend a lot of time at the grocery store. Taking our kids along for the trip ups the time commitment by 25%, the aggravation factor by 50%, and adds a few bucks in impulse purchases/bribes.

OUTSOURCING OPTIONS: Grocery delivery services are becoming wide- spread; between Peapod, Fresh Direct, Safeway, and more recent entrant Instacart, you can avoid the supermarket in most major cities. Amazon, Wal- Mart, and Google are also getting into the game, but coverage is still limited.

WHAT I TRIED: Instacart.com, which sends a “personal shopper” to a local store of your choice. I placed two orders: one from a supermarket, one from Costco.

COST: $3.99 fee for orders over $35—or $5.99 for one-hour delivery— plus tip. That fee was the lowest of all the services that were available in my pick a substitute or have the company buying area. (You can also choose a subscrip- deduct the charge? tion for $99 that gets you two-hour Both times, I got a text that a shop- clothes delivery for a year.) per was en route to the store; once TIME SAVED: About 90 minutes from a shopper herself to let me know THE CHALLENGE: My husband and I both for the supermarket; three hours an item from my list was out of stock. hate to sacrifice our free weekend time with for Costco. No items were missing from either or- trips to the mall, so we order a bunch of der, though one apple was mushy and basics each season from well-known online HOW IT WORKED: After entering my I’d have looked for riper bananas. stores and catalogues. The results? At best, zip code on Instacart’s site, I was given pretty lackluster duds, and at worst, a lot of a list of local grocers from which it de- WOULD I DO IT AGAIN? Absolutely. time spent returning ill-fitting garments. livers. I clicked on each item I wanted. Delivery of bulky items like the 20- Prices were about the same as what I pack of paper towels I got from OUTSOURCING OPTIONS: Online find in the stores. (Instacart says it Costco was a no-brainer. While it’s personal-shopper sites for men include makes its money from fees paid by tougher to trust in a stranger’s ability Trunk Club and Bombfell; women can participating retailers, as well as deliv- to pick produce and meat, the time choose from Stitch Fix, Tog & Porter, and ery charges, rather than on markup.) savings was worth an occasional bum Keaton Row (MONEY’s parent company, Before checkout, I was asked what I apple. Plus the delivery fee was can- Time Inc., is an investor in the last). Typically wanted to do if an item wasn’t avail- celed out by the lack of purchases to these sites ship you a box of brand-name able: Would I rather have the shopper quiet my antsy kids. clothes picked by stylists who aim to match WorldMags.net your taste based on information you pro- WorldMags.netOUTSOURCE YOUR LIFE

