Federal tax law changes made last year now allow state-sponsored college savings plan owners to withdraw money tax-free to pay for up to $10,000 in kindergarten through 12th-grade educational expenses each year. Previously only withdrawals for college education were tax-free. However, not all states allow these withdrawals. Some 20 states will allow you to make the withdrawals tax-free (see the list here). But many other states not only will tax the earnings on these withdrawals, but will seek to recover the value of tax deductions gained when contributions were made. New York is one of the largest states to tax pre-college 529 plan withdrawals. Its college savings plan recently announced that “it appears that K-12 distributions would not be considered qualified distributions under New York statutes and would require the recapture of any New York State tax benefits that accrued on contributions.” Another large state – California – said it would also levy...

The stock market plunges over two days! Volatility ripples around the world! Do rising interest rates signal the end of bull market? Pardon me if I yawn. After 20 years in the investment business and 14 years as a financial reporter at a daily newspaper I get bored with breathless news reports of impending catastrophe every time the stock market has a normal and expected hiccup.  I’m sorry, but a 1,400-point decline in the Dow Jones Industrial Average just doesn’t get my blood flowing anymore. This week’s decline in stocks shouldn’t be upsetting to an experienced, focused investor. One reason is that 1,000 Dow points ain’t what they used to be, because the index has reached almost 27,000 in the past year. The higher it gets, the less 1,000 points means in percentage terms. This week’s drop amounted to a 5.2% decline. Compare that to a real decline, like the Oct. 19, 1987...

Social Security gives you a broad range of options: Take the monthly payment as early as age 62, wait until “full” retirement age (age 66 for those retiring in the next few years), or wait until as late as age 70 to claim your benefit. The factor that makes this decision tough is the size of the benefit: Take it early and it will be reduced by as much as 25% from your full retirement age benefit (again, for most retirees now, at age 66). Delay the benefit until age 70 and get a payment that is 76% higher than the age 62 benefit. A good part of the claiming decision depends on your definition of the purpose of Social Security. Some workers see it as extra play money that is a reward for living to age 62. Others see it as an endangered benefit that could be reduced or eliminated in...

Last year marked the end of a 10-year, $1 million bet between New York hedge fund consultant Tom Seides and Warren Buffett, chairman of Berkshire Hathaway Inc. In 2007 Seides bet that hedge funds – exclusive investment pools for sophisticated investors – could beat the stock market over a ten-year period. Buffett bet that the Standard & Poors 500 Index, which tracks the largest U.S. stocks, would come out ahead. Seides selected five top hedge funds as the proxy for his bet. He had reason to be hopeful: hedge funds are run by some of the smartest and most-highly-paid investment professionals. They are allowed to invest in a broad range of securities and to make changes on a moment’s notice in response to movements in markets, interest rates, and economic conditions. Hedge fund managers believe that by being nimble they can stay one step ahead of other investors. It was a rocky period...

Fans of the “Terminator” series of movies may have reason to worry that Skynet, the world-wide computer network that waged robotic war on mankind in the dystopic future, currently controls the world’s stock markets. In a way that’s what has been happening since last week, when stocks started a frantic headlong tumble. Within several days all of January’s stock market gains were wiped out as U.S. stocks, measured by the Standard & Poor’s 500 Index, fell at least 8% from their recent highs. It is most likely that the large segment of the market controlled by automated trading algorithms caused the sharp volatility that halted a seemingly relentless 13-month rise in stock values. An algorithm is simply a set of rules that a computer uses to accomplish a specific end. When it comes to the markets, more and more speculative portfolios are traded automatically by algorithms that respond to changes in market...

Are you feeling frustrated on days when you hear the “market” has risen sharply but the gain in your portfolio doesn’t match popular market averages? You shouldn’t: If you have a well-diversified portfolio, it is probably doing just what it’s supposed to do. Always remember that there is a big difference between a diversified portfolio and “the market.” A diversified portfolio should include a mix of big and small stocks, domestic and international stocks, emerging markets stocks, government, corporate and/or municipal bonds, and commercial real estate investment trusts. “The market” is a measure that should include all of the publicly traded securities in the world. However, there is no easily accessible and long-term measure meeting those criteria. Most market indexes cover just a small portion of the world’s publicly-traded investment assets. For instance, the Standard & Poor’s 500 Stocks Index tracks the 500 largest stocks of U.S. companies. It leaves out thousands of...

Workers in their fifties are headed toward eventual retirement but aren’t there quite yet. However, this is the time to start seriously preparing for an eventual departure from the full-time workforce. Decisions made now will have a positive or negative impact in five or ten years when it is time to retire. Here is a monthly guide for 2018 that will help you take steps now to ensure a comfortable retirement later. January: The holiday hubbub is behind you and now you can spend some time daydreaming about what you want out of retirement. Do you want to stay in your current home and community and travel? Do you want to downsize to a smaller home? Or do you want to move to another part of the country? Picturing your ideal retirement will help you take specific steps over the coming years to help you realize your dream. February: Check up on...