Savant Blog

Savant offers perspective on a variety of topics. Entries range from current events to timeless insights in the world of finance and investments.

30 May
May 30, 2012

Here’s a deceptively simple question: how much of your income should you save during your working years if you want to enjoy a comfortable retirement?

To answer the question definitively, you have to know how long you’ll be working (and saving), how long you’ll live in retirement, and what the investment returns will be both during the accumulation period and also throughout your retirement years.

Wade Pfau, a researcher who is currently director of macroeconomic policy

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18 May
May 18, 2012

Large investment banks and brokerage firms are in the news again, with word that J.P. Morgan Chase suffered a $2 billion loss while trading for its own investment portfolio. If you’re inclined to be amused by such things, word had apparently leaked out weeks before the losses were spotted that a mysterious individual dubbed “The London Whale”–who we now know is Bruno Michel Iksil–was taking strangely large positions in credit default swaps linked to corporate bonds. Other

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26 Apr
April 26, 2012

If you are looking to free up cash flow, refinancing your mortgage might be one of the best solutions in today’s low-interest rate market. With the Federal Reserve pledging to keep interest rates low, qualified homeowners still have time to run a simple analysis to determine if refinancing makes sense for them.

The decision whether or not to refinance your mortgage involves weighing the costs and benefits. Will the refinancing of your home produce enough savings to justify the cost involved

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18 Apr
April 18, 2012

No, I’m not talking about a game – unless you think of credit scores as a game. Which, now that I think about it, might indeed be the case. Like any game, there is a list of rules, and it might be wise to become familiar with these rules because they are pertinent to your financial life.

Your FICO score (the most common credit score used) can help a lender evaluate the risks of extending credit or loaning money to people.

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09 Apr
April 09, 2012

Remaining optimistic about the future is certainly not fashionable today. Most of the data we take in reminds us of the hurdles standing between us and economic progress. Are we really doomed? Will the next 20 years be littered with volatile markets and below-average returns? As a rational optimist, I have difficulty accepting this fate. Humans have been making progress for thousands of years. In economic terms, a desire for a better quality of life, access to raw

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29 Mar
March 29, 2012

As the Baby Boomer generation approaches and enters retirement, the longevity of their assets will depend primarily on their levels of expenses in retirement. Many individuals have heard that they need 70% of pre-retirement income in order to maintain their lifestyle during retirement. While this may be true for some, this number can also be very misleading. For me, a better way of determining what level of expenses you can expect in retirement is simply to put pen to paper

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19 Mar
March 19, 2012

If you want to fix the problem of rising costs in the U.S. healthcare system, or at least reduce the looming Medicare/Medicaid entitlement burden, there’s a surprisingly easy solution. In Washington policy circles, it has been estimated that more than 80% of all the dollars spent on healthcare in the U.S. are incurred in the last nine days of a person’s life. Many times, the money is spent keeping a person alive in a vegetative state, prolonging an incurable illness

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19 Mar
March 19, 2012

In professional circles, we often talk about a “client-first” attitude, which is shorthand for giving your clients the same quality of financial advice as you would give your mother. It’s a useful shorthand way to navigate through a financial world that is still beset by incentive payments, expensive rewards for sales production, under-the-table or soft dollar incentives and a host of other ways that product vendors try to buy their way into your portfolios.

“Client-first” simply means that the client’s financial

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19 Mar
March 19, 2012

I cannot imagine that it is easy to decide which major headline or story should be published on any particular day. After all, articles on oil speculation, Apple’s new-look iPad, and the next landing spot for Peyton Manning all seemed to tickle my fancy during my personal media review today. Out of these three topics, I was particularly intrigued by Peyton Manning’s next destination because of my significant interest in professional football. I happened to be in my

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16 Mar
March 16, 2012

Around this time each year, the NCAA basketball tournament is well under way with 64 college teams battling to be crowned the best team in the nation. Most NCAA basketball fans will fill in a bracket with friends and coworkers to see if they have what it takes to predict the winner. Will it be the favorites like Kentucky or Syracuse, or the underdogs like Michigan or Murray State?

A similar activity takes place in the investment world; however, it is

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13 Mar
March 13, 2012

As we head into the election season, Washington insiders will tell you that the best way to sway undecided voters in an election is to take your tax dollars and promise to buy you something with it. This could be tax breaks, social programs, student loans, a myriad of loopholes for different corporate contributors; the list is too long to fit into this short article.

If you’re despairing about how this works in U.S. politics, consider Russia,

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02 Mar
March 02, 2012

Have you met Bob? You probably know a Bob. Bob has always been a disciplined saver and has built up a large nest egg over the years. Bob is fairly young and plans to retire in the next five to ten years. With longevity being in his family, he expects to live for quite some time, and that means his retirement is looking like a solid 30 years. Bob is living on cloud nine because the last time

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22 Dec
December 22, 2011

In today’s technology age, people are concerned with how their information and data are shared.  Given security breaches at reputable companies, their concern is understandable. While identity theft usually receives the most attention, there is another privacy concern that is consistently raised by clients. They are afraid people in their community will discover their financial resources. As a result, clients may not fully disclose their finances with their entire professional team. As a planner, I have been asked

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16 Dec
December 16, 2011

Though the evidence has been overwhelmingly consistent over time, much of the mainstream media covering the financial markets continues to express shock at the idea that active management of mutual funds typically underperforms a passive indexing strategy. Given active management’s actual track record, the underperformance shouldn’t come as such a shock.

