Category Archives: Individual and Medicare

Credit-Card Debt Can Sink Your Credit Score

This is a very timely article – avoid the temptation at the register this holiday season -“If you take out our credit card, you can save 20% off your order today…” and damage your credit rating! – Reeve
By Elizabeth Dwoskin | December 14, 2012 0:57 PM EST

Your obligations to credit-card companies carry
more weight on your credit report than bigger debts, such as home and
student loans.

That’s one of the findings from the Consumer Financial Protection
Bureau’s new report (PDF) on the credit scoring industry. The study
examined how Experian, Equifax,
and TransUnion calculate credit scores. To come up with scores, the
companies use information from thousands of different sources. Taken
together, the score allows lenders to assess a consumer’s likelihood of
paying back a loan, whether to offer a loan, and to calculate loan
amounts and interest rates. Besides mortgage, auto, and educational
loans, credit scores are also often a determining factor in apartment
rentals and in hiring decisions (PDF).

Credit-card companies supply most of the information that goes into
your credit report, according to the CFPB. Fifty-eight percent of the
pieces of information contained in the fine print of the average credit
report are furnished by credit-card issuers. Thirteen percent are
supplied by debt-collection agencies. Seven percent come from education
lenders, another seven from mortgage lenders, and the remaining lines
are provided by creditors that make auto loans.

Consumer Financial Protection Bureau Director Richard Cordray said
that consumers should view the findings as cause for caution.
“Especially around this holiday season,” Cordray said on a conference
call with reporters, “consumers may take out a retail credit card in
order to save 20 percent off their purchases on a given day. If they are
not responsible with that one card, it could end up costing them a lot
more down the line when they go to take out a mortgage and that credit
card is a black mark on their credit report.”

When the companies calculate a credit score, being behind on a single
mortgage payment counts against a consumer slightly more than being
behind on a single credit card, says Jeff Richardson, vice president of
public relations for VantageScore Solutions. That company develops score
formulas for the three major consumer-credit reporting companies
mentioned in the CFPB report (TransUnion and Experian referred queries
to VantageScore). If you have a credit score of 760, being 60 days late
on a credit-card payment will cause you to lose 70-90 points, the same
amount as being behind on a mortgage or car payment. If you have a high
credit score of 900, being behind on a mortgage is going to hurt your
score slightly more (100-120 points for the mortgage vs. 85-105 for the

But since each late card payment counts against you separately, and
people tend to have multiple cards, the cards often carry more weight.
In other words, being behind on your credit-card payments matters more
to your credit score than your consistency in repaying bigger debts,
such as home and student loans. “Regardless of the type of account,”
says Richardson, “multiple delinquencies are always more severe than a
single delinquency. … The impact from becoming delinquent on three bank
card accounts would be similar to going delinquent on a mortgage, auto,
and credit-card account simultaneously.”

Chi Chi Wu, staff attorney with the National Consumer Law Center, a
Boston-based consumer advocacy group, says the weighting system doesn’t
always accurately measure a person’s actual creditworthiness. “If you’re
looking to refinance,” she asks, “shouldn’t the fact you pay your
mortgage on time be more relevant than whether your pay your credit-card

The report, the first the agency has issued about credit scorers,
didn’t say companies had broken the law in their evaluations of
creditworthiness. But it did raise red flags about the accuracy of
credit scores. According to the report, regulators don’t know the extent
to which credit reports contain inaccurate information. They are
waiting on the results of a decade-long government study to find that
out. The study is expected to come out before year’s end—just as
consumers emerge from the holiday season loaded up with more debt.

Year-End Review: Five 401(k) Must-Dos Before 2013

By Chuck Saletta, The Motley Fool

The end of the year is fast approaching, so you’ve only got a few days left
before the window slams shut on your ability to make changes to your
401(k) for 2012.

The five tips below will help you make the most of that limited time,
and put you on track in your efforts to make your golden years as
comfortable as possible.

1. Make sure you’re getting your free money.

Many employers will provide matching money based on the amount you
contribute to your 401(k). Check your employer’s policy on matches and
make sure you’re socking away enough to capture every single dime the
boss will give you. If you hurry, you may even still have time to adjust
your contribution and get the most from your 2012 match.

