There is a new calculator at the Social Security Administration Web site, called the Retirement Estimator that makes it easy to determine how your social security benefits are affected by your retirement age.

The calculator estimates are based on your actual Social Security earnings record. Remember, however, that it’s just an estimate and many things can change over the next several years before you retire such as inflation.

Additionally, the estimate will vary slightly from the actual benefit you may receive in the future because your social security earnings record is constantly being updated and the calculators use different parameters and assumptions (i.e., different stop work ages, future earnings projections, etc.).

To use the Retirement Estimator, you will have to identify yourself online by completing an application and the calculator will search the Social Security database for your earnings history to forecast your future benefits.

Visit SocialSecurity.gov/Estimator to get your estimate.

This is cool.  KeyBank is offering a free Garmin nüvi GPS when you open a qualifying checking account by April 24, 2009 and make one debit card transaction plus a combination of two direct deposits and/or automated payments each of $100 or more by June 26, 2009.

To qualify, individuals that are new to KeyBank must have not had or opened a KeyBank personal checking account in the last 12 months.  For consumers who open a Key personal checking account jointly (multiple names on one account), one Garmin nüvi GPS will be mailed to the address on record.

Business entities that are new to KeyBank and have not had or opened a KeyBank business checking account in the last 12 months also qualify for the a free Garmin nüvi GPS.

For more information visit Key.com.

A mutual fund is an investment instrument where hundreds or thousands of people pool their money to create a portfolio of securities, which includes stocks, bonds, real estate, and other securities.  Each investor in a mutual fund owns a percentage of the fund.

Mutual funds enable investors to easily and cheaply own a diversified portfolio of securities.  This allows investors to own a diversified portfolio for much less than it would cost them to buy the individual securities.  

Most mutual funds require a small investment of a few hundred dollars to a few thousands dollars. Additionally, because mutual funds are diversified with hundreds or thousands of securities they tend to not fluctuate wildly when compared to owning a small amount of individual stocks, thus making them less risky.

Mutual funds are typically run by Mutual Fund Managers who determine what security to purchase and when to buy and sell these securities.  The investor pays the Mutual Fund Managers via fund fees to make these day-to-day decisions.

There are hundreds of mutual funds categories to choose from.  Some categories are as follows:

• Growth funds – invest in stocks of growing companies.
• Aggressive growth funds – invest in stocks of fast growing companies.
• Sector funds – invest in stocks of companies in a specific sector like technology or healthcare.
• Index funds – invest in stocks of every stock in a particular index, such as the S&P 500.
• Bond funds – invest in shares of government bonds, high-yield bonds (A.K.A. junk bonds), or municipal bonds.
• Value funds – invest in stocks that are cheap based on earnings to the price of the stock.
• Large-cap value funds – invest in stocks of large companies whose share prices are selling at discounted prices.
• Small cap value – invest in stocks of small companies (usually with market capitalization of less than $1 billion) that are ignored or unknown by investors.
• Growth-and-income, equity-income, and balanced funds – invest in a combination of dividend-paying stocks and income-producing securities, such as bonds or convertible securities, which are bonds or special types of stocks that pay interest but can also be converted into the company’s regular shares.

Things to consider when buying mutual funds are:

• Risk – Riskier funds may swing more in value depending on market conditions.
• Expenses – Mutual funds charge a percentage of total assets, which will cost you money.
• Taxes – Mutual funds that own dividend-paying stocks will issue dividends to the owners who have to pay taxes on these dividends.  Even if the fund declines in value, the owner is still liable to pay taxes on the dividends.
• Performance – Past performance is no indication of future performance, however, looking at a funds past long-term performance gives a good indication of which funds may do well in the long-term future.  
• Consider owning Index funds – Index funds mimic market benchmarks, such as the S&P 500 and are considered “passive” funds over “active” (or managed) funds because they have lower expenses and are more tax efficient.  Most active funds underperform the S&P 500 index.