planning Apron selects a menu for you, though you can opt out of meat and/or fish. In both meals cases, food arrived in a cooler parceled 3 lessons i’ve out among a few dozen clearly labeled learned about plastic bags, with pictorial instructions. THE CHALLENGE: Every time I think “Let’s All six recipes took longer than the outsourcing have something new for dinner!” I lose a promised 30 to 40 minutes to get on the half-hour to scanning food blogs, plus an- table. For Plated’s Italian wedding soup, other half-hour shopping for ingredients. for example, step one alone involved YOU HAVE TO and lunchboxes LEAVE YOUR topped the list, OUTSOURCING OPTIONS: Meal-kit peeling, rinsing, and chopping six kinds PRIVACY AT THE but it just didn’t services such as the widely available of veggies. The results ranged from so-so DOOR. Don’t like make sense to Plated.com, HelloFresh.com, and Blue (the meatballs for the soup were gloppy) strangers in pay someone to Apron will send premeasured ingredients to pretty good (my husband liked Blue your home? Not stand at my sink for select menus. Apron’s roasted chicken with grapes and sunchokes and Plated’s Cuban crazy about di- for 10 minutes WHAT I TRIED: Plated.com and chicken). My picky sons were not fans of vulging your every night. Blue Apron any of the dishes. waist size on THE MORE SPE- the World Wide COST: $72 and $60, respectively, for WOULD I DO IT AGAIN? No. The meals CIALIZED THE Web? Too bad. three meals for two people from each were far too time intensive. By Thursday TASK, THE LESS Even though I service. (Plated is a subscription service, night the whole family was relieved to sit LIKELY YOU’LL wasn’t willing to although you can cancel at any time.) down to our usual 20-minute baked- BE HAPPY WITH give out my chicken dinner. That said, the services THE RESULTS. TIME SAVED: At least an hour for plan- SSN, I still had aren’t aimed at moms in search of dinner There’s a reason ning and shopping, but I added about 30 to reveal an aw- on the double; Plated’s PR person says cleaning is one minutes to my usual cooking time. ful lot, including they’re “geared toward young profession- of the most of- my tastes, my HOW IT WORKED: For Plated, I chose als, millennials, and empty-nesters.” ten outsourced location, and three dinners from seven options; Blue Basically, everyone but me. chores: Every- (literally) my one knows what household dirt. a sparkling toilet THE WORST looks like. It’s a JOBS ARE OFTEN lot tougher for vide. You pay for the clothes you keep, plus husband okayed four of four, but ultimately TOO PETTY TO BE someone you’ve in some cases a small fee. (The companies two didn’t fit and two didn’t suit his taste. OUTSOURCED. To never met to fig- buy the clothes at cost and then mark My Stitch Fix shipment was similarly help me decide ure out what them up a bit.) challenged: Two of three shirts gaped on what to delegate, you’d consider a my chest, and two items were clearly suitable gift for WE USED: Bombfell and Stitch Fix, both economist Jus- meant for someone half my age. (The tin Wolfers sug- your mother-in- of which offered reasonably priced gar- sheer tank I got would’ve been the talk gested I make a law, how tight ments (about $50 to $150 a piece). of elementary-school pickup!) None real- list of my most- you like your COST: Bombfell charges you for only the ly suited my style. hated chores. pants, or what clothes you keep; Stitch Fix requires a $20 Washing my your kids will eat monthly subscription. WOULD I DO IT AGAIN? Maybe. If I wanted kids’ thermoses for dinner. to add some fun extras to my wardrobe, I’d TIME SAVED: None so far. give it another try: Both companies noted HOW IT WORKED: Both sites asked for to me that the stylists alter their picks our measurements and made us complete based on your feedback, so a second or a brief survey to help the stylists under- third shipment would probably fit our stand our style tastes. In both cases, it tastes better. But for stocking up on ba- took a couple of weeks to receive our order. sics, it seems faster to walk into a store Bombfell emails a list of the pieces it and assess the rack with my own eye. plans to send before shipping, so customers Sometimes if you want a job done right, MARCH 2015 money.com can opt out of anything they don’t like. My you’reWorldMags.net better off just doing it yourself. 75 WorldMags.net

There’s all this academic research out there that attempts to explain why stocks do well or poorly by focusing on investment factors, such as momentum or low price/ earnings ratios. In all, 316 different factors CAN YOU were identified in the papers I studied, including things like the amount of media attention a company gets or how much it spends on REALLY advertising. My research found that of all the published papers in finance, over half are likely false. The problem is the researchers were applying the tools of statistics as if there BEAT THE was only one test going on when there are multiple variables. Some factors are going to look statistically significant just by chance.

MARKET? Can you help us understand? There’s a cartoon that explains this well. ANSWERED BY Let’s say somebody has a hypothesis that jelly CAMPBELL HARVEY beans cause acne. So researchers conduct a controlled experiment where some people get DUKE UNIVERSITY FINANCE PROFESSOR AND jelly beans and some don’t. It turns out that FORMER EDITOR OF THE JOURNAL OF FINANCE there’s no signiﬁcant difference. INTERVIEW BY TAYLOR TEPPER Then somebody says, “Well, maybe we’re PHOTOGRAPHS BY JEFF BROWN looking at this incorrectly. We should look at this by the color of the jelly bean. So then 20 new experiments are undertaken. Again, some people get jelly beans and others don’t.

