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.

12 Jul
July 12, 2013

Some people spend more time planning their vacations than planning for retirement. But if you think about it, planning for both of these events is similar. When planning a vacation, you normally start with an ideal experience or destination in mind. Then you budget accordingly. When planning for retirement, you start by envisioning what you want your ideal retirement to look like. Do you want to retire early? Would you like to travel the world? Do you hope to

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17 Jun
June 17, 2013

The times they are a-changin’, and the world of financial advice is no different. Following in the footsteps of banking and do-it-yourself stock trading, there is an emerging trend toward wealth management firms serving clients with the aid of web technology.

It’s Becoming a Virtual World

Do you manage your checking account online, use web-based bill pay services, or shop for insurance on the internet? Most people do now. According to the Federal Reserve, over 60% of families used the internet to

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13 May
May 13, 2013

Whoever said “there’s no such thing as a free lunch” was unaware how often I eat out at my friends’ expense. Of course, I understand that someone has to pay for the lunch; I just know that it’s usually not me. From a planning perspective, a “free lunch” might relate to the relatively unknown one-time IRA to HSA transfer. This rule allows an individual to transfer some of his or her tax-deferred IRA dollars to a high-deductible savings account. If

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25 Apr
April 25, 2013

On Tuesday, April 23, PBS aired a program that many 401(k) plan sponsor and participants should have watched. I’m sure it was below the radar of most viewers, though, since no reality television stars, Kardashians, or other “celebrities” were involved.

The program is entitled “The Retirement Gamble” and focuses on the difficulty 401(k) participants face in reaching their retirement goals. The first hurdle is education. Participants are expected to learn how much to save, how to invest, how to select investments,

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18 Apr
April 18, 2013

We are pleased to present a guest blog from Ross Polking, CFP®, AIF®, MBA. Ross is an advisor with Foster Group, a Zero Alpha Group (ZAG) partner firm with offices in Iowa and Nebraska. For more information about ZAG, visit

Apologies to those amongst the readership who still have an affinity to Beanie Babies and the phenomenon that was. This current Bitcoin circus has been likened to the little stuffed dolls of yore . . . and not necessarily

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15 Apr
April 15, 2013

Investment companies, brokers, and even financial advisors have pioneered clever ways to make themselves look far better than they actually are. Recently, in an article in the Journal of Financial Planning, a financial advisor laid out some of the most deceptive practices that he’s run across–practices which, to the untrained eye, can make an ordinary investment company or advice-giver look like a genius.

Such as? Suppose an advisor says that he has the rare ability to hand-select terrific investment opportunities

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03 Apr
April 03, 2013

When a former White House Budget director who famously never balanced the federal budget suddenly claims to have special powers to forecast a major economic crisis, it’s hard to understand why anybody pays attention. But recently David Stockman, who served as Ronald Reagan’s budget chief back in the 1980s, has gotten a lot of publicity for his fiery Easter Sunday article in the New York Times, telling us that America’s future is bleak and everybody should get out of

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26 Mar
March 26, 2013

A 2% difference does not amount to much significance in our daily lives, unless it’s in regards to the price of gas or perhaps a cash-back reward program from a retailer. In general, we do not notice the nominal amount. Luca Pacioli thought differently. Luca Pacioli is considered the inventor of the Rule of 72 in 1494 A.D. Other famous individuals have been credited with the invention as well, including Ben Franklin, John Napier, and Albert Einstein. As a

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07 Feb
February 07, 2013

Although families are primarily responsible for covering the costs of higher education, there is a lot of flexibility as to who can receive additional support from external sources. While finding these resources is not an easy task, for parents and students who are willing to invest the time, rewards can abound. Even if financial aid is not received, the lesson a student learns from researching and putting forth their best efforts to save money will pay dividends on its

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31 Jan
January 31, 2013

If you’re like me, then you likely salivated over new TV technology for the last few years while watching pixelated people, pets, and scenery on your analog rear-projection TV. This was most evident on Super Bowl Sunday. Because I grew green with jealousy each time I went to a friend’s house, and because I decided I couldn’t see the football on my own screen, I “splurged” on my very own 32″ Samsung LED TV (less than $400). That was

