SmartyPig

Hi everyone, this is Marcie here guest blogging today. Part of my position here at Stewart Financial Services is connecting new technology and social media trends with the sector of finance and financial planning. We are always on the look out for innovative ideas to find holistic and safe finance advice, relationships, and technology that our clients can use.

Today, I wanted to talk about a really neat organization we found that utilizes social media, teaches good saving practices, and is a safe institution to use (and free!). It's called SmartyPig.

SmartyPig is a organization that allows anyone to open up a savings account for free. Straight from their FAQ page: SmartyPig is a unique savings program that was designed to help people save for specific goals. Goals may be funded with a monthly recurring contribution from your existing checking or savings account. You can also make one-time additions of money toward your goals and receive contributions from your friends and family members. 


What's great about this is that it's, wait for it... FREE. There are no monthly fees. Every account is FDIC insured for balances under $250,000. The initial deposit is only $25.00 and account holders earn 2.15% APY on balances under $50,000, which American Consumer News states, "one of the best rates available for FDIC insured savings accounts."


You can also use social media applications like Facebook and Twitter to help your family and friends fund your stated savings goal. Tired of receiving shirts from Aunt Susan that you don't like? A simple fix is sending Aunt Susan a link to your SmartyPig account and let her deposit the money into your account for your stated goal. Goals can be anything you want: a trip, a shopping spree, or a night on the town. Plus, if you use one of their retail partners, you can boost your money by up to 12%: places like Amazon.com, Macy's, or Travelocity.


As great as SmartyPig is for adults (and for me, I signed up to fund a trip to Hawaii), this is a great tool teaching children how to save. American Consumer News blogs about how to use SmartyPig as a tool to teach children how to save:


"Watching a saving account grow via compound interest can help teach a child the importance and benefits of savings and investing at an early age.


Perhaps the most important lesson that your child will learn with a SmartyPig account is the power of setting and achieving goals. They will see the direct correlation between the amount of effort that they put in and the results of their success."


For accounts for children under 18, SmartyPig says this, "Anyone may have a SmartyPig account. But customers under 18 years of age must be invited to become co-owners by parents or legal guardians who have first opened their own SmartyPig accounts."


To test out SmartyPig, I went ahead and opened an account. Here's a list of things I needed to begin:

I found setting up an account easy and intuitive. After 10 minutes, I had validated my information, set up my security questions and answers, and finished registration with a working account. The next step is setting up routing and bank information in which you want to transfer from. Remember: your first transfer only has to be $25.00 and $10.00 monthly after that. 


And, dare I say that setting up an account with my goal was actually fun?! Now instead of getting that t-shirt from Aunt Susan, all I need to do is to send my link around for my birthday and imagine sitting in Hawaii two years from now. Yeah!


If you have any questions about this post, saving accounts, or any other things, feel free to contact Stewart Financial Services at our email or give us a call at 888.891.9709. We'd be happy to help. Happy Saving!

Memorial Day Remembrance

People always talk about "celebrating" Memorial Day. But when you really think about it, what is there to "celebrate"? Memorial Day is a day to remember and honor our military for all of the sacrifices they've made. Since the Revolutionary War, over 775,000 Americans have died serving our country with countless numbers being wounded. Over 50,000 U.S. Citizens are (were) classified as "Missing in Action". Over 600,000 have been Prisoners of War. I fail to see what there is to celebrate. This doesn't mean we can't remember and honor our fighting heroes (they're all heroes) together with family and friends. Go camping, have picnics and BBQ's, enjoy the freedoms our military has fought to preserve; just remember the real purpose of Memorial Day.

Small Business Heath Care Tax Credit

This new tax credit is part of the recently signed Affordable Care Act (healthcare).  It helps small businesses and small tax exempt organizations afford the cost of providing health care coverage for their employees. 

Small businesses started receiving postcards from the IRS last month with details on this new tax credit.  Here are the major points:

• Credit is worth up to 35% of the premium costs paid by a small business in 2010 thru 2013.  In 2014, the credit is increased to 50%
• Credit phases out for small businesses with average wages between $25,000 and $50,000 and for firms with with the equivalent of between 10 and 25 full time (FTE) employees
• A qualifying employer must cover at least 50% of the cost of health care coverage
• A qualifying employer must have less than 25 (FTE) workers

Clearly, this tax credit is designed for the very small businesses that are the backbone of this country in an effort to encourage them to provide valuable health care for their employees.  Many employers have always wanted to provide the coverage but could not afford to do so.  Hopefully, this will give them an incentive to do so. 

I have also provided a youtube link for a video that explains this credit in more detail:  http://www.youtube.com/watch?v=85i1kzIG57k

New Law Allows Tax-Free Health Coverage to Older Children

Changes made by the recently enacted Patient Protection and Affordable Care Act, provide tax-free health coverage for an employee's children who are under age 27. The change is effective March 30, 2010. These changes immediately allow employers with cafeteria plans to permit employees to begin making pre-tax contributions to pay for this expanded benefit.

In addition to extending coverage to older children, the Affordable Care Act also requires plans that provide dependent coverage to continue to make the coverage available for an adult child until the child turns age 26. The extended coverage must be provided no later than plan years beginning on or after September 23, 2010. The favorable tax treatment applies to that extended coverage.

COBRA Premium Subsidy extended for 3rd time

Congress has extended eligibility for the COBRA premium subsidy for two months as one provision of The Continuing Extension Act of 2010 enacted April 15th.
The subsidy, which expired March 31, is now available to qualified individuals who lost their jobs between September 1, 2008, and May 31, 2010. The premium reduction, originally a provision of The American Recovery and Reinvestment Act (ARRA), applies to periods of health coverage that began on or after February 17, 2009, and lasts for up to 15 months.

