Kiplinger's Personal Finance

february 2008

www.kiplinger.com

How Much to Save at 25, 35, 45, 55your $1 Million formula p 57

FREE One-on-One Financial Advice p 56

Profiting From Sin Stocks p 27

Boost Your Home’s Value p 85

money

RETIRERICHWe Make It easier

Than ever p 54

investing

living

LISA and SEAN KENNEDY add to the amount they stash in their 401(k) plan each year.

personalfinance

BESt VAluES in PuBlic cOllEgES p 64

http://www.kiplinger.com

3

02/2008 KIPLINGER’S PERSONAL FINANCE

CONTENTS VOL. 62 NO.2

AHEAD13

20 PORTFOLIO DOCTOR

22 OPENING SHOT

INVESTING27

27 THE VIRTUES OF VICE STOCKS

PLUS:

34 TARGET FUNDS UNDER FIRE

PLUS:

37 5 WAYS TO BET ON A SINKING DOLLAR

42 GOING LONG

46 MUTUAL FUNDS

40 MORE ABOUT INVESTING

(40)

(41)

(41)

(44)

(48)

(48)

51

MONEY53

54 RETIRE RICH

PLUS:

64 BEST VALUES IN PUBLIC COLLEGES

PLUS:

70 THE ’08 RACE TO FIX HEALTH CARE

KIPLINGER’S PERSONAL FINANCE // FOUNDED 1947

JIM

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64

KIPLINGER’S PERSONAL FINANCE 02/2008

74 A HEAD START ON THE ROAD TO RICHES

81 ASK KIM

77 MORE ABOUT YOUR MONEY

(77) (78)

(78)

(79)

(83) (83)

LIVING85

85 REMODELING THAT PAYS BACK

90 HIGH DEF FOR LESS THAN $1,000

92 DRIVE TIME

95 THE LOWDOWN

96 MY STORY

IN EVERY ISSUE6 FROM THE EDITOR

8 LETTERS

ON THE COVER: Photograph by Mark Tucker. Stylist: Shannan Shepard. Hair and makeup: Bridget Henry.

CONTENTSKIPLINGER.COM

WHAT YOU’LL FIND ONLY ONLINEFIND MORE TAX DEDUCTIONS Consult our updated Taxopedia for clear, concise explanations. kiplinger.com/links/taxopedia

WHICH CANDIDATE’S HEALTH-INSURANCE PROPOSAL IS BEST? Read our analysis, then go online and vote. Plus, see our Web recap and share your views. kiplinger.com/links/healthcare08

HOME MAKEOVERS Our before-and-after photos of kitchen and bath redos provide remodeling inspiration. kiplinger.com/links/makeovers

WHO BENEFITS FROM A REVERSE MORTGAGE? Seniors can tap home equity to remain in their home—or even modify the house for wheelchair use. Watch our video at kiplinger.com/video/retirement.

HASSLE-FREE GIFT RETURNS Retailers are using more restocking fees and other deterrents. Learn how to avoid the headaches—or just share your cautionary tale—at kiplinger.com/links/holiday-returns.

REAL ESTATE VALUES Track prices in your area from 2006 to 2007. Find out which homes appreciated in a declining market, or compare the numbers with last year’s predictions. kiplinger.com/tools/houseprices

HOW TO REACH US: Subscriptions. For inquiries about ordering, billing or renewing a subscription, or to report address changes, call 800-544-0155, Monday through Friday between 7 A.M. and 11 P.M. and Saturday and Sunday between 8 A.M. and 6 P.M. central time. Please have your mailing label handy when speaking with our customer-service representatives. You can also write to Kiplinger’s Personal Finance, P.O. Box 3292, Harlan, IA 51593-0472, or e-mail us ([email protected]). On the Internet, go to kiplinger.com/magazine. Reprints. PARS International Corp. (212-221-9595, ext. 322; e-mail, [email protected]). Content licensing. Call 202-887-6558 or e-mail [email protected]. mailing lists. From time to time we make our subscriber list available to carefully screened companies whose products may be of interest to you. If you would rather not receive such solici-tations, send your mailing label to P.O. Box 3292, Harlan, IA 51593-0472 and instruct us to exclude your name.

Log OnGo online to get more from our experts and enjoy expanded articles that include slide shows, tools and videos. Find out what we’re talking about this month at Kiplinger.com:

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AHEAD »

SCARCELY A DAY GOES BY

Colgate-PalmoliveAbbott Laboratories

Nicor

Vanguard Consumer StaplesiShares Dow Jones

US Healthcare

A CUSHION FOR UNCERTAIN TIMES AS THE OUTLOOK CLOUDS, INVESTORS CAN PROTECT THEMSELVES FROM MARKET SHOCK. BY ANNE KATES SMITH

TOPIC A

ALI

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FFER

14

Select Sector SPDR- Utilities

Kraft Foods

SPDR DividendAlpine

Dynamic Dividend

AHEAD

STOCK-MARKET VOLATILITY SEEMS OUT OF CONTROL. WHAT IS THE VOLATILITY INDEX, ALSO KNOWN AS THE FEAR INDEX, AND WHAT CAN IT TELL US ABOUT OUR INVESTMENTS?

WHAT’S THE VIX TELLING US NOW?

HOW CAN YOU PROTECT YOUR-SELF?

WILL THE MARKET BECOME EVEN MORE JUMPY?WE

■ GEOFF CONSIDINE SAYS PRE-RETIREES SHOULD KEEP A KEEN EYE ON VOLATILITY, WHICH CAN AFFECT PORTFOLIO WITHDRAWAL RATES FOR YEARS.

INTERVIEW

A WILD RIDE WILL GET EVEN WILDER INCREASING MARKET VOLATILITY ISN’T NECESSARILY A BAD THING. JUST BE PREPARED FOR IT.

JOH

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KIPLINGER’S PERSONAL FINANCE

16


AHEAD

SOME INVESTORS MAY BE

POP GOES A BUBBLEDON’T GET LEFT HOLDING THE (HAND)BAG. AND WATCH YOUR STOCKS, TOO.

Q: My siblings and I own a business that was founded by our late father. It’s been struggling, and we’ve decided to sell it.

The highest offer, by far, is from a private-equity investor. The middle offer is from a direct (and tough) competitor, who would probably fold our company into his.

The lowest offer is from a respected firm in a related field that says it will retain our prod-uct line, brands and employees. It won’t pay us as much because it plans to invest heavily to revive our franchise.

What are the ethical considerations here?

The top two bidders are most likely to slash costs to recover their high purchase price as quickly as possible. If you care most about protecting your company’s culture and brand, your loyal employees, and your father’s legacy, you’ll take the lowest offer—and cross your fingers.

There’s no guarantee that the low bidder, honorable though its intentions might be, will stick to them if conditions worsen in your field. If you take the low offer, consider keeping a stake in the firm or getting a performance-based price escalator so that you may share in the upside if the turnaround works.

Q: A colleague at my office takes his wife on a lot of his business trips. Is this ethical?

Yes, as long as he gets his work done and pays the added costs of her accompanying him—her airfare, meals, side trips for pleasure and so on. If traveling alone, he would still need a hotel room and rental car, so he doesn’t have to reimburse the company for her sharing in their use. If the business travel entails entertaining clients—including their spouses—it is sometimes appropriate for the spouse’s expenses to be cov-ered, too. It’s always best to check with one’s supervisor first.