According to Bank of America Merrill Lynch, only 23% of large-cap managers are beating the S&P 500 and 27% percent are ahead

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09 Dec
December 09, 2011

It’s getting to be the time of year when people are thinking about adding to their IRA (Individual Retirement Account). This usually occurs around the end of the year up to the income tax filing date the following year (the norm is April 15th). Right now the rules say you can put in up to $5,000 (you can add another $1,000 if over age 50) if you have income, that income isn’t too high, and you

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16 Nov
November 16, 2011


The month of October was almost a mirror image of September. Equity markets treated investors with a strong rally coming off of a five-month decline. The S&P 500 Index had its best monthly return in 20 years and moved into positive territory for the year. Other domestic and international equity markets posted strong gains for the month but remained negative for the year. Fixed income also experienced solid returns for the month. Markets reacted positively to continued improvements in U.S.

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27 Oct
October 27, 2011

Economic uncertainty and longer life expectancies have created stress for many baby boomers. This generation is quickly becoming known for being the sandwich generation – those trying to provide financial support for both their aging parents as well as their young adult children. It is normal for many of these parents to try lending a hand to their children, many of whom have been a casualty of high unemployment. At the same time that these young adults

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12 Sep
September 12, 2011

Often people believe that estate planning is having a will or possibly a trust. However, there are other documents to include in your basic estate plan in order to ensure that all of your needs are taken care of both during lifetime as well as at death.
The basic documents that every estate plan should have are:

Will/Trust – Is the main document of the plan. The Will/Trust provides for asset distribution upon death. A properly drafted document can save estate taxes,

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07 Sep
September 07, 2011

I recently came across an article on Yahoo! Finance titled “Retirement Plans for 1,000 Year-Olds.” It is based on recently published research from a biomedical gerontologist who claims that with advances in medicine, the first person who will live to age 150 has already been born and that the first person to live for 1,000 years could be born in the next 20 years.

While these claims seem to be that of science fiction, that fact that humans are living longer

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02 Sep
September 02, 2011

2011 has been a volatile year to say the least. The world has experienced earthquakes, tsunamis, debt ceiling negotiations, European debt negotiations, riots, and economic uncertainty. As a result of many of these events, the world equity markets have been quite the rollercoaster ride for virtually all investors. Despite the volatility in the markets, the DOW Industrial Average managed to turn positive for the year to close out the month of August. While the S&P 500 is still

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29 Aug
August 29, 2011


Sometimes it can be difficult to explain the cultural differences between financial planners and wirehouse brokers. However, at a recent financial services conference, author Michael Lewis–the celebrated author of Liar’s Poker, The Big Short, and Moneyball–talked about his own experiences as a broker and as a writer about brokers and their world.

Lewis told the audience that he had written Liar’s Poker, which is basically an expose of how Wall Street does business, as a kind of warning

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23 Aug
August 23, 2011

Each Certified Financial Planner (CFP®) has taken an oath to follow the Code of Ethics and Professional Responsibility of the CFP Board of Standards. Below are the Principles that each Certified Financial Planner agrees to abide by, as well as a brief explanation of each:


A CFP® must demonstrate his/her integrity. This involves being honest and not taking advantage of clients for one’s own personal gain. When an individual reaches out for financial advice, they are

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05 Aug
August 05, 2011

Many issues are currently coming together to cause anxiety.  European debt fears, worries of a double dip recession, frustration regarding the U.S. deficit and debt ceiling, as well as frustratingly high unemployment have all caused volatility.  Most of these issues are not new.  We have been hearing about most of these issues for a while now.

While it is true the economy has slowed in the first half of 2011, the following signs don’t point to another recession

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25 Jul
July 25, 2011

Investing mistakes can cost you time and money (total return). If you confront the most obvious of these issues, you’ll put yourself 90% of the way home.

The feeling that “I’m missing out on great returns” has probably led to more bad investment decisions than any other single factor. Many investors select asset classes, strategies, managers and mutual funds based on recent strong performance. If a particular asset class, strategy or fund has done extremely well for three or

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20 Jul
July 20, 2011

In 2010 Morningstar acquired, a site started by business reporter Michelle Leder to report news from the footnotes of SEC filings. If you have never visited the site, it’s worth a peek. This month a favorite has to be the “Top 10 disclosures for the 2011 proxy season”. With the 2011 proxy season essentially over, the report highlights perks and benefits that were all reported in footnotes of proxies filed by the companies identified. Some are just amazing!

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07 Jul
July 07, 2011


By now, most of us are familiar with the concept of a 529 plan. Parents, grandparents, or anyone else can all make contributions to these investment accounts, and the assets are able to grow tax-free, so long as they are used for approved education expenses. These state-by-state investment accounts make saving for college much easier while also providing incentives such as tax-free growth and the potential for tax deductions during the years contributions are made.

But what

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05 Jul
July 05, 2011

How often have we heard that life, a “successful” life, is about giving 100% all the time in everything you do? Sometimes, the quoted number is even higher. 110, 120 or even 200% have been offered as the target for greatness.

If we allow ourselves to contemplate this often-repeated mantra, we soon realize this is an impossible standard to maintain. We have all witnessed the person who is capable of tremendous deeds falter on the simplest tasks or

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27 Jun
June 27, 2011

Funeral costs have risen so far and so fast lately that people who have been through it tell what may be the unfunniest joke in history: they say that dying has become so expensive that nobody can afford it any more.

One reason for these cost increases is that many people fail to plan for the funeral, the burial plot or cremation, the flowers and everything else before the fact. Suddenly, the grieving family has to make complicated

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23 Jun
June 23, 2011

President Obama’s speech on Afghanistan collected most of the headlines, but Fed Chairman Ben Bernanke’s press conference the same evening was, for some economists, more interesting. Among other things, Bernanke made it clear that the Fed was ending, on schedule, a widely-publicized initiative known as QE2, more formally referred to as the second round of quantitative easing by the U.S. Central Bank.

Some of you may

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