Mutual funds can be purchased and researched online at a variety of online brokerage houses, such as E-Trade, Fidelity, Schwab, Scottrade, and Ameritrade.

Several years ago I was in the market for a used car.  I had a company car but quit my job for a new one, so I needed a car.  The beauty of the company car was that I did not have a car note, so I was determined to keep this expense low with purchasing a car.

One day while driving by a used car lot, I spotted a fully loaded Nissan Sentra (sun roof, A/C, cruise control, power seats) with low millage and still under warranty.   The sticker price on the car was $16,900.   After a test drive, I offered $12,000 for the car and told the sales man I wouldn’t go one penny over.  I picked $12,000 out of the sky without doing any research, but it sounded like a great price for the car.  The sales man laughed at me and told me there was no way he could go that low.  I reiterated that I wasn’t going 1 penny over $12,000. 

As usual, the salesman went into the back room to speak to his manager.  A few minutes later he came back and said, “Wow, my manager was able to drop the price to $15,900”.  I said thank you for your time.  He said, “Hold on, let’s talk about it”.  I said “$12,000 is all I’m willing to spend.”  He then went back to speak to his manager and came back out after a few minutes.  He then said, “Ok, this is the best I can do and I can’t do any better than this.  We’ll give it to you for $13,900”.  Again, I was ready to walk out.  He then went back and spoke to his boss again.  He came back out and said, “Ok we’ll give it you for $12,000, but keep in mind we are making no money on the car”.  He then showed me on his computer that the dealership purchased the car for about $12,100.  I was amazed!  I then wondered what the Blue Book value of the car was.  So I told the sales man I had to run home and check something before I purchased the car.  I ran home and checked the Blue Book value and the car was valued at about $15,500.

I thought to myself, “Wow I’m getting a great deal!”  I immediately went back to the dealership and purchased the car.  About a month later, while driving by the same used car dealership I saw that the lot was empty and they had closed.  Then it hit me – they were going out of business and wanted to get rid of the cars.  My timing was great.

I was extremely happy that I stuck to my price and ended up getting a car that ran well for years.  I sold that same car about 5 years later by placing an ad on Yahoo for a sale price of $2,500.  The very next day a gentleman purchased the car in cash for $2,500 without inspecting it or negotiating.  He told me he was shipping the car to South America to sell it as a taxicab.  I then thought to myself, “Damn, I should have asked for more money, maybe $2,500 was too low!”

Related Articles:

• Stick to Your Price and Negotiate When Buying
• Save Money on Car Loans
  

Many Americans are drowning in debt, which is becoming more apparent everyday with all the foreclosures. 

Many American families live from paycheck-to-paycheck and if there is a hiccup financially, such as losing jobs, things easily come falling down.

For many Americans to live their desired lifestyle, they must have access to credit cards and loans.  In many American households, the house, the cars, the furniture, the big screen TV are all purchased on credit.  We have become a society that even for families with dual incomes; the family must live on credit to attain their desired lifestyle.

Consider the following sobering statistics:

• The Federal Reserve Board reported that the size of total U.S. consumer debt grew from $824 billion in 1990 to nearly $2.2 trillion in 2005, almost five times in size.
•  Experian reported that in 2008 the average American had $16,635 in debt, not considering mortgages.
• ComScore reported that in 2008 55% of Americans maintained a running balance on their credit card accounts.
• Visa and MasterCard reported that in 2006 there were 984 million bank-issued Visa and MasterCard credit and debit card accounts in the U.S.
• Mail Monitor, a credit card direct mail tracking service, reported that almost 4.2 billion credit card offers were made to U.S. households in 2008.
• CardTrak.com reported (via an online poll) that the average rate for bank credit cards interest 19% in March 2007, up from 16.5% in 2003.

Business Week has issued a report of the best and worst 401k plans based on a new online database at BrightScope.com that has more than 1,000 plans.  The plans are rated based on participation rate, fees, default and employer match. 