MONEY & ETHICS KNIGHT KIPLINGER

3 OFFERS FOR A BUSINESS— WHICH TO ACCEPT?

MARKETS

HAVE A MONEY-AND-ETHICS QUESTION YOU’D LIKE ANSWERED IN THIS COLUMN? WRITE EDITOR IN CHIEF KNIGHT KIPLINGER AT [email protected].

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Put off by tomelike mutual fund prospectuses? You’re in luck. Easy-to-read summaries are on tap for 2008. The plain-English booklets will boil down fund objectives, costs, strategy, risks, returns and taxes. They’ll provide more clarity on fees, includ-ing line-by-line explanations of what funds charge for manage-ment, marketing and other expenses. (www.kiplingerbiz.com/

ahead/fundsummaries)

CLARITY, BREVITY AT LAST

●● From The Kiplinger Letter

18

AHEAD

THE PLAN AIMS TO PREVENT

MATTHEW MOGUL

FAQ

THE PITFALLS OF THE MORTGAGE BAILOUT THE PLAN TO HELP OUT STRUGGLING BORROWERS WON’T DO MUCH TO STEM THE TIDE OF FORECLOSURES.

AS JOB SEEKERS, WE’VE BEEN REMARKABLY LOYAL TO OUR industries. About 60% of professionals with new jobs stayed within their industry during the third quarter of 2007, according to a recent survey. That put the year on track for a record-low level of industry-switching—until trouble broke out in the housing and finance sectors. Now, outplacement firm Challenger, Gray & Christmas expects a spike in industry crossovers early in 2008, similar to the one that occurred in late 2001 as the dot-com bubble collapsed.

Starting anew can be invigorating, but it’s risky to your earning power. “The secret is to be conversant in the language of the industry you’re moving to,” says Jan Cannon, of Cannon Career Development in Boston. For instance, networking skills means something very dif-ferent in the tech field than it does in public relations, says Cannon. “You don’t want the person reading your résumé to do any of the work—you have to do all the translating.” People who’ve hop-scotched before have an advantage. Twenty-year veterans of a single industry may have to draw on outside volunteer work or other inter-ests to highlight their adaptability. If you have to take a pay cut to get in the door, try to negotiate an early performance and salary review.

It helps to target thriving industries open to newcomers. Harriet Wiggin, 59, was downsized out of her marketing post at a technology research firm in Boston. She hopes to land a similar position in manu-facturing—among the few bright spots in a struggling economy this year. “I think there’s more opportunity,” says Wiggin, acknowledging that challenges await as well. “There’s always a learning curve.”

WORKPLACE

CAREER CROSSOVERS EXPERTS EXPECT MORE WORKERS TO SWITCH INDUSTRIES, EVEN CAREERS, AS THEY CHANGE JOBS IN 2008.

sNinin

pyinf“wsinein

Wrefyt

●● Stock Watch

BIG ENOUGH BLUE

Investors worry that finan-

cial firms, representing one-

fourth of sales for Interna-

tional Business Machines,

will trim orders. But resil-

ient, recurring revenue from

services and software is 73%

of sales. A global presence

mitigates U.S. struggles.

SYMBOL: IBMPRICE: $109EARNINGS PER SHARE:2007: $6.97*2008: $7.98*

To Dec. 10. *Estimate. SOURCES: Morningstar Inc., Thomson Financial.

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■ HARRIET WIGGIN HOPES

TO HOP TO MANUFACTURING

FROM TECH.

20

»

STEVEN LEIBENSPERGER AND

Stocks’ long-term edge.

Rare win for bonds.

»

DESIGNER STEVEN LEIBENSPERGER SHOULDN’T LET HIS FEAR OF RISK COLOR THE WAY HE INVESTS HIS 401(K) MONEY.

STUMPED BY YOUR INVESTMENTS? WRITE TO US AT [email protected].

PORTFOLIO DOCTOR

DESIGNING YOUR FIRST 401(k) PLANWHEN YOU’RE YOUNG, YOU CAN TAKE MORE CHANCES. THINK STOCKS. BY JEFFREY R. KOSNETT

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/RED

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AHEAD


27

»


IN THIS SECTIONTarget-date retirement funds 34

Bet on a sinking dollar 37Buy shares in BlackBerry? 40

Insured munis take a hit 41Jeremy Siegel’s ’08 forecast 42

A new breed of mutual funds 44PLUS Update on the Kiplinger 25 48

INVESTING

BY THOMAS M. ANDERSON

THE VIRTUES OF VICE STOCKS

THE

IRIS

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BIS

GUINNESS, MADE BY LONDON-BASED DIAGEO, IS THE WORLD’S MOST POPULAR STOUT.

28


INVESTING // STOCKS»

LUCRATIVE LIQUIDS

Diageo

AmBev

Anheuser-Busch

HARD TIMES WON’T STOP GAMBLERS FROM BETTING, PARTYGOERS FROM DRINKING AND

STEW

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NEW YORK, NEW YORK AND THE BELLAGIO,

BOTH OWNED BY MGM MIRAGE,

ARE AMONG THE NEWEST HOTELS

ON THE STRIP.

30


INVESTING // STOCKS»

HIGH-STAKES STOCKS MGM Mirage

EIGHT THAT PROMISE BIG PROFITSIn addition to being attractive in their own right, these companies have strong market forces behind them. All of them are large, consistent growers (an area of the market currently in favor), and four are based overseas.

Sin Stocks

Data to December 10. *Based on 2008 fiscal-year estimates. †Based on estimated earnings. SOURCES: Thomson Financial, Yahoo.

Altria MO $78 $164 $39 $4.69 17

AmBev ABV 76 47 12 3.40 22

Anheuser-Busch BUD 53 39 17 3.09 17

British American Tobacco BTI 78 80 21 4.82 16

Diageo DEO 87 58 19 4.92 18

Imperial Tobacco Group ITY 105 36 11 6.47 16

International Game Technology IGT 44 14 3 1.66 27

MGM Mirage MGM 93 28 8 2.79 33

Company SymbolRecent price

Mkt. cap. (in billions)

Revenues (in billions)*

Earnings per share*

Price- earnings ratio†

31


International Game Technology

UNSEEMLY PRODUCT, GREAT STOCKS

Imperial Tobacco Group

British American Tobacco

IF YOU DON’T WANT TO MUCK AROUND IN SIN STOCKS, HIRE A MUTUAL FUND MANAGER TO DO the dirty work for you.

Only one fund specializes in the entire range of sin stocks. Vice fund, run by Charles Norton since September 2005, invests in alcohol, gaming, tobacco and defense. We hardly consider military-related companies to be sinful, but Norton includes them because they tend to run counter to general economic trends and because most socially screened funds—polar opposites of his fund—shun them. Top holdings include Altria, Diageo and British American Tobacco. Vice gained 21% in 2007 to December 10, compared with the S&P 500’s 8% return. The $177-million fund (symbol VICEX) doesn’t levy sales fees, but it charges a hefty annual fee of 1.75%.

Dan Ahrens, former manager of Vice fund, now runs the tiny (assets of $3 million) Ladenburg Thalmann Gaming and Casino fund. The fund holds just 35 stocks, including Penn National Gaming, Las Vegas Sands and MGM Mirage. Since its March 2006 debut, performance has been as erratic as a float-ing craps game. In 2007 to December 10, the fund (GACFX) gained 3%. Annual fees are 1.70%.