76 money.com MARCH 2015 WorldMags.net WorldMags.net

THE HARVEY FILE AGE: 56 PROFESSOR OF FINANCE AT DUKE’S FUQUA SCHOOL OF BUSINESS FOUNDING DIRECTOR, DUKE/CFO MAGAZINE GLOBAL BUSINESS OUTLOOK SURVEY; PRESIDENT-ELECT, AMERICAN FINANCE ASSOCIATION

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But the jelly beans are just red. only in stocks beginning with the A separate experiment uses just letter “H.” The managers claim yellow beans. Then all purple. Each historical outperformance for H time there’s no effect.On the 20th stocks based on simulations going try, which happens to test green jelly back to 1926. They claim their results beans, they find there’s a difference are “significant.” They’re likely using that is statistically significant by the the wrong statistical method to usual rules. And then in the news- declare their strategy “true.” They A BOOM IN INVESTMENT THEORIES paper the next day, there’s this head- might have tried 26 letters and “H” Number of factors identified Number of papers line: green jelly beans cause acne. worked by chance. The insight is the same for 316 2010–12 Record number 50 What should the standard be? factors. If you try enough strategies, of market- Usually you’re looking for 95% some will work by luck. In many beating factors confidence, which means there’s a cases it’s not about being “smart.” identified. 5% chance the result was a fluke. But 40 that’s true only if you’re conducting Speaking of smart, rebalancing a single test. As soon as you go to has been recommended as a 30 multiple tests, it’s like the jelly bean prudent approach. You’ve done 1995–97 The same number problem. You do 20 experiments and research on this topic, right? of winning strategies you’re likely to get a hit by chance. Rebalancing is like mom-and- “discovered” as 20 in 1968–1988. apple-pie sort of finance, in that we To be fair, you’ve made this just assume it’s a good idea. We don’t mistake yourself. think through what it involves. In my 10 Some of the papers we analyzed research I detail the risk that is are my own. This actually gives me induced by a rebalancing strategy. a bit of a pass when I’m talking to my colleagues and saying, “Half of what Don’t you rebalance to reduce risk? 1962 1986 2012 you guys published is false.” And they Let’s say you’ve got a portfolio of SOURCE: Campbell Harvey kind of push back: “How could you 60% stocks and 40% bonds. Now, say that?” And I say, “Well, it also imagine stocks drop and you’re in a holds for me, okay?” prolonged bear market. If you’re rebalancing, you have to buy equities to get What does this mean for that proportion back up to 60%. So as information. Use your judgment. the average investor? stocks are falling, you’re buying more For individual investors the best and more. Your portfolio is going to If you don’t have time to figure thing to do is to just go with an index have a bigger drawdown than another this out, isn’t rote rebalancing fund. Don’t believe these claims of portfolio where you didn’t rebalance. worth the risk—to keep from using this or that “factor” to beat the It works in bull markets too. If being overly exposed to stocks market. Invest in the broad market, equities are going up and up and before a bear market? and go with the lowest possible fee. you’re rebalancing, you’re dumping If you have a very long time hori- stocks. The market goes up. You zon, you may be able to bear the But so-called smart beta dump more. All of a sudden your extra risk by rote rebalancing. You index funds claim to capitalize portfolio has done worse than if you will still have bigger drawdowns in on these “factors.” had just let it run. the value of your retirement port- Imagine there are 316 of these folio, but you don’t need the money “smart” beta index funds, each So how should investors think in the short term and you can ride chasing one of the factors that I about rebalancing then? out the risk. My point is all investors detail. It is likely that more than 50% It is not smart to rebalance the need to understand that rote rebal- of them are destined to disappoint. last day of the year or the last day ancing is an active investment deci- Suppose there’s an ETF investing of the quarter by rote. It means sion that increases risk. you’re ignoring all of the information in the market. There’s lots of You’ve also done research on This interview has been edited. informationWorldMags.net out there, so use that Bitcoin. The smart money is WorldMags.net

ownership. It’s like getting into your car with your smartphone. You present crypto- graphic proof of ownership. You’re the owner, and it’s veriﬁed through this common ledger. The car is able to identify that it is your car, and so the car starts. You’re done. Now suppose you borrow money from the bank for the car and you’re three months behind in your payments. You present your key, the car doesn’t start. The bank has the key that starts the car. So this is a very cool idea, right?