Bright Scope uses more that 200 data points to determine an overall 100-point rating for each plan.

Below are the top 10 401K plans with at least $100 million in assets:

1.   Saudi Arabian Oil  
2.   Bank of New York Mellon
3.   Greenwich Capital Markets  
4.   Southwest Airlines  
5.   Piper Jaffray  
6.   Nucor  
7.   Fedex
8.   Amgen  
9.   Mcdermott Will and Emery  
10. Chevron  

Below are the 10 worst 401K plans with at least $100 million in assets:

1.   Darden Restaurants 
2.   Big Lots 
3.   Radioshack 
4.   Zale 
5.   Compass Group Usa 
6.   Bob Evans Farms 
7.   Mps Group 
8.   O’reilly Automotive 
9.   Best Buy 
10. Pep Boys

Visit BusinessWeek.com to see the best 50 401k plans and the worst 50 401k plans.  Visit BrightScope.com to search ranking and rate your employer.

Related Article:  What is a 401K?

An annuity is an insurance product that pays out income in a series of payments and is usually a part of a retirement strategy.  Investors who want to a steady income stream at retirement can purchase an annuity to accomplish this. Investors can use an annuity to complement other retirement income sources, such as Social Security and pension plans.

How does an annuity work?  
Money is invested in an annuity and at a future date or a series of future dates; the annuity makes payments to the investor. The income received from an annuity can be paid monthly, quarterly, annually or even as a lump sum.  Payments are determined by a variety of factors including the length of the payment period.

Types of Annuities
There are two basic types of annuities:

• Deferred annuity – money is invested for a period of time until its ready for withdrawals, normally at retirement.
• Immediate annuity – payments are received soon after the initial investment is made.  People approaching retirement age usually do this.

A deferred annuity accumulates money while an immediate annuity pays out. Deferred annuities can be converted into immediate annuities when the investor wants to start receiving payments.

Annuities can also be fixed or variable.  This depends on whether the payout is a fixed sum, tied to the performance of the overall market or group of investments, or a combination of the two. Payments can be received for the rest of the investor’s life or for a specified number of years. Payments can depend on whether the investor opts for a guaranteed payout  (fixed annuity) or a payout stream determined by the performance of the annuity’s underlying investments (variable annuity).  Variable annuities are normally invested in mutual funds.

Tax Benefits
Money invested in an annuity grows tax-deferred.  When withdrawals are made, the earnings are taxed at the owner’s income tax rate; however, the amount you contributed to the annuity is not taxed. This is the biggest benefit to annuities.
 
Advantages
Unlike other tax-deferred retirement accounts such as a 401k and an IRA, there is no annual contribution limit for an annuity. This allows investors to deposit more money for retirement, and is useful for people close to retirement who need to catch up.

Disadvantages
The main disadvantage of annuities is that they normally have very high fees.   Often there are hidden fees that can cut into profits.  Anyone considering an annuity should thoroughly research it first before deciding whether it’s an appropriate investment.

Annuity fees include:

• Commissions – Most annuities are sold by insurance brokers or sales people who can get paid up to 10% in commissions.
• Surrender Charges – Annuities have surrender chargers, where the owner has to pay to take money out of an annuity for the first several years.  The surrender charge normally costs about 7% of an annuity value if money is taken out after 1 year and will decline 1 percentage point a year unit it reaches zero.  Some annuities can have surrender charges of up 20% for the first year.
• Annual expenses – Variable annuities have high annual expenses, which can cost 1.25% or more.  Additional annual expenses includes:

• Annual investment management fees can range from 0.5% to over 2%.
• Insurance rider fees can range from 0.6% or more.

Not all annuities have high annual fees by not charging a sales commission or a surrender charge. These are called direct-sold annuities because they are sold directly by traditional insurance companies and not through an insurance broker so there is no need to pay a commission. Companies that that sell low-cost annuities include Schwab, T. Rowe Price, Ameritas Life, Fidelity, Vanguard and TIAA-CREF.