So-called leisure funds and other specialized funds may also hold healthy doses of sin stocks. Geoff Kuli, manager of Fidelity Select Leisure since October 2006, hunts for reasonably priced, growing companies in the media, entertainment, cable, food and beverage industries. At last report, the fund (FDLSX) had about 15% of its $263 million of assets in gaming stocks. Select Leisure gained 9% in 2007 to December 10. About one-fourth of Rydex Leisure’s $9 million in assets are in casino stocks. The fund (RYLIX) uses a formula to buy equal portions of stocks in the leisure sector. Over the past five years, it returned 14% annualized, beating the S&P 500 by an average of one percentage point per year.

Fidelity Select Consumer Staples recently kept 20% of its portfolio in alcohol and tobacco stocks. The fund (FDFAX), managed by Robert Lee since June 2004, has a three-year annualized return of 18%, which beat the S&P 500 by an average of seven percentage points per year.

The Fund Route to Sin Stocks

n as erratic as a float-

“Leisure funds and other specialized funds may hold healthy doses of sin stocks.”

51


INTERNATIONAL STOCKS COASTED

ELIZABETH ODY

Foreign Markets Roar On

EXPLANATION OF TERMSTotal return assumes reinvestment of all dividends and capital gains; three- and five-year returns are annualized. Returns reflect ongoing expenses but not sales charges.

Maximum sales charge A figure without a footnote means the commission is deducted from the money you send to the fund. A figure with an r is the maxi-mum redemption fee charged when you sell shares. Funds that charge both sales and redemption fees are footnoted with an s next to the front-end load.

Expense ratio is the percentage of assets claimed annually for operating a fund.

RETURNS FOR 3,OOO+ FUNDS ONLINEGet the latest data and see the top 25 performers over one-, three- and five-year periods. We group our rankings into eight bond-fund and almost two dozen stock-fund categories and update them monthly. To see the rankings and look up fund information, go to kiplinger.com/links/mutualfunds.

1. Allianz NFJ Intl Value A@ AFJAX 34.1% — — 5.50%s 1.46% 800-498-5413

2. Cullen Intl High Dividend Ret@ CIHDX 30.6 — — 2.00r 1.25 877-485-8586

3. Harbor Intl Instl@ HAINX 30.5 27.8% 27.5% 2.00r 0.85 800-422-1050

4. Thomas White Intl TWWDX 24.6 27.7 26.7 2.00r 1.44 800-811-0535

5. American Century Intl Value A@ MEQAX 22.9 20.9 21.8 5.75 1.40 800-345-2021

6. Dryden Intl Value A@ PISAX 22.0 22.2 20.7 5.50 1.65 800-225-1852

7. Cambiar Intl Equity Inv CAMIX 21.5 19.0 21.2 2.00r 1.50 866-777-8227

8. Templeton Foreign A@ TEMFX 20.9 17.4 18.9 5.75s 1.16 800-632-2301

9. Longleaf Partners Intl LLINX 19.7 18.2 18.4 none 1.61 800-445-9469

10. DWS Intl Value Opps A@ DNVAX 19.7 — — 5.75s 2.05 800-621-1048

CATEGORY AVERAGE 14.6% 18.0% 22.0%

INTERNATIONAL LARGE-COMPANY VALUE FUNDS Ranked by one-year returns

20 LARGEST STOCK MUTUAL FUNDS Ranked by size

@Rankings exclude share classes of this fund with different fee structures or higher minimum initial investments. sFront-end load; redemption fee may

apply. rMaximum redemption fee. †For all share classes combined. **Closed to new investors. MSCI EAFE is Morgan Stanley’s Europe, Australasia, Far

East index. SOURCE: © 2007 Morningstar Inc.

Rank/Name Symbol 1 yr. 3 yrs. 5 yrs.

Max. sales

chargeExpense

ratioToll-free number

Total return to Dec. 10

1. American Gro Fund of America A@ AGTHX $193.9 12.5% 13.9% 15.3% 5.75% 800-421-0180

2. American EuroPacific Gro A@ AEPGX 125.4 24.3 23.2 23.2 5.75 800-421-0180

3. Vanguard 500 Index Inv@ VFINX 123.3 8.8 10.5 12.4 none 800-635-1511

4. American Cptl Wrld Gro & Inc A@ CWGIX 113.3 22.1 20.3 22.8 5.75 800-421-0180

5. American Cptl Inc Builder A@ CAIBX 110.8 13.8 14.0 15.8 5.75 800-421-0180

6. Vanguard Total Stck Mkt Idx Inv@ VTSMX 105.3 8.6 11.0 13.6 none 800-635-1511

7. American Invstmt Co of America A@ AIVSX 90.7 8.9 11.1 12.8 5.75 800-421-0180

8. American Inc Fund of America A@ AMECX 88.5 6.6 10.5 13.1 5.75 800-421-0180

9. American Washington Mtl Inv A@ AWSHX 84.3 7.8 10.3 12.2 5.75 800-421-0180

10. Fidelity Contrafund** FCNTX 80.3 20.7 17.6 18.2 none 877-208-0098

11. Dodge & Cox Stock** DODGX 65.7 5.4 11.9 15.9 none 800-621-3979

12. American New Perspective A@ ANWPX 61.8 20.1 17.6 19.3 5.75 800-421-0180

13. Franklin Income A@ FKINX 61.6 6.9 9.8 13.9 4.25s 800-632-2301

14. American Balanced A@ ABALX 61.0 8.6 8.3 10.5 5.75 800-421-0180

15. Fidelity Diversified Intl** FDIVX 57.5 20.3 20.8 23.8 1.00r 877-208-0098

16. Dodge & Cox Intl Stock DODFX 53.5 17.7 21.4 27.6 none 800-621-3979

17. Vanguard Windsor II Inv@ VWNFX 51.6 8.4 11.7 15.2 none 800-635-1511

18. Vanguard Wellington Inv@ VWELX 50.8 10.0 11.3 12.4 none 800-635-1511

19. American Fundamental Inv A@ ANCFX 49.8 15.7 16.5 17.9 5.75 800-421-0180

20. Davis New York Venture A@ NYVTX 49.8 8.7 12.1 14.9 4.75 800-279-0279

S&P 500 WITH DIVIDENDS 9.0% 10.6% 12.6%

MSCI EAFE 16.5% 19.1% 22.3%

Rank/Name Symbol 1 yr. 3 yrs. 5 yrs.Assets†

(in billions)

Max.sales

chargeToll-free number

Total return to Dec. 10

Kiplinger.com

53

»


IN THIS SECTION Best values in public colleges 64

The race for health-care reform 70 Make your child a millionaire 74 After the California wildfires 78 Telecom-bundle deals 83

A REAL-WORLDRETIREMENT PLAN

MONEY

ROB FALCONE CONSIDERED SEVERAL ROLLOVER OPTIONS TO KEEP HIS 401(K) SAVINGS GROWING AFTER HE SWITCHED JOBS.

PHOTOGRAPH BY PETER ROSS

MONEY // COVER»

RETIREMENT SAVINGS PLANS ARE UNDERGOING AN EXTREME MAKEOVER. AFTER

BY MARY BETH FRANKLIN

6 Simple Ways to Retire Rich

54


LISA AND SEAN

KENNEDY WILL

AUTOMATICALLY

INCREASE THE

AMOUNT THEY

CONTRIBUTE TO

THEIR RETIREMENT

ACCOUNTS

EACH YEAR.

