Summer of 2011 to do list: investing, estate plan, refinance, taxes and planning matters

For this summer, we have suggested financial matters for you to review:

1. Asset allocation and investments – taking all IRAs, 401(k)s and taxable accounts as a single portfolio, reviewing the allocation and checking to see if it is time to rebalance;
2. Interest rates, investing and inflation – rates are likely to stay low, inflation is likely to stay low as well (there is no wage component, in fact wages may be deflationary now, there is only commodity inflation), so that leaves looking at any investment that equals or beats the 10 year Treasury bond at a 3% yield: good municipal bonds, dividend paying stocks, or packaged stocks like Berkshire Hathaway or the Permanent Portfolio mutual fund;
3. Refinancing – rates are back down some, so that you can bring a 30 year loan down to a 4.5% 25 year loan, or 4.25% 20 year, or 3.75% 15 year fixed;
4. Home Equity Line of Credit – rates are still under 3% and no closing costs, so be sure to set one up so you have a fall back source of funds to cover the unexpected
5. Estate plan – reviewing your wills and trusts, and any letters to fiduciaries, to be certain that you account for such matters as the portable credit, which requires an election at the first death;
6. Tax planning – reviewing your information for 2011 against 2010 and checking your options to be you minimize your 2011 and 2012 taxes (e.g., max out 401(k), 402(b), ESPP plans, convert to Roth IRAs in low income years, etc.); and
7. In fact, you could do a Finance Health Day (you own financial planning focus) – please check out Finance health day….

Let me know if you have questions or comments, or if anyone you know wants to ask about any of this material. Also check out Time Saving Tips…

Coming soon…. credit card benefits with real value

Financial planning: Time still to refinance

Investors looking for returns from “risk free” investments are frustrated with low interest rates. However, the flip side is that borrowing is cheap. The place to start reviewing your debt structure is with your mortgage. If the rate is high, refinancing, even after closing costs, can make for big savings over time.

Rates are at lows not seen in many decades and are not likely to go lower: 30 year fixed mortgages are as low as 4.75% in Massachusetts.

However, if you have not dealt with banks in a few years, be prepared for a very different experience. The lenders that were willing to do “no-doc loans” a few years ago want more documentation that you can believe, much of which may not even seem reasonable.

And even if you do qualify for a loan, recent home buyers may not have enough equity as their homes will appraise for much less than what they paid, which may not leave enough equity for the bank loan to value ratios.

What type of loan is best? This depends on what you do with any cash saved by using a mortgage with a lower monthly payment. If you invest well, then that may be best. If you will just spend the money, then a 15 year mortgage may be better for you than a 30 year, as the rate will be lower and the higher payment will pay off the mortgage much faster (look for our iPod app on this and other mortgage issues).

Let us know if you have questions or comments. Thanks,