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October 11, 2013     Heritage Florida Jewish News
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October 11, 2013
 

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PAGE 4B HERITAGE FLORIDA JEWISH NEWS, OCTOBER 11, 2013 (BPT)--Many people don't take enough ownership over what they pay when it comes to investing. A recent study by Charles Schwab in May 2013 of investors who are highly engaged in their ev- eryday lives shows that most Americans do research before making a major purchase. Yet just 51 percent say they know how much they pay for their investments and only 16 percent who work with an investment professional have asked how fees and commis- sions impact their portfolio's returns. It can really pay to pay attention, says Mark Riepe, head of Schwab Center for Whose money is invested money? Financial Research, who adds, "One way to reduce your investment return is to ignore fees." A seemingly small differ- ence in fees can make a poten- tially big difference in your return. Here's a hypothetical example: let's assume you make a $10,000 investment that earns six percent each year for the next 20 years. If you were to pay one-half of one percent in fees each year on that investment, after 20 years your after-fee balance - or net return - would be about $29,000. But if your annual fee was closer to 1.5 percent, after 20 years that $29,000 would shrink to about $24,000 - or about 20 percent less. So how can you make sure to take ownership over the money you've invested and your financial future? Knowledge is the first step - here are some of the most common fees to be aware of: Commissions Commissions are the fees you are charged when you place a trade with a brokerage firm. If you trade frequently, commissions can add up fast. There are many brokerage firms that offer commission- free products, Such as certain exchange-tradedfunds (ETFs) and no-load mutual funds. Portfolio management fees If you use a professional to help you with portfolio management, there are two primary fees to keep in mind. The first is an annual fee, which is usually a set percentage and can vary depending on the advisor and the amount of assets in your portfolio. For example, you might pay one percent of $250,000 you have invested, or $2,500 per year. But there can also be fees for the un- derlying investments in your portfolio, including commis- sions and operating expenses that you pay on top of the annual fee. Mutual fund fees Mutual fund investors are charged a percentage of the fund's average net assets. This is called the operating expense ratio, or OER, and it covers the fund's manage- ment expenses. These fees can vary, so investors should always compare OERs before purchasing a mutual fund, especially when deciding between two similar funds. OERs are listed in the fund's prospectus and most can be found online. Typically, the more complex the fund, the more management it requires and the more, it costs. It's important to know that OERs are charged on top of any transaction fees or commis- sions you might pay to invest in the fund. Bond fees In most cases with bonds, when you buy or sell you either pay a percentage or flat fee, however the yield on a bond is impacted by what you pay for it, so finding the lowest cost is to your advantage. It is a good idea to compare prices from multiple bond dealers before settling. Exchange traded fund fees (ETF) An ETF is a fund that can be traded like a stock. Depending on how frequently you buy and sell ETFs you may be more or less concerned with some of their fees. For example, if you trade ETFs more frequently, the commission you are charged for each transaction can add up quickly. You also want to pay attention to the bid/ask spread - the prices at which people are willing to buy and sell the fund. If you're planning to hold an ETF over a longer period of time, the commission and spread be- come less important, since they are one-time costs. But "buy and hold" ETF investors should pay close attention to the fund's expense ratio, which is a recurring fee. Of course lower expenses do not necessarily translate into higher returns, but they are important to understand. One way to be more aware of the fees you're paying is to regularly review your state- ment. Being an informed and engaged investor today can have a real impact on your ability to achieve your invest- ing goals tomorrow, whether that's retirement, saving for your child's education or purchasing a home. More information is avail- able at www.schwab.com. Scenario is hypothetical in nature and not intended to predict or project the performance of any specific investment product. Investors should care- fully consider information contained in the prospectus, including investment objec- tives, risks, charges and expenses. You can request a prospectus by calling Schwab at 800-435-4000. Please read the prospectus carefully be- fore investing. Investment returns will fluctuate and are subject 'to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable di- rectly with the ETF. Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV). Bond, investments are subject to various risks, in- cluding changes in interest rates, credit quality, market valuations, liquidity, prepay- ments, corporate events, tax ramifications, and other factors Charles Schwab & Co., Inc., Member SIPC (0813-5603) Behind in saving for rei&e:00ent? Approaches to catching up (BPT--Does the pace of your busy personal and profes- sional life leave you feeling like you're always playing catch up? From finally reading that best-seller that's been sitting on your book shelf for a year to getting a solid eight hours of sleep to making sure you have enough money set aside for the future, it can be diffi- cult to regain lost ground. If you were among the millions whose retirement savings and investments suffered during the recession, there's good news: you can start to catch up with a few simple steps. On average, baby boomers say they have saved or invested $275,000 for retirement, but believe they'll need a median of $750,000 to live comfort- ably, according to a Boomers & Retirement Survey released by TD Ameritrade, Inc. ("TD Ameritrade'), a broker-dealer subsidiary of TD Ameritrade Holding Corporation (NYSE: AMTD). That means some boomers may face a shortfall of nearly a half a million dollars as they head into retirement. Smart retirement plan- ning, thoughtful choices and a handy option called a "catch- up contribution," can help boomers regain ground lost during the recession.A catch- up contribution allows people older than 50 to increase their contributions to their IRA or employer-sponsored retire- ment plans beyond the usual limits for such tax-deferred retirement plans. 'Anyone approaching re: tirement should consider different opportunities, like catch-up contributions, that might make sense for their retirement investing plans," says Lule Demmissie, manag- ing director, retirement, TD Ameritrade. "These catch-up contributions could help workers 50 years and older save thousands more - per- haps even hundreds of thou- sands of dollars more - toward their retirement. When plan- ning for retirement, every dollar counts, especiallywhen it's going into a tax-deferred vehicle." Demmissie offers some guidance for baby boomers approaching retirement: There is no standard target amount for retirement. When setting a target for your retirement investing or savings, you need a realistic idea of how much you'll need to maintain the standard of living you desire in retire- ment. Online calculators and tools, like those found on TD Ameritrade's online retirement center can help you set goals by exploring various real-world scenarios that might impact your assets over time and at retirement. For example, do you have health challenges that may create medical expenses? Perhaps you and your spouse would like to travel when re- tired. Different objectives and circumstances will influence how much you'll need to save in order to live comfortably. Don't rely on Social Security benefits, but don't overlook them, either. They should be a part of your overall retirement plan, but not the heart of it. Unfortunately, 65 percent of retired boom- ers said they rely on Social Security benefits, and nearly one-third said they wouldn't be able to live comfortably without these payments, ac- cording to TD Ameritrade's survey. "The best way to avoid having to rely completely on We knew this was d3e p00ce. For Annette Rosch, moving toThe Mayflower from St. Petersburg was a family decision. Her daughter, a physical therapist, and her- son-in-law, :an attorney, wanted her to live closer. "We visited various communities and talked to people who worked in the industry and who h.ad older parents. The Mayflower name kept coming up," says Jeannie. "From the first minute of our initial visit here, we knew this was the place. All levels of care are right here." That, as thing turned out, was a good thing. Just prior to moving in, Annette broke her arm and wound up going straight to -The Mayflower's Health Center, followed by rehab and physical therapy right on-site. "It was a wonderful experience," she says. "The staff was very gracious; I was well taken care of." Now Annette is settled in her new apartment and couldn't be happier. For her daughter, it is a huge relief. "Morn is in good hands," adds Jeannie. "She has peace of mind and feels secure. And so do we." l yot'r loved one needed long-term care, what woud you de? Call today, and tet's talk about it: 407.6:72A620o Social Security is to set a retirement savings goal and work toward it prior to retir- ing," Demmissie says. Take advantage of catch- up contributions. As long as you will be 50 (or older) by the end of the calendar year, you may be eligible to contribute an extra $1,000 per year toward your IRA until you turn 70 (which is the last year to contribute to a traditional IRA). If you save an additional $1,000 per year for 20 years and geta5 percent rate of return, you could have an additional $34,719 toward retirement. Fully fund your IRA with $6,500 a year be- tween ages 50 and 70, and that could amount to an additional $225,675 for retirement. "Remember, it is never too late to start planning for retirement," Demmissie says. "If you experienced financial setbacks that stalled your retirement efforts, it may just mean you have to adjust your retirement expectations, work a little longer or think of other means of support that you may have not considered before. But it's never too late to get started."