PHOTOGRAPH BY MARK TUCKER

»

56


* KipTip

NUMBERS TO KNOW IN 2008

SIMPLE WAY #1: SIGN UP

SIMPLE WAY #2: GET HELP FROM THE PROS

* Ki Ti

IRA AND ROTH IRA

CONTRIBUTION LIMITS:

$5,000, plus $1,000 if you’re 50 or older

401(K) CONTRIBUTION LIMITS:

$15,500, plus $5,000 if you’re 50 or older

INCOME CEILINGS FOR ROTH IRA:

$169,000 if you’re married and filing jointly

$116,000 if you’re single

INCOME CEILING TO CONVERT

AN IRA TO A ROTH IRA: $100,000

* KipTip

FAST RETIREMENT SAVINGS FACTS FOR ’08

MONEY // COVER

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How to Make a Million STRATEGIES FOR SAVING AT EVERY AGE

The road to $1 million starts early, but there’s hope, and help, for late bloomers. The table below shows how much you need to save each month to accumulate $1 million by age 65, along with strategies to fit retirement saving into the rest of your life. At age 25, you’re starting from scratch. At ages 35, 45 and 55, we assume you already have money in savings on which you’re earning 8% annually. Even if you can’t save quite this much now, our step-by-step guide will help you set priorities for every stage of life.

35YOU’VE SAVED $0

WHAT YOU NEED TO SAVE PER MONTH $671

YOU’VE SAVED $50,000WHAT YOU NEED TO SAVE

PER MONTH $304

YOU MAY BE STARTING A FAMILY OR PREPARING TO BUY

A HOME. BALANCE YOUR SHORT-TERM NEEDS WITH

YOUR LONG-TERM SAVINGS GOALS.

Although you have added responsibilities, don’t

neglect retirement. AIM TO SAVE 15% OF YOUR

GROSS INCOME (including an employer match) in

your 401(k). If one parent leaves work to care for

the kids, consider opening a spousal IRA.

Shift your assets to 90%

STOCKS AND 10% BONDS.

INVEST IN A 529 COLLEGE-

SAVINGS PLAN. Many states offer a tax deduction for

your contribution, and qualified distributions are

exempt from federal taxes.

25YOU’VE SAVED $0

WHAT YOU NEED TO SAVE PER MONTH $286

YOU’RE JUST STARTING YOUR CAREER, SO THIS IS YOUR

CHANCE TO BUILD A SOLID FINANCIAL FOUNDATION.

TIME IS ON YOUR SIDE.

Contribute enough to your company 401(k) plan to

CAPTURE YOUR EMPLOYER

MATCH. If you don’t have a retirement plan at work,

fund an IRA.

You’ll be investing for 30 years or more, so you can afford to KEEP 100% OF YOUR

ACCOUNT IN STOCKS.

PAY DOWN CREDIT CARDS AND

OTHER HIGH-INTEREST DEBT. That will free up money to

save for a house.

SET UP AN EMERGENCY FUND equal to three to six months of take-home pay. Stash it in a readily accessible account in an online bank that pays

interest of 4% or more.

YO

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45YOU’VE SAVED $0

WHAT YOU NEED TO SAVE PER MONTH $1,698


PER MONTH $1,298


PER MONTH $861

YOU MAY BE JUGGLING THE NEEDS OF A GROWING

FAMILY AND AGING PARENTS, BUT DON’T TAKE A BREAK

FROM RETIREMENT SAVINGS.

You can CONTRIBUTE UP TO

$15,500 TO A 401(K) or similar workplace-based retire-

ment plan this year or $5,000 to an IRA. Roll over

retirement savings from previous jobs into an IRA.

Adjust your asset allocation to 80% STOCKS AND

20% BONDS.

Your kids can get grants or loans for college, but

there’s no financial aid for retirement. DON’T PUT YOUR

KIDS’ COLLEGE COSTS

AHEAD OF RETIREMENT.

55YOU’VE SAVED $0

WHAT YOU NEED TO SAVE PER MONTH $5,466


PER MONTH $4,859

YOU’VE SAVED $100,000 WHAT YOU NEED TO SAVE

PER MONTH $4,253


PER MONTH $3,040

TAKE ADVANTAGE OF YOUR PEAK EARNING YEARS

TO TOP OFF YOUR SAVINGS.

ADD AN EXTRA $5,000 IN

CATCH-UP CONTRIBUTIONS to your 401(k) savings and

an extra $1,000 to your IRA.

As you near retirement, reallocate your portfolio

to 70% STOCKS AND

30% BONDS.

Estimate your retirement expenses and your

projected income. If you’re coming up short, CONSIDER

WORKING A FEW MORE YEARS.

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SIMPLE WAY #3: CHECK YOUR PROGRESS

SIMPLE WAY #4: CONSIDER A ROTH

IF YOU START AT AGE 22, SAVE $100 A MONTH AND EARN AN 8% RETURN

UNTIL YOU’RE 65, YOU’LL HAVE

$450,478IF YOU START AT AGE 32, SAVE $100 A MONTH AND EARN AN 8% RETURN

UNTIL YOU’RE 65, YOU’LL HAVE

$194,654

* KipTip

THE MAGIC OF COMPOUNDING

MONEY // COVER»

61

Turn Savings Into Retirement Income RETIREES HAVE MANY CHOICES, BUT NOT ONE OF THEM OFFERS THE PERFECT SOLUTION

BABY-BOOMERS ARE ABOUT TO START

tapping a lifetime of retirement savings.

The $16-trillion question is how to turn

that pile of cash into an income stream

you can’t outlive.

The quick answer: There’s no quick

answer. “Any retirement solution will be

only a piece of the puzzle,” says Jonathan

Shelon, co-manager of the new Fidelity

Income Replacement funds. Heavy hitters

Fidelity and Vanguard have recently come

up with solutions that will appeal to

different groups of retirees.

FIDELITY’S APPROACH. Fidelity’s new

funds offer a unique approach that com-

bines asset allocation with withdrawals.

Essentially, they are mutual funds with an

expiration date. You select a target date,

currently from eight to 28 years, and

receive monthly payments until the fund

is exhausted. Payments are set for a year

at a time, and may rise (or fall) in subse-

quent years depending on market perfor-

mance and payout rates.

Because of the set time frame, payouts

are larger than the typical 4% initial annual

withdrawal rate recommended for retir-

ees, who must take a cautious approach to

try to make their money last a lifetime.

But the limited time frame also means the

funds are depleted by a preset date, so

this option is not appropriate for all your

savings.

Instead, you could use them as an

income bridge or for specific spending

needs, such as a travel budget. For exam-

ple, say you’re 55, work part-time and plan

to collect Social Security at 65. You could

use Fidelity’s 2018 Income Replacement

fund to supplement your income for the

next ten years. If you invested $200,000,

you would receive $19,160 the first year,

spread out over 12 equal monthly pay-

ments, based on the fund’s initial payout

rate of 9.58%.

That rate would gradually increase to

100% of the fund’s balance in the final

year. But the actual dollar amount could

fluctuate from year to year depending on

market performance. (The longer your

time horizon, the smaller your initial

payout rate. The 2028 fund with a 20-year

timeline, for example, pays out 6.10% the

first year.) You can cash out your funds or

switch among them at any time.

VANGUARD’S STRATEGY. Vanguard’s

soon-to-be-available managed-payout

funds take a different tack. They are

designed to provide retirees with current

income without consuming capital so their

portfolios can continue to grow. “Our

shareholders are interested in having the

flexibility in their later years to meet

unexpected expenses or to leave money to

family members,” says Ellen Rinaldi, head

of Vanguard’s retirement services.

