Wednesday, February 4, 2015

Payroll Adjustment Calculator and Take Home Pay Estimator

It's tax season and many folks will realize they are getting a huge refund.  While this might be considered good news, it also means you've given the government an interest free loan all year.  Alternatively, perhaps you discover you underpaid your taxes during the year and find you even owe a penalty for underpaying during the year.  

Click here for a handy payroll adjustment calculator.  

Grab your latest pay stub and use this tool to help figure out what changes you need to make to your tax withholding.  If your pay stub does not include information about the allowances you are claiming, you may need to go to your company's payroll department and ask to see what your W-4 currently looks like.  

After using the above tool, fill out a new W-4 by clicking here.  Or, go back to your company's payroll department and ask to fill out a new W-4 to change your future tax withholdings. 

Sunday, January 25, 2015

The Key to Lower Healthcare Costs

The key to lower healthcare costs is high-deductible health insurance plans combined with websites like this one--> (click here).  The cost-sharing aspects of high-deductible health insurance plans like those attached to healthcare savings accounts (HSA) encourage patients to shop around for the best care at the best price for non-emergency care.  

The website above shines a light on certain hospitals and doctors that charge more than twice what similar hospitals and doctors charge for similar care.  I'd like to see the website above add patient reviews.  Reviews combined with clear pricing would do for healthcare costs what Amazon has done for almost everything else.

It's incredible to think, most of us put much more research effort into buying a new car, TV, vacation spot, or even a small power tool than we do choosing a doctor or hospital for hip replacement or hernia repair.  

Sunday, January 4, 2015

Historical Asset Class Returns 2014

Here's the latest historical asset class returns chart ending 2014.  Overall, a terrific year for investors with all but one asset class rising (I don't consider commodities an investment asset class).

It is funny how the financial markets can make smart people do really stupid things.  The top performing asset class in 2014 was long-term bonds which rose nearly 20% in 2014.  In fact, US Treasury bonds with maturities longer than 20 years rose nearly 30% in 2014! 

This must come as a nasty a surprise, to the North Carolina State Treasurer who sold billions of dollars of bonds just before they sky-rocketed in value.  This was just the latest example of North Carolina Treasurer Janet Cowell zigging while the markets zagged.  Five years ago Ms. Cowell sold stocks in favor of "inflation-sensitive" assets (aka: commodities).  Her inflation portfolio has lost value over the past five years while the stock market rose each and every year and is now at all-time record highs.  2014 was another dismal year for speculators in commodities.  Oops! Sorry, North Carolina pensioners, likely no COLA (cost of living adjustment) for you.

If you rebalanced your portfolio last year (and you should always rebalance once or twice each year) you would have PURCHASED long-term bonds after they fell in 2013.  If you did, congrats, you are a better investor than North Carolina's State Treasurer.

The chart above shows the last 15 years of investment returns by asset class. On the far right I have calculated the 25-year average for each asset class and pointed out the best and worst annual returns for the past 25 years for each asset class.  I love this chart - which is why I put it on the back cover of every book I have written.  Almost everything you need to know about investing can be learned from this chart:
  1. Stocks beat bonds over the long-run.  In the far right columns of the chart you will notice that all 4 of the major stock classes have a higher 20-year average return than all 4 of the major bond classes. You will notice that the various stock classes averaged 8-14% annual returns over 25 years while the various bond classes averaged just 5-8%.  
  2. Stocks don't beat bonds EVERY year, but they win about 75-80% of the time.  You will also notice that a stock class claimed the top spot in 10 out of the past 15 years (and 19 out of the past 25 years).