DON’T ASSUME There’s still a EVERYTHING YOU problem with the READ IN FINANCIAL JOURNALS IS TRUE, roller-coaster ride in SAYS HARVEY. Bitcoin prices, right? There is, and Bitcoin currently is not a reli- able store of value because of it. But the price pretty sure it’s a worthless Bitcoin is safer? swings could be solved with more currency. What don’t people get? Bitcoin is much safer. When you liquidity—more money in the market. Almost everything. For instance, go to buy something, the retailer The recently launched Bitcoin ex- part of the misunderstanding is the actually is able to check a common change, which is fully regulated, in- focus on the price of the Bitcoin. You ledger of all transactions to make sured, and backed by the New York see that it was at $1,000, then it’s sure you actually have the money to Stock Exchange, should help with this. down to $200. People say, “Well, the spend. The public ledger, which is Bitcoin price fluctuations are a factor bubble has burst,” and stuff like that. almost impossible to hack, solves the of it being so young. They are looking at just one problem of double spending—using The best way to judge Bitcoin is aspect of Bitcoin. These critics don’t the same Bitcoin to buy two things. not to look at the price progression, start by asking themselves, “What Merchants, such as restaurants, but to look at the vast amount of problem does Bitcoin solve?” which are paying 3% to the credit money that’s being invested by ven- card companies, love this. ture capitalists into Bitcoin-related What problem does it solve? For me, though, I look at Bitcoin companies. That’s what I look at. I am tired of constantly getting not just as a currency, but what it phone calls from my credit card could do in the future in other appli- TABLET BONUS companies, having to go online to fix cations. Think of the Bitcoin technol- Listen to more of Campbell Harvey’s the 20 things I’ve got auto-debits for, ogy as a way to exchange and verify thoughts on financial misconceptions. and dealing with charges that are not mine on my card. These are problems

GROOMING BY KYRA DORMAN KYRA BY GROOMING money.com that many people encounter. WorldMags.netFEEDBACK: [email protected] 79 THE NUMBERS STOCKS WorldMags.net & FUNDS