Investors may choose from among three

managed-payout portfolios with distribu-

tion targets ranging from 3% per year,

for those primarily interested in growth,

to 7%, for retirees who need more income.

The low-cost funds, with estimated an-

nual expenses of 0.34%, will invest mainly

in Vanguard domestic and international

index funds, as well as inflation-protected

securities and money-market funds.

INCOME FOR LIFE. Both companies ad-

dress retirees’ concerns about generating

steady income while protecting against

future inflation. But neither tackles the

biggest financial risk of the 21st century:

living longer. Aside from a traditional

pension or Social Security benefits, only

an insurance product, such as an immedi-

ate annuity, can guarantee income for life.

But the trade-offs are giving up control

of your assets and leaving nothing for your

heirs—neither of which is popular with

retirees. In 2006, immediate annuities

accounted for less than 1% of sales of all

insurance investment products.

The newest generation of annuities

is more attractive. You can change your

payout amount, withdraw funds for an

emergency or guarantee payments to

your beneficiaries if you die prematurely.

But each of those features reduces the

amount of your monthly check.

It’s up to you to create your own plan

for retirement income. You have a growing

number of choices, and there are a lot of

right answers (for an overview, see the

box below). MARY BETH FRANKLIN

CREATE YOUR OWN PENSIONHow much annual income can a 65-year-old man who invests $100,000 expect? Here are the first-year figures from a variety of retirement-income sources, as well as the trade-offs between income and flexibility. The annuity payments listed here are fixed for life. Investment payouts could rise or fall with market performance.

Retirement Income

*Guarantees payments for life and pays death benefits to heirs if you die within 20 years. SOURCES: Fidelity Investments, New York Life.

4% initial withdrawal from portfolio $4,000 No Yes Maybe

Fidelity Income Replacement 2036 5,090 No Yes Maybe

Annuity with 20-year guaranteed payout* 7,020 Yes No Maybe

Life-only annuity 8,062 Yes No No

Income sourceAmount per year

Guaranteed income for life?

Control of assets?

Legacy for heirs?


62


SIMPLE WAY #5: ROLL IT OVER

SIMPLE WAY #6: SELL COMPANY STOCK

For more tips on saving for retirement

and figuring out how much you can

spend once you quit, visit kiplinger.com/

yourretirement.To see if your savings are on track,

check out the interactive tools at fidelity

.com/myplan and nationwide.com/

retirability.

* On the Web

EASY TOOLS TO SEE HOW YOU’RE DOING

MONEY // COVER»

64


MONEY // COLLEGE»

PRICES HEAD NORTH

BY JANE BENNETT CLARK

IT COULD JUST BE THE BEST PUBLIC COLLEGE YOU’VE NEVER HEARD OF, WITH PRICES SO

BEST VALUES IN PUBLIC COLLEGES

65

02/2008 KIPLINGER’S PERSONAL FINANCEPHOTOGRAPHS BY JIM BASTARDO

AT SUNY GENESEO, THE MIX OF OLD IVY

AND A NEW SCIENCE CENTER ATTRACTED

STUDENTS MAUREEN GILLARD AND ROB BROOKS.

66


MONEY // COLLEGE»

DIVERGING TRENDS

THE BEST VALUES IN PUBLIC COLLEGESKIPLINGER’S BASES ITS COLLEGE rankings on a combination of outstand-ing academic quality plus an affordable price tag.

We start with nationwide data from more than 500 public four-year colleges and universities, which are provided to Peterson’s/Nelnet. We supplement Peterson’s data with our own reporting.

We narrow the list to about 120 schools based on several measures of academic quality—including the per-centage of the 2006–2007 freshman class scoring 600 or higher on the verbal and math components of the SAT (or scoring 24 or higher on the ACT), admis-sion and retention rates, student-faculty ratios, and four- and six-year graduation rates, which most schools reported for the student cohort entering in 2000.

We then rank each school based on cost and financial aid. We look at total cost for in-state students (tuition, man-datory fees, room and board, and esti-mated expenses for books); the average cost for a student with need after sub-tracting grants (but not loans); the aver-age cost for a student without need af-ter subtracting non-need-based grants; the average percentage of need met by aid; and the average debt a student ac-cumulates before graduation. In the ta-ble, aid refers to need-based assistance.

To determine out-of-state rankings, we run the academic-quality and cost numbers again, this time using total costs for out-of-state residents and average costs after aid.

In our scoring system, academic qual-ity carries more weight than costs (al-most two-thirds of the total). To break ties, we use academic-quality scores and average debt at graduation.

67


In-state rank/NameUndergrad.

enroll.

SAT (V/M)* or ACT

Student/ faculty ratio

4-yr. grad. rate

6-yr. grad. rate

CostsTotal After aid Rank

CostsTotal After aid

Average debt at

graduation

Quality In-state Out-of-state

N/A information not available. *Verbal/Math. SOURCE: Peterson’s Undergraduate Database. Copyright © 2007 Peterson’s/Nelnet LLC. All rights reserved.

