Jill on Money: Fiscal Cliff, taxes, 529s

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Now that the election is over, attention turns to the dreaded "Fiscal Cliff", the combination of tax increases and spending cuts that would likely spark a recession in 2013. On the show, we talk about the effect of the Fiscal Cliff on your tax bill. Here are two blog posts for future reference:

What the Fiscal Cliff means for your tax bill

Fiscal Cliff Q&A

Callers Troy from IN, Jim from WA and Steve in VA seemed less concerned about the outcome of the election than their retirement projections and portfolio allocation. The steps necessary to calculate retirement income are straightforward:

-- Determine how much income you will need in retirement (this will likely force you to figure out what you spend now)

-- Add up what you currently have in retirement assets and the value of future contributions to retirement savings (don't include cash, emergency reserves or equity in your home)

-- Apply a conservative annual rate of return on those assets (4-5 percent)

-- Take portfolio value and apply a withdrawal rate of 4 percent to determine how much money you can withdraw from your portfolio on an annual basis and not drain the account before death. For example, if your retirement funds total $500,000, you could safely withdraw $20,000 to supplement your other streams of income.

Remember, an ample retirement stash may allow you to assume less risk with your investments. For the feint of hear, here is my trusty "Wimpy Portfolio":

-- 20% CDs

-- 15% Cash

-- 20% Bond Fund (Vanguard's Intermediate Term Bond Index fund (VFICX), Vanguard Short-Term Investment Grade fund (VFSTX), Vanguard Total Bond Market Index Fund (VBMFX), Schwab Total Bond Market (SWLBX), Fidelity U.S. Bond Index (FBIDX)

-- 15% International Bond Fund T. Rowe Price International Bond Fund (RPIBX) or if you want to assume more risk, you can add the T. Rowe Price Emerging Markets Bond (PREMX)

-- 10% Total Stock Market Index Fund (Fidelity Spartan Total Market Index, Schwab 1000 Index Fund Investor or Vanguard Total Stock Market Index)

-- 10% International Stock Index Fund (Fidelity Spartan International Index (FSIIX), Vanguard Total International Stock Index (VGTSX)

-- 5% Emerging Markets (Vanguard Emerging Markets Stock Index (VEIEX) or T. Rowe Price Emerging Markets Stock (PRMSX)

-- 5% Commodity Fund (Harbor Commodity Real Return Strategy (HACMX) or for gold bugs out there, Vanguard Precious Metals and Mining (VGPMX))

We fielded questions about saving for education from Shirley in MD, Brian in Buffalo and Joe. To reiterate, I really like using 529 plans to save for college, versus EE bonds.

Speaking of school, Claudio is trying to decide whether to pay for graduate school from cash flow and Wendy is trying to put her son in the best position to receive financial aid, amid a complicated domestic situation.

Here are web sites and resources mentioned in this week's show:

-- Jill's Blog

-- How to Choose a Financial Advisor: 10 Questions

-- NAPFA: National Association of Personal Financial Advisors (fee-only advisors)

-- E, EE and I Savings Bonds

-- The ABCs of Annuities: 6 Questions to Ask

-- The Pros and Cons of Annuities

-- Annuity salespeople don't like me

-- Retirement Calculator

-- 529 plan info

-- College Loans: What you need to know

Thanks to everyone who participated and to Mark, the BEST producer in the world. If you have a financial question, there are lots of ways to contact us:

Call 855-411-JILL and we'll schedule time to get you on the show LIVE

Send an email: [e-mail]

Tweet me: @jillonmoney

Post a comment on this blog

[joesapper]

Well I guess the night life thing is slowing as some fail to keep reservations from burning the flame into the night of hope .

Well wining and dining is one thing that never last as economics grind to a hault , but the turn around to restore the reservation list is never hard as long the budget is based on good living and the tomorrows are not taking all the coin . It is aways a balance between today & the tomorrows , but the tomorrows have to have the Family of today cared for so they are at our side tomorrow . We spend a lot of time dining with the staff of the boss , but the best is with family & friends . Budget correctly , the office staff will come and go , but family & friends is a constant gem that one cannot afford to lose over a bad budget plan .Just because we stand at the cliff does not mean we should jump when we have family & friends to support us and for us to support them .

To lose everything for a bosses demand when the paycheck is not worth the cost of family & friends is foolish . In these hard economic times pessures will be applied , seek wisdom not the promise of coin . In these hard times , some will be seen as nothing more than tools .
24/7 is not worth the wages , if your a slave to the demands of the boss , some jobs are best done when they are left back in the office where they belong . The chair one sits in does not make the person , the person makes the chair . Your worth is more than wages , so stand your ground , and keep family & friends in focus , and the job thing will work its way to fit.