Are zero-interest credit cards a good deal?

It sounds like a great deal. Pay no interest on balances transferred from other credit cards, and make interest-free purchases throughout the promotional period. Why wouldn't you take advantage of such an offer?

Although a 0% credit card may be a wise choice for some people, the devil is in the details — and in your individual propensities as a consumer. Consider the following questions:

• Is the balance transfer really free? Yes, you may not be required to pay interest on a balance moved from one credit card account to another. But your new account may charge a fee for making the transfer. Such fees typically run from 3% to 5%. If your balance, for example, is $3,000 and you pay a transfer fee of 3%, you'll be charged $90 just to make the switch. And in some cases, the lender doesn't set a cap on this fee; it's a flat percentage. So the higher the balance that's transferred, the higher the transfer fee.

• What happens after the promotional period? You may be offered a 0% credit card now, but the offer may expire in six months. After that, the rate will likely adjust upward, sometimes substantially. So if you can't pay off the balance before the promotional period ends, you may want to deposit the offer in the nearest trash can.

• What happens if you're late on a payment? Some companies have strict terms on new credit cards that mandate substantial penalties if even one scheduled payment doesn't arrive on time. The card may be cancelled; the full balance may be immediately due; the 0% rate may vanish like the morning fog. So reading the details of the credit card agreement before you make the switch may save headaches and dollars later on.

• Are there minimum use requirements? To keep the promotional rate, you may be required to use the card at least once a month. If you don't, look out. The rate may jump or penalties may be assessed. Again, reading the fine print is crucial to making a prudent decision.

• Will you pay off the balance — really? Know your propensities. If it's likely that six months from now the balance on your new credit card will remain unpaid, perhaps it's time to redouble your efforts and concentrate on your existing account.

© MC 2013

contact: aconner@atconnercpa.com

Should you pay off your home mortgage before retirement?

As Shakespeare put it, "Borrowing dulls the edge of husbandry." In other words, subsidizing a lifestyle with credit tends to make us financially lazy. When headed into retirement with the prospect of a fixed income, liquidating all your debts — including your mortgage — seems to make a lot of sense. Nevertheless, paying off a mortgage, unlike reducing credit card or installment debt to zero, may not be the wisest choice for everyone. Here are four factors to consider.

• How's your emergency fund doing? If you don't have enough money set aside to cover the unexpected hazards of life, you may end up charging credit cards or raiding retirement accounts to cover those costs. How much should you set aside? Most experts recommend enough to cover three to six months of living expenses. Funding an emergency fund first will keep you from being house-rich and cash-poor.

• How much can you earn elsewhere? If you've refinanced your mortgage and locked in a historically low interest rate, you may want to invest extra money in funds that earn higher returns. Of course, the stock market is notoriously volatile. So if you can't handle the volatility of the market or can't sleep at night when your investments take a downturn, paying off the mortgage may be the more prudent choice for you. In other words, know yourself and plan accordingly.

• Is consumer debt draining your cash flow? If you're only making the minimum payments on your car loan or credit card balance, attack those debts first. Consumer interest isn't deductible on your taxes, and the interest rates are probably higher than you're paying on a mortgage. If you're heading into retirement with only a few years left on a fixed-rate mortgage, most of your payment is already being applied toward the principal balance.

• Are you fully funding retirement accounts? As full-time employment winds to a close, be sure to contribute as much as possible to IRAs and 401(k) accounts. Most folks will use those funds to supplement social security payments, pensions, or other savings. Again, having a house that's paid off may provide little consolation if you run out of cash partway through retirement. True, you might be able to sell the house and use the cash to cover a shortfall. But selling your primary residence should fit into a carefully considered plan. A fire sale doesn't qualify.

For help in analyzing whether paying off your home mortgage makes sense in your circumstances, give us a call.

aconner@atconnercpa.com

Some early 401(k) withdrawals are penalty-free

To encourage workers to set aside money for retirement, Congress modified the tax law in the late 1970s. The new provisions offered certain tax advantages to companies that established "defined contribution" plans. Unlike traditional pensions, such plans do not provide for specific pension payouts during retirement. Instead, they establish how much an employee can contribute. The most common of these plans, as defined by its subsection in the Internal Revenue Code, is the 401(k).
In an effort to keep employees from raiding their retirement accounts too soon, the tax code also assesses stiff penalties for early withdrawals. In general, if you're still working and pull money out of your employer-sponsored 401(k) account before age 59½, you'll be socked with a 10% penalty on the withdrawal, in addition to regular income taxes.
Nevertheless, some provisions of the tax code allow for penalty-free withdrawals from a 401(k) account before age 59½.
Think long and hard, however, before taking an early withdrawal. Presumably, the longer you contribute to a 401(k) account, the more savings will be available to meet your retirement needs. Considering the meager retirement savings of many Americans — one recent study found that the median retirement savings of households nearing retirement is $12,000 — the decision to make an early withdrawal should not be taken lightly.
Following are two ways your traditional 401(k) account can be tapped without incurring the 10% penalty. Note that different rules apply to distributions from Individual Retirement Accounts (IRAs) and Roth 401(k) plans.