BIGGEST MUTUAL FUNDS BY CATEGORY TOTAL RETURN EXPENSES (AS % OF ONE THREE ASSETS) CATEGORY YEAR YEARS1 LARGE-CAP STOCKS Fidelity Contrafund (FCNTX) 7.9% 17.8% 0.67% American Funds Growth Fund of America (AGTHX) 7.2 18.3 0.66 Dodge & Cox Stock (DODGX) 7.7 19.9 0.52 American Funds Investment Co. of America (AIVSX) 12.0 17.8 0.61 Fear Returns to American Funds Wash. Mutual Investors (AWSHX) 10.6 16.6 0.60 MIDCAP Fidelity Low-Priced Stock (FLPSX) 5.9 16.8 0.82 Wall Street Vanguard Mid-Cap Index (VIMAX) 11.9 18.6 0.09 Vanguard Extended Market Index (VEXAX) 4.2 17.6 0.10 SO FAR, 2015 is off to a rocky start as oil prices have sunk Fidelity Spartan Extended Market Index (FSEVX) 4.4 17.5 0.07 (ACRNX) on worries the global economy is stalling out. As a result, Columbia Acorn –2.0 12.4 0.79 investors piled into traditional defensive areas of the SMALL-CAP Vanguard Small-Cap Index (VSMAX) 4.1 17.4 0.09 market, such as utility stocks and bonds. Fixed income T. Rowe Price Small-Cap Value (PRSVX) –2.8 12.5 0.96 gained 1.4% in the four weeks ended Jan. 21. Vanguard Explorer (VEXRX) 0.2 16.7 0.35 Vanguard Small-Cap Value Index Fund (VSIAX) 6.6 17.9 0.09 Vanguard Small-Cap Growth Index (VSGAX) 1.1 16.4 0.09 S&P 500 RATIOS BALANCED (VWENX) P/E DIVIDEND YIELD Vanguard Wellington 9.5 12.8 0.18 American Funds American Balanced (ABALX) 8.5 13.4 0.61 Fidelity Balanced (FBALX) 9.1 13.1 0.56 19.0 2.2% Oakmark Equity and Income (OAKBX) 5.911.70.77 Fidelity Puritan Fund (FPURX) 9.1 13.5 0.56 CURRENT INTERNATIONAL (VGTSX) 18.0 2.1 Vanguard Total International Stock Index –3.2 7.4 0.22 18.0 ONE- Harbor International (HAINX) –6.5 7.2 0.74 YEAR (AEPGX) RANGE American Funds EuroPacific Growth –1.4 10.4 0.84 CURRENT Fidelity Diversified International Fund (FDIVX) –2.8 11.4 0.92 ONE- Vanguard International Growth Fund (VWILX) –4.2 9.7 0.34 2.0 YEAR 17.0 RANGE 2.01 EMERGING MARKETS American Funds New World (NEWFX) –2.2 6.6 1.03 Vanguard Emerging Markets Stock Index (VEMAX) 6.6 2.3 0.15 16.0 1.9 T. Rowe Price Emerging Markets Stock (PRMSX) 8.7 3.5 1.25 Fidelity Emerging Markets (FEMKX) 5.7 4.7 1.09 Russell Emerging Markets (REMSX) 2.1 2.6 1.51 U.S. GOVERNMENT BONDS BENCHMARKS TOTAL RETURN Fidelity Government Income (FGOVX) 5.9 2.3 0.45 ONE ONE THREE (AMUSX) INDEX MONTH YEAR YEARS1 American Funds U.S. Government Securities 5.0 1.7 0.64 S&P 500 –1.7% 12.5% 18.1% MFS Government Securities (MFGSX) 4.9 1.7 0.88 Nasdaq2 –2.1 10.5 18.8 J.P. Morgan Government Bond (OGGAX) 5.8 2.1 0.76 Russell 2000 –2.4 0.5 15.7 Sit U.S. Government Securities (SNGVX) 2.2 1.0 0.80 –0.1 – Morgan Stanley EAFE 4.9 9.6 INVESTMENT-GRADE –1.3 Dow Jones industrial average 9.5 14.2 Vanguard Total Bond Market II Index (VTBIX) 6.3 3.0 0.12 1.4 Barclays U.S. aggregate bond index 6.3 3.1 Vanguard Total Bond Market Index (VBTLX) 6.3 3.1 0.08 SECTOR Dodge & Cox Income (DODIX) 5.1 4.5 0.43 Utilities 5.1 32.7 16.9 Vanguard Short-Term Investment-Grade (VFSUX) 2.0 2.5 0.10 Telecom services 2.9 8.9 11.5 T. Rowe Price New Income (PRCIX) 5.8 3.4 0.61 Consumer staples 2.2 20.9 18.5 HIGH YIELD Health care –0.1 24.8 27.6 (AHITX) Basic materials –0.8 6.5 12.0 American Funds American High-Income Trust –1.2 6.0 0.66 (VWEAX) Consumer discretionary –1.7 8.9 21.1 Vanguard High-Yield Corporate 3.8 7.3 0.13 (FAGIX) Industrials –2.0 8.6 17.7 Fidelity Capital & Income 5.1 9.7 0.71 (SPHIX) Information technology –2.5 17.0 17.9 Fidelity High Income 0.3 6.7 0.72 (NHFIX) Energy –4.5 –8.4 4.4 Northern High Yield Fixed Income 0.4 7.4 0.81 Financials –5.1 8.8 20.5 TAX-EXEMPT Vanguard Intermediate-Term Tax-Exempt (VWIUX) 7.1 3.8 0.12 Fidelity Municipal Money Market (FTEXX) 0.0 0.0 0.40 NOTES AND SOURCES: Stock index data as of Jan. 21 from Lipper, New York; 877-955-4773. Sector returns from Bloomberg. Bond index data from Barclays. Monthly S&P 500 ratios are Vanguard Limited-Term Tax-Exempt (VMLUX) 2.1 1.6 0.12 from Standard & Poor’s. P/E ratios are based on previous four quarters of operating earnings. Vanguard Tax-Exempt Money Market (VMSXX) 0.0 0.0 0.16 Biggest funds ranked by total net assets. 1Annualized. 2Price change only. Schwab Municipal Money Fund (SWXXX) 0.0 0.0 0.62

money.com MARCH 2015 80 WorldMags.net WorldMags.net THE NUMBERS MONEY 50

TOTAL RETURN EXPENSES PHONE (AS % OF NUMBER ONE ONE THREE ASSETS) (800) Investors Flock FUND (TICKER) MONTH YEAR YEARS1 to Bond Funds GLOBAL SLOWDOWN FEARS AND FALLING OIL PRICES DRIVE MONEY OUT OF RISKY EQUITIES.