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16 Jan
January 16, 2013

Way back in early 2011, the Social Security Administration (SSA) stopped mailing Social Security statements to U.S. workers age 25 and older. Almost a year later, the SSA started sending annual statements to workers age 60 and older who were not receiving benefits. News like this doesn’t typically hit everyone’s radar; however, if you’re like me, you soon noticed that your Social Security statement did not come in the mail around your birthday. And if you didn’t do

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11 Jan
January 11, 2013

One of the more interesting myths in the investment world is that large financial institutions, with their access to mountains of data pored over by teams of staff economists, can determine where the markets are going and profit accordingly. Gullible investors believe this even though, every year, we can go back to the confident predictions of brokerage firm leaders and leading hedge fund managers and see a hard-to-explain gulf between expectation and reality.

This past 12 months, the broad U.S.

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09 Jan
January 09, 2013

The recently passed American Taxpayer Relief Act of 2012 (ATRA) not only resolved the issue of income tax rates, but also addressed other issues including the extension of the Qualified Charitable Distribution (QCD). This option allowed taxpayers age 70 ½ and older to contribute up to $100,000 of IRA distributions directly from their IRA to charity. It has been available since 2006, but was set to expire on December 31, 2011. The $100,000 could include the taxpayer’s Required Minimum Distribution

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13 Dec
December 13, 2012

Many people, including myself, find that the best time to start anything is at the beginning of some specific time period. For instance, every January 1st a slew of individuals start getting into shape. Why not start on December 27th? I am sure there are some psychological studies looking into this phenomenon. Perhaps I will research this, but if I do, it would be best if I waited until February 1st.

For all of the many things that are

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26 Nov
November 26, 2012

The answer, as with most tax and investment questions posed to advisors, is…it depends.

As many investors are aware, Congress and the Administration are negotiating tax law changes in light of the impending “fiscal cliff.” No one knows for sure what the new rates will be for 2013, so it is impossible at this point in time to make a definitive statement. We do know that beginning January 1, 2013 there will be a new 3.8% tax on investment income (including

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16 Nov
November 16, 2012


The fourth quarter got off to a shaky start following a third-quarter rally which was the result of the positive sentiment regarding global central bank actions. Uncertainties about the U.S. election and the broader global economic outlook held back global stock markets in October. In particular, U.S. large-cap stocks fell -1.8% (S&P 500 Index), international large-cap stocks rose 0.8% (MSCI EAFE Index), and emerging markets stocks fell -0.6% (MSCI EM Index). Fixed income fared better as investors looked instead to

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01 Nov
November 01, 2012


I have never met a farmer who didn’t haggle from time to time. Whether it’s buying or selling, there is always a negotiation. It seems most farmers are unable to sleep unless they come out of a transaction with a sense that the deal was, at a minimum, fair. Can we extend this mentality beyond buying equipment and selling crops?

An Iowa study indicates that two-thirds of farmers have done no retirement planning, much less estate planning. How can we turn

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27 Sep
September 27, 2012

Over the past five years, the markets have been very volatile and unpredictable. And there’s no reason to believe that the rollercoaster ride will end any time soon. You may find it interesting to analyze your returns over the past five years and take a close look at where you are today, versus where you were on September 1, 2007. Which of these scenarios is more frustrating to you: an annual return of 1.3% in the S&P 500, or an

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26 Sep
September 26, 2012

“The October Effect” is the theory that the stock market will see large declines in the month of October. October Effect theorists suggest that individuals should sell off their equity positions before the month of October to avoid inevitable losses.

One reason why individuals believe in the October Effect is the Great Depression. The Great Depression had several “Black” days in October, such as Black Thursday (October 24th, 1929), Black Monday (October 28th, 1929), and Black Tuesday (October 29th,

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11 Sep
September 11, 2012

Recently, multi-generational IRAs (MGIRAs or “Stretch IRAs”) have become an increasingly popular financial planning tool among advisors looking to assist their clients in preserving wealth for future generations. In fact, an April 2012 article implies that this is a relatively new concept. I can assure you that “Stretch IRAs” have been around for a long, long time!