• Age 50 withdrawals for public safety employees and reservists. If you're a police officer, firefighter, or medic working for a state or city government, you won't be subject to the 10% penalty on early withdrawals if you leave your job in or after the year you turn 50. This provision also applies to certain active-duty reservists.

• Age 55 withdrawals after separation from service. If you leave your employer in or after the year you reach age 55, you can take penalty-free distributions from your company's qualified 401(k) plan. Note, however, if you retire before that year and wait until you're 55 to take the distribution, you'll be subject to the 10% penalty.

In addition to these two provisions, the tax code provides additional limited exceptions to the 10% penalty rule. If you're considering an early withdrawal from your retirement accounts, give us a call.
© MC 2013

contact: aconner@atconnercpa.com

Are zero-interest credit cards a good deal?

It sounds like a great deal. Pay no interest on balances transferred from other credit cards, and make interest-free purchases throughout the promotional period. Why wouldn't you take advantage of such an offer?
Although a 0% credit card may be a wise choice for some people, the devil is in the details — and in your individual propensities as a consumer. Consider the following questions:

• Is the balance transfer really free? Yes, you may not be required to pay interest on a balance moved from one credit card account to another. But your new account may charge a fee for making the transfer. Such fees typically run from 3% to 5%. If your balance, for example, is $3,000 and you pay a transfer fee of 3%, you'll be charged $90 just to make the switch. And in some cases, the lender doesn't set a cap on this fee; it's a flat percentage. So the higher the balance that's transferred, the higher the transfer fee.

• What happens after the promotional period? You may be offered a 0% credit card now, but the offer may expire in six months. After that, the rate will likely adjust upward, sometimes substantially. So if you can't pay off the balance before the promotional period ends, you may want to deposit the offer in the nearest trash can.

• What happens if you're late on a payment? Some companies have strict terms on new credit cards that mandate substantial penalties if even one scheduled payment doesn't arrive on time. The card may be cancelled; the full balance may be immediately due; the 0% rate may vanish like the morning fog. So reading the details of the credit card agreement before you make the switch may save headaches and dollars later on.

• Are there minimum use requirements? To keep the promotional rate, you may be required to use the card at least once a month. If you don't, look out. The rate may jump or penalties may be assessed. Again, reading the fine print is crucial to making a prudent decision.

• Will you pay off the balance — really? Know your propensities. If it's likely that six months from now the balance on your new credit card will remain unpaid, perhaps it's time to redouble your efforts and concentrate on your existing account.

aconner@atconnercpa.com

Saving the Dream”, A Serious Discussion About the Challenges to Preserving Affordable Housing.

t’s not too late to register for the Philadelphia Council for Community Advancement’s 2013 Report  to the Community on Wednesday, November 13, 2013 at 8:00 AM at The Union League of Philadelphia, 180 S. Broad St in Center City.

The topic for the morning is “Saving the Dream”, a serious discussion about the challenges to preserving affordable housing.  The recession, slow economic recovery and a widening economic gap have turned the dream of homeownership into a nightmare for many households in the Greater Philadelphia area.  These factors have also placed the American Dream of beyond the reach of others.  Equal housing opportunity for a growing segment of the area’s population is being threatened by the depressed economic climate, stagnant unemployment, increasing household operating expenses, and changes in credit and lending policies.

PCCA hopes to lead the conversation about solutions to these problems.  During the event, PCCA will use its experience, along with other professionals from the field, to have a dialog that will examine critical issues facing homeowners who are trying to save their homes and first-time homebuyers, who are seeking to capture dream.

Individual tickets for the breakfast forum can also be purchased for $25.00. or to become a sponsor go to www.pccassavingthedream.eventbrite.org  and reserve your seats.  For more information contact Pierrette Pearson at 215-567-7803 Ext. 2133 or pierrette@philapcca.org.

"Seasons of Hope" Part 1 NOW Available on Kindle

"There is nothing new under the sun."

For many centuries, sexuality has been a taboo subject.  People of the same sex have been attracted to each other since ancient times.  Homosexuality and Lesbianism has been the root of self-hatred, suicides and mental illness in individuals.  In an effort to not disappoint parents, family and society, some try to live a “normal” life. This decision often has adverse effects on the individual and the people in their lives.

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"Seasons of Hope" is a fictional account of one woman's journey through a series of unfortunate, life altering events.  At the root is her coming to the realization that her husband is gay. The story follows one man’s struggle with his sexuality and the lengths he will go through to keep it a secret.  .  It takes the reader on a spiritual  journey through  seasons of betrayal, brokenness, healing, empowerment and restoration.

"An ugly truth is better than a beautiful lie."