MOST OF THE STOCK FUNDS in our recommended list of mutual and exchange-traded funds fell in the four weeks ended Jan. 21, thanks to disappointing corporate earnings amid a slowing global economy. Bond funds, on the other hand, rallied as market participants sought shelter even in the face of record-low interest rates. Among MONEY 50 funds, newcomer iShares iBoxx $ Investment Grade Corporate did the best, gaining 2.4%. In other news, Dodge & Cox International Stock announced in January it would close to new investors to protect the interests of existing shareholders. MONEY will replace the fund on our recommended list, but if you’re already in the portfolio, you should feel comfortable staying put. —TAYLOR TEPPER

HOW TO USE OUR RECOMMENDED LIST

Building-block funds: For broad exposure to core asset classes Custom funds: Specialized investments that can tilt your strategy One-decision funds: If you want stocks and bonds in one portfolio

TOTAL RETURN EXPENSES PHONE (AS % OF NUMBER ONE ONE THREE ASSETS) (800) FUND (TICKER) MONTH YEAR YEARS1 BUILDING-BLOCK FUNDS Large-Cap Schwab S&P 500 Index (SWPPX) –1.7% 12.4% 18.0% 0.09 435-4000 Schwab Total Stock Market Index (SWTSX) –1.7 10.8 17.9 0.09 435-4000 Midcap/Small-Cap iShares Core S&P Mid-Cap (IJH) –0.9 7.6 17.2 0.14 474-2737 iShares Core S&P Small Cap (IJR) –1.9 2.4 16.7 0.14 474-2737 Foreign Fidelity Spartan International (FSIIX) –0.1 –4.9 9.6 0.20 544-8544 Vanguard Total Intl. Stock (VGTSX) 0.4 –3.2 7.4 0.22 662-7447 Vanguard FTSE A/W ex-U.S. Small (VFSVX) 0.1 –6.5 7.4 0.40 662-7447 Vanguard Emerging Markets (VEIEX) 4.0 6.5 2.1 0.33 662-7447 Specialty Vanguard REIT Index Investor (VGSIX) 7.0 34.1 17.3 0.24 662-7447

NOTES: As of Jan. 21, 2015. N.A.: Not available. Load funds are included for those who prefer to use a broker. 1Annualized. 2Phone numbers are 866. 34.25% sales load. SOURCES: Lipper, New York, 877-955-4773; the fund companies

MARCH 2015 money.com WorldMags.net 81 MONEY WorldMags.netDo you have a purchase you consider Money Well Spent? Email us about it WELL SPENT and what it means to you at [email protected].

a touch-me-not, after the fern that folds in on itself when stroked. When I hug people, I often catch myself placing my arms around them tentatively, the equivalent of a dead-fish handshake. Yet there I was on the first day of my class on Chinese medical massage, practicing a “basic pushing technique”—over my male classmate’s backside. Sweating, I stifled a nervous giggle and kept my eyes on the clock. Slowly I became more comfortable. I started to enjoy feeling for changes in tempera- ture on my classmates’ bodies and practicing massage techniques. The lessons began to seep into my outside life. When I was stressed, I bolstered my neck and knees as we had learned. In a class I teach, I gave a discouraged student a pat on the back. Studies show that touching communi- Hands-On cates emotion and builds empathy and trust. At last, I was putting that science into practice. Learning After the first semester, I visited my friend Erin, who was by Sushma Subramanian having back problems. I asked her to lie down, felt for her knots, and went to work. Then I stretched FTER WEEKS OF REPORTING, I was still coming up the tissue in her shoulders to help blank. I was in the middle of writing a book about the her stand straighter. “That’s sense of touch and the role it plays in our lives. I planned amazing,” she said. I blushed. A to devote a chapter to therapeutic touch, but the research What started as a research on the subject was thin, and I was starting to panic. Then project has become a life skill. I’d I remembered a massage therapist I’d once seen. The way he explained his limited myself by shying away technique was just what I was after. I emailed him to ask where he’d studied. from touching the people in my The therapist referred me to the Pacific College of Oriental Medicine, life. Now, when words won’t cut it, where I was pleased to discover a series of classes I could start immedi- I have another way to connect. ately. However, doing so would cost $3,000, a big bite out of my research budget and advance. Nevertheless, I bit the bullet and registered. Sushma Subramanian’s first book, The Fifth Here’s where the irony comes in. While I’m fascinated by the proper- Sense: Understanding the Power of Touch, ties of touch, I’m not big on the actual practice. My father used to call me is forthcoming from Algonquin Books.

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