Why this matters: When combined with the potential tax savings, a 401(k)

match may very well let you double your money,
instantly. There are very few other investments that give you the
opportunity to get that large an instant return, and even fewer that
provide that type of return with such certainty.

2. Diversify out of your employer’s stock.

You may work for the best company on Earth, but one of the most dangerous

things you can do is to have your savings and your paycheck tied to the same business.
If the company hits a rough patch,
you may find yourself out of work and with a substantially diminished
nest egg at the same time. Your own contributions should go into other
options in the plan, and if your match comes in the form of company
stock, check the rules on when you can sell it and shift your money into
a different fund.

Why this matters: Remember Enron? It went from
full-fledged Wall Street darling to becoming completely worthless as
both an investment and an employer. And it really didn’t take long for
it to move from the list of “Best Companies to Work For” to the list
“Biggest Collapses of the Century.”

3. Make a plan to pay off any loans against your account.

If you’ve taken out a 401(k) loan, make it a priority to pay it back
quickly. The convenience of being able to borrow money with no credit
check and the pleasure of paying yourself back rather than
sending your money to some faceless bank make 401(k) loans tempting. But
the gotchas can be downright ugly if you’re unable to repay back the
loan on schedule — especially if you lose your job.

Why this matters: If you lose or walk away from your
job, you could be required to pay the loan back in full within 90 days.
If you can’t, the outstanding balance is treated as a distribution. That
means you’ll get socked with taxes at your ordinary income tax rate and pay
a 10% penalty on top of that if you’re under age 59½. That’s an ugly
outcome, especially since the people facing it are often in a tenuous
financial position to start with.

4. Try to invest more.

Most employees are allowed to invest up to $17,000 in their 401(k) plans
in 2012, and those ages 50 or higher can contribute an additional
$5,500 in catch-up money, as well. (In 2013, the general limit rises to
$17,500, though the catch-up limit stays at $5,500.) All else being
equal, the more you put away with a decent allocation plan, the better
off you will be in retirement, even if your investing returns wind up being somewhat lousy.

Why this matters: The biggest benefit of maxing out
your retirement savings plans is the long-term financial health you get
from building a decent nest egg. In addition, if your 401(k)

the less many of those fees will bite.

5. Take your Required Minimum Distribution, if you need to.

Once you reach age 70½ and are retired, you must start taking money out of your 401(k),
even if you don’t need to spend it to cover your lifestyle. There are
special rules for the year of your first mandatory distribution, but for
every year after that, you have to take money out of your account by
Dec. 31 of each year.

Why this matters: If you don’t, Uncle Sam will tax you
at a rate equal to 50 percent of the amount you should have taken out
but didn’t. That’s way too much money to lose for simply forgetting to
move your money from one pocket to another.

20 days and counting- whats over the cliff for you?

Certainly, the most obvious change will be the reinstatement of full payroll taxes.  Your social security taxes from your paycheck will go from 4.2% back to their original 6.2%.

However, the single biggest contributor to the “cliff” is the expiration of the Bush Tax Cuts.  If the Bush tax cuts expire as scheduled, in January…

…Income taxes rise.  The Lowest bracket goes from 10% to 15%, and the highest bracket goes from 35% to 39.6%

…Capital Gains taxe rates rise from 15% to 20%

…Dividend rates rise from 15% to whatever your new, higher, tax rate will be

…The child tax credit reduces from $1000 to $500

…College tuition credits will reduce, with the expiration of the American Opportunity Tax Credit

…The Marriage Penalty returns, and married couples will owe more than if they were single.

…Estate Taxes return with a vengenace, with the exemption level falling from $5 million to $1 million, and top rates going up 20% to 55%.

As if that isn’t enough, there’s more!  The Alternate Minimum Tax (AMT) patch expires, subjecting another 26 million middle class earners to the tax.  A 3.8% surtax on investment Income is guaranteed, affecting mostly high-net-worth individuals.

So, its going to affect everyone you know – keep an eye on this.




If the fiscal cliff is averted, stocks may have all kinds of reasons to rise.

Presented by Reeve Conover

What if the future is more bullish than the bears assume? With 2013 approaching, stock market volatility seems
to have increased. Equities rise on optimistic remarks about a fiscal cliff
solution, then fall when another voice expresses pessimism, and vice versa.