The subsidy already has been extended twice. Democrats in Congress are working on a bill that will extend the COBRA subsidy for a longer period, at least until the end of the year, but passage may prove difficult because of cost concerns.

Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit.

To be eligible for the subsidy, the terminated worker must have experienced a qualifying event, which can include a reduction in hours followed by termination; must elect the coverage within the required timeframe; and must not be eligible for Medicare or any other group coverage.

The premium subsidy is retroactive and will be made available to individuals who lost their job between March 31st and April 15th.

Is a Reverse Mortgage in Your Future?

Reverse mortgages are a curious and complex topic. There is a lot of misunderstanding and confusion about them. They have received bad press and good press. So, let's try and demystify them and see if they make sense for you.

Using a reverse mortgage may make sense for a lot of baby boomers who will not have sufficient retirement savings when they finally retire. And with the uncertainly over Social Security and the compelling arguments that benefits will most likely change in the next few years, a reverse mortgage may be the product that allows boomers to have a comfortable retirement.

For some folks, the only true valuable asset may be their home with a low mortgage or no mortgage. A reverse mortgage converts your home equity into tax free proceeds and the owners retain title to their home. The reverse mortgage payments do not count towards Social Security and Medicare. The payments can cover living expenses, long term health care, home health care etc... It can be an important and necessary safety net for those folks with limited savings. Here are some facts about how a reverse mortgage works:

• Qualifying is not dependent on income, health, employment or credit score


• Only available for folks age 62 and over


• Must have a low mortgage balance or no mortgage balance


• Must attend a counseling session with a HUD approved agency so that you are fully informed of how a reverse mortgage works and also look at other options


• Can be taken as a lump sum, monthly annuity or line of credit


• Upon death, the beneficiaries will need to pay back the loan and the interest if they are keeping the house. If selling the house, all monies need to be paid back from the sale.

Please be aware the Reverse Mortgages are expensive--the fees are high. However, the benefits can be huge to folks who simply do not have enough funds to live a comfortable retirement.

In summary, a Reverse Mortgage can be a viable option in retirement in providing needed tax free income. Make sure that you do your homework and know all the ins and outs of how this works before entering into a binding contract.

The Truth About Annuities

I have to admit up front that I am not a fan of annuities, except in very rare situations. The sad facts are that 90% of the folks who buy an annuity have absolutely no idea what they are buying and 90% of the folks who buy an annuity really don't need this investment product.

Annuities are a very lucrative product for insurance sales reps to sell. They typically receive 3 to 8% of the deposit money. So, let's assume that you deposit $100,000 in an annuity. The sales rep can receive up to $8000 for selling you this product! Pretty outrageous commissions.

An annuity is really an insurance contract. Many times the sales rep will tell you that the investment is insured against loss because when you die, your heirs will always receive at least the original value of the annuity insurance contract. So, you are paying a steep fee for this insurance protection. However, with most conservative investments, over time, your investment should at least be worth what you started with. So, the extra cost for the insurance is expensive and not needed.

Annuities carry heavy surrender charges. If you need your money in the first 7 to 10 years after opening the annuity, you most likely will pay anywhere from 7-10% in surrender charges. On your own money!

Annuities are often sold as "safe investments". But remember that insurance companies can fail and investments can go south. Nothing is guaranteed. Especially in this economy where we have witnessed huge companies going bankrupt in the past few years. Did you ever think GM would need to be rescued?

Annuities are sold to folks for "tax savings". This is because the money inside an annuity grows tax deferred. However, once the money starts to get distributed (either to the person who bought the annuity or the heirs) the distributions are taxed at the highest rate. All distributions are treated as ordinary income. If you held this money in a taxable brokerage account, you would pay capital gains rate on the earnings and not ordinary income tax rates. Big difference.

Annuities typically have very limited investment options. Most offer high cost captive mutual funds with few good choices.

Annuities should never be purchased within an IRA account. IRAs are tax deferred already so it makes no sense to put a tax deferred annuity in an already tax deferred account. Remember...big commissions on the sales of annuities!

And finally...annuities are hardly ever "bought"...they are almost always "sold".

California and the new tax credits

California is offering some nice tax credits for folks who buy either a new home (never been occupied) or a first home. These credits are available for purchases that close escrow on or after May 1, 2010. Here are the rest of the details:

• Applications for the credit must be faxed after escrow closes
• Credits are available for taxpayers who purchase a qualified personal residence only after May 1, 2010 and before January 1, 2011
• Tax credits limited to the lesser of 5% of the purchase price or $10,000, whichever is smaller
• Tax credit received over a 3 year period ($3333 per year) beginning with the tax year the home is purchased.
• Tax credits are non refundable and unused credits cannot be carried over

For both the First Time Home buyer and the New Home Buyer credits, the taxpayer must live in the home for 2 years following the close of escrow.

California has allocated $100 million for the New Home credit and $100,000 for the First Time Buyer credit. Credits allocated on a first come, first served basis. We expect the credits to go fast so if you know of someone who qualifies under the rules, let them know ASAP.

What To Do When Your Home Is Underwater

Currently, there is so much consternation for consumers concerning their homes right now. This article written by a colleague of mine really details the options that are available and the ramifications of each one. Very good article.

Here is a link to the blog by Burt Whitehead, "What To Do When Your Home Is Underwater."

Inflation or Deflation???

Excellent article written by some of my colleagues at Cambridge Advisors. Enjoy reading.

Bert Whitehead's blog about Inflation or Deflation