In the most basic sense, this tool “stretches” IRA distributions over the life expectancy of the next generation to maximize tax deferral and

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04 Sep
September 04, 2012

By now, you’ve seen the final medal count at the London Olympics, and no doubt felt a stirring of national pride. American athletes took home 104 total gold, silver and bronze medals, comfortably ahead of China (87), Russia (82), Great Britain (65), Germany (44), Japan (38), Australia (35), France (34), South Korea (28) and Italy (28).

Does that mean that we Americans–so often accused of being a nation of couch potatoes–are the most athletic people in the world? Total medal

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27 Aug
August 27, 2012

After the Supreme Court ruling upholding the recent Health Care act, everybody is required to buy health insurance. Or are they?

People who earn less than $9,500 are exempt from the requirement; above those income levels, you would have to pay a tax that depends on your income level. There is a phase-in of rates from 2014 through 2016, but just looking at the 2016 rates, any person with taxable income between $9,500 and $37,000 would have to pay $695

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27 Aug
August 27, 2012

According to the Federal Reserve Board’s latest Survey of Consumer Finances, nearly 60% of families use the internet to access financial services. Even more impressive, among the wealthiest 10% of American families, about 85% use the internet for financial services or information. Clearly people are becoming more and more comfortable accessing financial information and receiving financial services online.

As investors have become more comfortable interacting online, a slew of companies have recently sprung up offering a range of web-based financial

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13 Aug
August 13, 2012

I have no idea how Michael Phelps and Gabrielle Douglas invest their earnings. They might be solicited by brokers to place trades to purchase hot stocks like Facebook, Inc. (FB) or Apple, Inc. (AAPL). They might even be encouraged to put some of their money towards last year’s best performing mutual fund. Or, maybe their investing behavior mimics their preparation for the Olympic Games; putting a long-term strategy in place with the assistance of a team of professionals who

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12 Jul
July 12, 2012

Retirees today face enormous challenges as expenses and costs continue to rise. Yet yields on bonds and fixed income assets remain depressed; the yield on short-term bonds is less than 0.5%. A longer term might yield up to 2%. How can retirees plan to meet their future income needs in such a low-interest environment?

Unfortunately, many retirees have chosen to move into assets that produce a higher yield, including high-yield bonds, high dividend-paying stocks, and master

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05 Jul
July 05, 2012

The past year will be remembered for two remarkable social media initial public offerings: LinkedIn on May 19, 2011 and Facebook on May 19, 2012. Although the dates were the same, the two offerings went very differently. LinkedIn’s share price roughly doubled immediately after the shares were purchased, from the $45 IPO price to $94.25 when the market closed that day. The offering was widely described in the papers as a great success.

Facebook’s shares, meanwhile, were priced at $38

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29 Jun
June 29, 2012

Here’s a trivia question to startle your friends with: According to International Monetary Fund (IMF) statistics, what country has the highest government debt levels, compared with its economic output, in the world?

You might be inclined to guess troubled or developing nations like the African nation of Eritrea (134% of its 2011 GDP), Lebanon (136%), or Jamaica (139%)–or, if you were aware that it existed, the sovereign nation of Saint Kitts and Nevis (153%), a former British colony is

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22 Jun
June 22, 2012

Okay, I agree with you. Over the last few months the stock market has been volatile and uncooperative. Does this mean you should panic? Probably not. Does this mean that it may make sense to talk to your advisor about your allocation? Maybe. One thing I do know is that risk and return are related, and eventually, the price investors pay in volatility will ultimately pay dividends in the form of wealth. So, how can you deal with the

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22 Jun
June 22, 2012

A recent study by Demos, a non-partisan public policy group, estimates that the average American household will pay a total of $155,000 in 401(k) fees over their lifetime. This equates, on average, to 30% of the total value of their 401(k) plans! This study found that, while investors have access to expense ratios of the underlying investments within 401(k) plans, they rarely factor other expenses (trading costs, bid-ask spreads, and administrative fees) into their fee calculations. All told,

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08 Jun
June 08, 2012

There has been a lot of controversy lately surrounding the Patient Protection and Affordable Care Act, better known as Obamacare. One point of this bill that has caused a lot of questions is the Unearned Income Medicare Contribution tax that is being used to help fund Obamacare. It would create a 3.8% surtax on certain types of income above certain thresholds starting January 1, 2013.

For individuals, the 3.8% surtax is imposed on the lesser of net investment income or the

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