1. University of North Carolina at Chapel Hill 17,124 72%/81% 14 71% 84% $13,430 $5,902 4 $29,078 $21,550 $14,487

2. University of Florida 35,110 60/69 21 51 78 11,216 6,520 3 25,801 21,105 15,045

3. University of Virginia 14,676 79/85 15 84 93 17,225 4,702 7 36,475 23,952 12,726

4. College of William and Mary (Va.) 5,734 84/83 11 81 91 17,449 5,992 6 35,010 23,553 14,524

5. New College of Florida 746 96/76 11 53 63 11,605 3,985 31 29,458 21,838 15,334

6. SUNY Geneseo 5,358 79/87 19 64 79 14,966 12,320 1 21,226 18,580 17,000

7. University of Georgia 25,437 59/62 18 41 75 13,754 7,732 18 28,858 22,836 13,478

8. SUNY Binghamton 11,523 59/80 20 67 79 16,000 10,973 2 22,260 17,233 15,167

9. University of Washington 27,836 45/59 11 46 74 15,730 7,230 21 31,476 22,976 15,900

10. University of California, Los Angeles 25,432 69/80 17 57 87 20,969 10,025 13 40,037 29,093 15,996

11. University of California, San Diego 21,369 55/76 19 50 78 19,180 9,146 17 38,248 28,214 15,170

12. Georgia Institute of Technology 12,361 71/92 14 29 76 13,936 9,076 58 31,660 26,800 14,895

13. North Carolina State University 23,730 35/57 16 36 71 13,417 6,509 16 25,615 18,707 14,719

14. University of Mary Washington (Va.) 4,183 62/49 16 70 76 13,226 10,026 12 23,106 19,906 12,800

15. Florida State University 31,347 39/44 22 42 66 12,355 8,911 32 25,486 22,042 13,290

16. University of Michigan 25,555 94 15 67 87 19,657 11,711 14 40,511 32,565 23,533

17. Virginia Polytechnic Institute and State Univ. 21,997 43/62 16 47 76 13,527 9,307 26 25,905 21,685 19,807

18. University of California, Berkeley 23,863 72/81 15 58 87 23,466 11,925 11 43,086 31,545 14,751

19. University of Wisconsin–Madison 30,055 91 13 43 78 15,510 11,681 23 29,760 25,931 20,282

20. University of Delaware 16,296 44/58 12 62 76 16,898 11,662 8 28,148 22,912 17,200

21. University of California, Irvine 20,719 38/61 19 42 80 19,667 9,328 41 39,287 28,948 13,587

22. James Madison University (Va.) 16,013 28/33 16 62 80 14,340 8,601 19 25,060 19,321 11,932

23. College of New Jersey 6,094 62/75 13 61 81 21,549 12,063 5 28,772 19,286 19,459

24. University of Texas at Austin 37,037 54/68 18 42 75 17,046 10,746 35 33,920 27,620 16,800

25. Texas A&M University 36,580 42/57 20 35 77 14,971 8,176 9 23,311 16,516 16,027

26. Truman State University 5,524 86 16 41 66 13,477 10,517 10 18,087 15,127 16,656

27. Appalachian State University (N.C.) 13,447 30/36 17 35 64 10,897 6,186 20 20,639 15,928 14,838

28. University of Maryland, College Park 25,373 68/78 19 50 76 17,848 12,405 24 32,087 26,644 17,731

29. University of California, Santa Barbara 18,212 49/55 17 58 78 21,013 10,793 30 40,633 30,413 15,808

30. University of Connecticut 16,347 45/58 17 50 72 18,236 11,793 43 32,180 25,737 20,030

31. Miami University (Ohio) 14,551 81 16 66 80 20,294 15,609 33 34,121 29,436 22,255

32. University of Illinois at Urbana–Champaign 31,472 87 17 59 81 20,526 13,995 25 34,612 28,081 15,413

33. Clemson University (S.C.) 14,096 54/69 15 44 75 17,031 13,531 34 28,961 25,461 17,556

34. Indiana University, Bloomington 29,828 30/38 18 48 71 15,271 8,443 66 29,750 22,922 19,756

35. University of South Carolina 18,648 39/50 17 41 65 15,166 11,721 59 27,594 24,149 19,360

36. University of North Carolina at Wilmington 10,759 26/37 18 37 57 12,330 8,667 51 22,293 18,630 15,620

37. Ohio State University 38,479 82 13 35 68 17,358 10,833 45 29,967 23,442 18,130

38. Western Washington University 12,838 33/32 19 30 65 13,344 7,172 55 24,418 18,246 14,887

39. University of Wisconsin–La Crosse 8,306 64 24 21 64 11,320 7,144 38 18,894 14,718 16,793

40. University of North Carolina at Asheville 3,609 47/41 13 28 54 11,244 7,138 53 22,234 18,128 14,211

41. Cal. Polytechnic State Univ., San Luis Obispo 17,777 38/62 20 21 69 14,868 13,074 15 23,004 21,210 14,032

42. St. Mary’s College of Maryland 1,948 64/57 12 63 72 21,844 17,844 40 31,178 27,178 17,125

43. University of Pittsburgh 17,246 57/64 16 44 67 22,176 14,903 44 31,686 24,413 N/A

44. University of Nebraska–Lincoln 17,371 59 19 22 63 13,688 8,821 61 23,708 18,841 16,909

45. Pennsylvania State Univ. at University Park 36,613 37/58 17 48 84 21,384 16,689 46 32,252 27,557 23,500

46. Rutgers, State Univ. of N.J., New Brunswick 26,691 41/60 16 46 71 21,373 12,483 36 30,541 21,651 16,283

47. Purdue University (Ind.) 31,290 30/45 14 31 64 15,996 7,103 75 30,804 21,911 20,102

48. University of California, Davis 23,458 35/54 19 42 80 21,150 12,078 57 40,218 31,146 12,701

49. University of Minnesota, Twin Cities 32,113 69 15 32 61 18,122 10,526 63 29,752 22,156 24,995

50. University of Texas at Dallas 9,375 58/73 19 30 56 16,425 12,027 37 25,725 21,327 16,895

COLLEGE RANKINGS CONTINUED ON NEXT PAGE >>

For more on affordable education, check out our Best Values in Colleges and Universities Center. Go to kiplinger.com/links/college08.

68


MONEY // COLLEGE»

In-state rank/NameUndergrad.

enroll.

SAT (V/M)* or ACT

Student/ faculty ratio

4-yr. grad. rate

6-yr. grad. rate

CostsTotal After aid Rank

CostsTotal After aid

Average debt at

graduation

Quality In-state Out-of-state

N/A information not available. *Verbal/Math. SOURCE: Peterson’s Undergraduate Database. Copyright © 2007 Peterson’s/Nelnet LLC. All rights reserved.