In addition to this constant seesawing, the market
is contending with anxieties about Europe, with the eurozone now officially in
another recession, and the strong possibility of higher taxes on capital gains
and dividends in 2013 plus surtaxes on varieties of net investment income.1

Even so, 2013 may turn out to be a good year for stocks.
Our economy looks to be healing, and that may give investors around the world more

A housing comeback appears evident.
Our economy won’t fully recover from the downturn until the housing market does.
We have strong indications that this is happening. The October report on
existing home sales from the National Association of Realtors showed a 10.9%
annual improvement in the sales pace, with the median sale price rising 11.1%
in a year to $178,600. (The median sale price increased in October for an
eighth straight month.) The Census Bureau noted a 17.2% annual rise in new home
sales in October. Lastly, the Conference Board’s November consumer confidence
poll found that 6.9% of respondents planned to buy a home in the next six months.
In November 2010, less than 4% did.2,3,4

QE3 is open-ended. The Federal Reserve will keep
buying mortgage-linked securities for as long as it sees fit, and the Wall Street Journal has reported that
the Fed will likely broaden the effort to include the purchase of Treasuries in
2013 (compensating for the absence of Operation Twist next year). So cheap
money should be around in 2013 and beyond thanks to the Fed’s bond-buying
efforts and its dedication to maintaining historically low interest rates.5

Earnings couldimprove. This
last earnings season was as disappointing as analysts believed it would be, but
we could see gradual improvement across upcoming quarters, assuming Congress
does something significant about the fiscal cliff. Citigroup sees earnings
growth of 5% next year even with minor fiscal tightening.6

Durable goods orders didn’t drop last month. They
were flat in October (minus transportation orders). This implies that if some
companies cut back on spending heading toward the fiscal cliff, others
increased or resolutely maintained theirs. Business investment increased in
October in key categories: 0.9% for computers (the first rise in demand in five
months), 2.9% for machinery and 4.1% for electrical gear.7

Consumer confidence may be translating into personal spending. This month, the Conference
Board’s consumer confidence index reached a mark of 73.7; the highest level
since February 2008. Chain-store sales were up 3.3% during Thanksgiving week
from the week before, and up 4% from last Thanksgiving week according to the
International Council of Shopping Centers.7
If we get a fix for the fiscal cliff, 2013 could be promising. There is a real sense that the
U.S. economy is headed for better times, along with the market. Morgan Stanley
had projected the S&P 500 ending 2012 at 1,167; that certainly seems
doubtful. It now forecasts the index finishing 2013 at 1,434. Other year-end
2013 projections for the S&P are even more bullish: Deutsche Bank is seeing
a year-end finish of 1,500, Bank of America Merrill Lynch sees the S&P
reaching 1,600, and Piper Jaffray thinks it can make it all the way up to
There are economists who think 2013 could be a key
transitional year, a step toward a more robust economy at mid-decade. If solid
economic indicators inspire companies and consumers to spend and invest more,
next year might surprise even the most ardent stock market bears.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily
represent the views of the presenting party, nor their affiliates. All
information is believed to be from reliable sources; however we make no
representation as to its completeness or accuracy. Please note – investing
involves risk, and past performance is no guarantee of future results. The
publisher is not engaged in rendering legal, accounting or other professional
services. If assistance is needed, the reader is advised to engage the services
of a competent professional. This information should not be construed as
investment, tax or legal advice and may not be relied on for the purpose of
avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.


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8 – [11/27/12]


Saver’s Tax Credit for IRA’s

Are you eligible for a tax credit when you contribute to your retirement plan?

Certain lower income contributors to various tax-advantaged
plans—IRAs, 401(k) plans, 403(b) tax sheltered annuities, SIMPLE IRAs, Section
457 governmental plans and salary reduction SEPs—receive a nonrefundable tax
credit in addition to any other tax benefits resulting from participation. The
tax credit, being nonrefundable, applies only to the extent the client has an
income tax liability. Thus, a client with no federal income tax
liability—despite otherwise being eligible for a Saver’s Tax Credit—would not
receive it.

The tax credit is equal to the applicable percentage shown
in the following chart multiplied by the total qualified retirement savings
contribution, reduced by distributions received from such plans during the prior
two taxable years. The maximum Saver’s Tax Credit for any individual is $2,000.

Image 1042

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA. - SIPC - Brokercheck