51. University of Central Florida 39,545 34%/44% 28 31% 57% $12,650 $9,225 85 $26,851 $23,426 $12,876

52. Louisiana State University 24,583 65 21 27 59 12,895 7,665 56 21,195 15,965 16,354

53. University of Missouri–Columbia 21,551 66 18 38 68 16,572 10,418 54 27,228 21,074 18,983

54. University of Iowa 20,738 64 15 38 66 14,503 10,031 74 27,675 23,203 20,234

55. SUNY Purchase 3,754 37/23 15 32 47 13,383 8,638 52 19,643 14,898 16,058

56. SUNY Fredonia 5,046 23/31 16 49 63 14,922 11,772 27 21,182 18,032 22,303

57. University of Colorado at Boulder 26,163 68 16 38 66 17,421 10,244 91 35,583 28,406 17,141

58. Iowa State Univ. of Science and Technology 20,440 59 15 32 68 13,854 10,706 68 24,612 21,464 27,324

59. University of Arkansas 14,350 64 17 30 56 14,021 10,068 50 22,475 18,522 18,170

60. University of Alabama 19,471 46 19 35 63 12,518 9,038 77 23,336 19,856 18,653

61. Michigan State University 35,821 62 17 36 71 17,222 11,733 81 31,082 25,593 22,147

62. Salisbury University (Md.) 6,791 21/27 16 47 67 15,216 10,534 49 23,304 18,622 18,330

63. Northern Arizona University 14,526 22/24 16 26 48 11,634 7,524 71 20,619 16,509 17,563

64. University of Wisconsin–Eau Claire 10,031 57 19 19 59 11,455 7,287 62 19,028 14,860 16,953

65. University of Massachusetts, Amherst 19,823 34/43 17 46 66 18,759 11,595 60 29,337 22,173 14,094

66. University at Albany (SUNY) 12,457 26/42 20 50 62 16,050 11,283 28 22,310 17,543 11,856

67. Missouri University of Science and Technology 4,515 83 14 15 60 15,732 9,972 70 26,388 20,628 17,820

68. University of North Carolina at Greensboro 12,921 16/18 17 38 51 11,891 7,492 89 23,159 18,760 19,146

69. University of Vermont 10,082 44/46 15 49 65 21,014 10,244 83 36,898 26,128 23,328

70. College of Charleston (S.C.) 9,820 57/59 13 41 58 17,272 14,406 67 28,226 25,360 16,761

71. Murray State University (Ky.) 8,601 45 16 36 57 11,780 9,597 65 13,858 11,675 15,010

72. Ramapo College of New Jersey 5,188 36/46 17 39 59 21,475 14,126 22 27,046 19,697 15,937

73. University of Tennessee 20,619 74 15 29 57 13,578 10,781 82 25,820 23,023 18,254

74. SUNY New Paltz 6,263 30/31 13 28 54 14,220 11,791 39 20,480 18,051 1,900

75. SUNY Oneonta 5,596 16/28 17 37 53 14,756 10,965 48 21,016 17,225 12,100

76. University at Buffalo (SUNY) 18,165 30/47 15 33 58 16,285 13,974 42 22,545 20,234 19,062

77. George Mason University (Va.) 18,221 25/31 15 33 52 15,958 10,880 86 28,150 23,072 15,791

78. SUNY Brockport 6,916 26/16 18 29 56 14,596 10,938 47 20,856 17,198 19,082

79. University of South Florida 34,438 26/32 19 21 47 12,347 8,000 94 25,045 20,698 17,995

80. University of New Hampshire 11,971 24/33 17 53 73 20,036 17,588 84 32,996 30,548 23,928

81. Florida International University 31,712 28/28 17 19 47 14,922 9,855 93 27,320 22,253 4,489

82. University of Minnesota, Morris 1,740 56 12 40 59 16,602 10,717 29 16,602 10,717 15,490

83. Georgia College & State University 5,141 24/25 16 22 45 13,346 10,487 97 25,968 23,109 15,128

84. Colorado State University 21,283 51 18 34 63 13,791 8,326 100 27,231 21,766 16,887

85. University of Arizona 28,442 28/36 19 32 58 13,418 7,387 95 24,652 18,621 17,392

86. University of Oregon 16,529 30/32 18 39 65 14,935 10,704 92 27,691 23,460 18,813

87. University of Oklahoma 19,600 72 20 19 56 14,675 10,845 76 23,789 19,959 19,206

88. Auburn University (Ala.) 19,367 54 18 32 62 14,400 9,887 87 24,900 20,387 21,256

89. SUNY Cortland 5,960 18/11 17 37 57 14,989 11,439 64 21,249 17,699 N/A

90. Washington State University 19,554 25/32 14 32 63 15,094 9,228 88 25,408 19,542 18,754

91. Longwood University (Va.) 3,787 19/14 20 41 61 15,134 10,199 78 23,454 18,519 17,781

92. Arizona State University 41,815 26/34 23 27 55 13,241 7,589 98 25,273 19,621 15,894

93. West Chester Univ. of Pennsylvania 10,821 14/18 13 26 59 14,466 14,466 69 22,322 22,322 17,500

94. Oklahoma State University 18,737 60 19 26 59 13,821 9,704 90 23,246 19,129 19,180

95. Mississippi State University 12,630 47 14 25 56 12,929 8,634 80 19,420 15,125 19,780

96. Rowan University (N.J.) 8,430 22/35 12 39 63 20,160 14,350 72 27,468 21,658 16,253

97. SUNY Plattsburgh 5,567 16/17 17 31 54 14,461 10,235 79 20,721 16,495 17,596

98. University of Idaho 9,127 43 20 20 54 12,264 9,119 96 22,344 19,199 20,002

99. University of California, Riverside 14,792 15/29 18 38 65 20,555 9,877 99 40,175 29,497 14,965

100. Illinois State University 17,885 53 19 33 62 16,755 9,321 73 24,075 16,641 17,015

69


IVY-LEAGUE ALTERNATIVE

COLETTA HAGAN, ELIZABETH ODY AND STACY RAPACON HELPED COMPILE THE DATA FOR THIS SPECIAL REPORT.

OUR RANKINGS FOCUS ON TRADITIONAL FOUR-YEAR SCHOOLS WITH BROAD-BASED curricula. As a result, schools that offer great value but focus on special or narrow academic programs are excluded.

For example, the academies for the Air Force, Army, Coast Guard, Merchant Marine and Navy offer top academic quality; they charge no tuition and pay students to attend. But appli-cants to the federal academies must generally obtain congressional or military nominations and serve in the armed forces after graduation.

Cornell University, best known as a member of the Ivy League, is another exception. Four of Cornell’s colleges—Architecture, Art and Planning; Arts and Sciences; Engineering; and Hotel Administration—are part of the privately endowed university, which we consider a private in-stitution. But three of Cornell’s undergraduate colleges are land-grant state schools that charge much lower tuition. New York State residents who attend the colleges of Agriculture and Life Sciences, Human Ecology, and Industrial and Labor Relations pay about $19,000 a year for tuition and fees.

MORE GREAT COLLEGE VALUES

* KipTip

81

ASK KIMKIMBERLY LANKFORD

Mistaken Identity

Is my broker safe?

Insurance when you’re sick.

PE

TER

RO

SS

“Check your statements to see whether the card issuer is using a

different version of your name.”


» MONEY

82

GOT A QUESTION? ASK KIM AT KIPLINGER .COM/ASKKIM, OR WRITE ASK KIM, 1729 H STREET, N.W., WASHINGTON, DC 20006. KIMBERLY LANKFORD IS THE AUTHOR OF ASK KIM FOR MONEY SMART SOLUTIONS (KAPLAN, $18.95).

» MONEY // ASK KIM / YIELDS / TELECOM / CREDIT

TOP-YIELDING MONEY-MARKET ACCOUNTS

To December 10. †Internet only. #Not a toll-free number. SOURCE: © 2007 Bankrate.com, a publication of Bankrate Inc., 11760 US Highway 1, N. Palm Beach, FL 33408;

800-327-7717, ext. 11410; www.bankrate.com.

GG.HKA(

UPDATESONLINEFor the latest savings yields and loan rates, visit kiplinger .com/finances/yields.

Kiplinger.com

1. Countrywide Bank (Cal.) 5.35% $10,000 countrywide.com 866-846-4480

2. E*Trade Bank (Va.)† 5.25 1,000 etrade.com 800-387-2331

3. UmbrellaBank.com (Ala.)† 5.17 1,000 umbrellabank.com 866-242-0065

4. Corus Bank (Ill.) 5.16 10,000 corusbank.com 800-989-5101

NATIONAL AVERAGE 3.30%

1. Apple Bank for Savings (N.Y.) 5.21% $500 theapplebank.com 800-722-6888

2. Corus Bank (Ill.) 5.16 10,000 corusbank.com 800-989-5101

3. E*Trade Bank (Va.)† 5.15 1,000 etrade.com 800-387-2331

4. Countrywide Bank (Cal.) 5.10 10,000 countrywide.com 866-846-4480


1. Apple Bank for Savings (N.Y.) 5.26% $500 theapplebank.com 800-722-6888

2. ThirdFederal Savings & Loan (Ohio) 5.10 500 thirdfederal.com 888-844-7333

3. Capital One (Va.) 5.10 5,000 capitalone.com 866-369-2737

4. Intervest National Bank (N.Y.) 5.03 2,500 intervestnatbank.com 212-218-8383#


To December 12. ‡EE savings bonds purchased after May 1, 2005, have a fixed rate of interest.

Bonds purchased before May 1, 1995, earn a minimum of 4% or a market-based rate.

Bonds bought between May 1, 1995, and May 1, 2005, earn a market-based rate from date of purchase.

SOURCE FOR TREASURIES: Bloomberg.com, U.S. Treasury.

TOP-YIELDING CERTIFICATES OF DEPOSIT

YIELD BENCHMARKS YieldMonth-

agoYear-ago

U.S. series EE savings bonds‡ 3.00% 3.00% 3.60%

U.S. series I savings bonds 4.28 4.28 4.52

Six-month Treasury bills 3.24 3.70 5.07

Five-year Treasury notes 3.49 3.80 4.55

Ten-year Treasury notes 4.10 4.25 4.50

1. TIAA-CREF Instl. Money Market/Retail 4.83% $2,500 tiaa-cref.org 800-223-1200

2. Fidelity Money Market 4.78 25,000 fidelity.com 800-544-6666

3. Vanguard Prime Money Fund/Investor 4.76 3,000 vanguard.com 800-635-1511

4. Fidelity Cash Reserves 4.74 2,500 fidelity.com 800-544-6666


30-day yield to Dec. 5

Minimuminvestment

Web address

Toll-free numberTAXABLE MUTUAL FUNDS

1. Alpine Municipal* 3.50% 4.7%/5.4% $2,500 alpinefunds.com 888-785-5578

2. Vanguard Tax-Exempt 3.46 4.6/5.3 3,000 vanguard.com 800-635-1511

3. DWS Tax Exempt Money Fund 3.34 4.5/5.1 1,000 dws-scudder.com 800-621-1048

4. American Century Tax Free 3.25 4.3/5.0 5,000 americancentury.com 800-345-2021

NATIONAL AVERAGE 2.99% 4.0%/4.6%

30-day yield to Dec. 4

Tax. eq. yield 25%/35% bracket

Web address

Toll-free numberTAX-FREE MUTUAL FUNDS

Minimuminvestment

Recent annual yield

Minimumamount

Web address

Toll-free number6-MONTH

Recent annual yield

Minimumamount

Web address

Toll-free number1-YEAR

Recent annual yield

Minimumamount

Web address

Toll-free number5-YEAR

*Fund is waiving all or a portion of its expenses. †Internet only. SOURCES: Money Fund Report, iMoneyNet Inc., One Research Dr., Westborough, MA 01581 (508-616-6600;

www.imoneynet.com); Bankrate.com.

Annual yield to Dec. 10

Minimumamount

Web address

Toll-free numberDEPOSIT ACCOUNTS

1. OneUnited Bank (Cal.)† 5.30% $1,000 oneunited.com 877-663-8648

2. UFBDirect.com (Cal.)† 5.22 none ufbdirect.com 888-580-0049

3. Corus Bank (Ill.) 5.12 100 corusbank.com 800-989-5101

4. Flagstar Bank (Mich.) 5.10 none flagstar.com 800-642-0039



83


JEFF BERTOLUCCI

WHEN IT COMES TO BUYING

HOW DO I CANCEL MY PARENTS’ CARDS?Q: Both of my parents have passed away. I ran a credit report on them and several credit cards came up. I haven’t found the actual cards, and I don’t know the account numbers. How can I cancel these cards?

Your parents’ credit report should provide a phone number for each credit card listed. Call the number and explain your problem. The issuer should be able to locate and close the account if you supply some basic information, including the name, Social Secu-rity number and address of the cardholder. You may be asked whether the estate is in probate, and the issuer may request a certified copy of the death certificate.

If the credit card has a balance, you will likely be asked to pay it from the estate. “The general rule,” explains Martin Shenkman, an estate-planning attorney in Teaneck, N.J., “is that the debt is of the estate and the estate must pay.” If the estate does not have adequate cash to clear the outstanding balance, you may have to sell some assets.

If that is still insufficient to cover the amount owed, you and any other heirs are not liable. Your parents’ debt is not passed on to you, and the credit-card issuer will write off the amount as uncollectible. However, paying off credit-card debt does take precedence over distributing bequests that are specified in a will. “If the bequests are made first and the debt cannot be paid, the executor of the estate is personally liable,” says Shenkman. JOAN GOLDWASSER

As of December 10; rates are adjustable. (P) Platinum card. (G) Gold card. *If you do not qualify for this interest rate, the issuer will offer a higher-rate card. †Depending on balance. ‡Rewards may expire after two years. SOURCE: Bankrate.com, N. Palm Beach, Fla. Banks may offer lower introductory rates.

Wells Fargo Bank (P) 7.50% $19 $39†/$35 800-932-6736

Capital One Platinum Prestige (P) 7.90 none 39†/39 800-548-4593

Pulaski Bank & Trust (G) 7.99 50 35†/35 800-980-2265

LOW-RATE PREMIUM CARDS

IssuerRecent rate*

Annualfee

Late/Over limit

Toll-free number

CREDIT CARD Q&A

American Express Blue Cash 12.49% none up to 5% 800-223-2670

National City Everyday Rewards Visa 14.24 none up to 4%‡ 888-622-4932

Chase Freedom Visa Signature 17.49 none up to 3% 888-215-3049

CASH REBATE CARDS

IssuerRecent rate*

Annualfee

Rebate terms

Toll-free number

LLO

YD

MIL

LER

; BIG

STO

CK

PH

OTO

Save With a Triple Play

●● TELECOM UPDATE

85

»IN THIS SECTION

HDTVs for less than $1,000 90Car-leasing myths debunked 92

The lowdown on do-not-call lists 95

BY JESSICA L. ANDERSON

REMODELING THAT PAYS BACK

LIVING


86

A COMPETITIVE EDGE

UPDATE YOUR KITCHEN

LIVING // HOME»

AS THE HOUSING MARKET HAS VEERED OFF COURSE, SO HAVE MANY HOMEOWNERS’

//


HIRING HELPGet at least three bids on any project

you’re considering. The middle bid is

probably your best bet—the low one

may not include all the costs, and a high

bid often means the contractor doesn’t

have time to take on your job. Contrac-

tors won’t give you the names of clients

who hated their work, so in addition

to their references, check the Better

Business Bureau’s complaint records

(www.bbb.org).

* KipTip

87


DREW AND JULIENNE STATHIS SPENT $37,500 ON AN UPSCALE BATHROOM REMODEL THAT INCLUDES A JACUZZI, NEW SHOWER AND TOP-OF-THE-LINE FIXTURES. THEY HOPE IT WILL MAKE THEIR HOME EASIER TO SELL. PHOTOGRAPHS BY LISE METZGER

88

» LIVING // HOME


Cabinets.

Countertops.

Sinks.

A BETTER BATH

Cabinets and sinks.

Toilet and tub.

89

REPLACEMENTS

Windows.


The table shows the national average price tag, and the percent-age recouped at sale, for 17 popular projects. If your area has a lot of new homes on the market, your return will be less because buy-ers would rather purchase a new house with builder incentives than a remodeled home. Costs are based on figures from HomeTech

Information Systems, which develops software for estimating re-modeling costs. The percentage of cost recouped at resale is based on estimates by members of the National Association of Realtors. The payback varies by region. Single-city reports for 60 cities are available free at http://costvalue.remodelingmagazine.com.

HOW MUCH WILL YOU GET BACK?●● REMODELING AND RESALE

REMODEL

Project Price% recouped

at sale

Minor kitchen, midrange $21,185 83%

Bathroom, midrange 15,789 78

Major kitchen, midrange 55,503 78

Attic bedroom, midrange 46,691 77

Basement, midrange 59,435 75

Major kitchen, upscale 109,394 74

Bathroom, upscale 50,590 68

Home office, midrange 27,193 57

REPLACEMENT

Project Price% recouped

at sale

Fiber-cement siding, upscale $13,212 88%

Vinyl siding, midrange 9,910 83

Wood windows, midrange 11,384 81

Vinyl windows, upscale 13,479 81

Foam-backed vinyl siding, upscale 12,132 80

Vinyl windows, midrange 10,448 79

Wood windows, upscale 17,383 79

Fiberglass asphalt roofing, midrange 18,042 67

Steel roofing, upscale 33,151 66SOURCE: Remodeling magazine’s “2007 Cost vs. Value Report”

Siding.

Roofing.

90


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» LIVING // TECH

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