Resolution for 2011: "I will give my all for the Kingdom"

Every few weeks, we invite a guest blogger to write our Personal Financial Friday post. Today, we're turning today to Ben Stroup of ChurchGivingMatters.com.

Ben is a former pastor who now represents GENERIS, a company that helps churches and ministries "to develop generosity — a generosity that permeates the culture."

He is a graduate of Belmont University, and he lives with his wife and two young sons near Nashville, Tenn.

We've asked to Ben to share what he's learned about generosity, both as a pastor and as a teacher/trainer in the area of generous giving.

Take it away, Ben!

I have the privilege of traveling around the country and meeting with many people who stand in pulpits and many more who sit in the pews. And, yes, I talk with them about money and giving.

In many situations, I have been encouraged to see people exhibit an attitude of what the Bible calls "rich generosity" (2 Corinthians 8:2). Here three things in particular that I've noticed about many of the generous people I've come across:

• Their generosity is an external response to an internal reality. For them, giving is not something they see as an obligation. Rather, they see it as the only appropriate response in light of their faith in Jesus Christ. Put another way, there is an interest and discipline related to generosity that doesn’t begin or end in the realm of human things.
• Those with the greatest wealth are truly generous. Maybe we're too influenced by Charles Dickens' portrait of the miserly Ebenezer Scrooge, but often we think of wealthy people as being stingy. I’m consistently surprised at how the wealthy people I come across are like the transformed Scrooge at the end of the story! Indeed, in my experience, there seems to be a close connection between those who give the most and those who possess the greatest net worth. (Perhaps the best way to build your net worth is to give it away!)
• Generous people are intentional about being good money managers. Those who choose to be generous know that by managing their money well, they can continue to be generous and perhaps even increase their level of generosity. I've met people who have built a "generosity plan" that rests alongside their personal investing plan.

No one becomes generous accidentally. Financial generosity is something we decide is important to us — and for us. We must find ways to leverage the margin we have to benefit others.

Socialism seeks to bring about change by forcing people give up what they have. Generosity, on the other hand, asks us to freely share with others, with the knowledge that we are simply God's vehicles through which His money passes.

The greatest challenge — and the greatest opportunity — to living a life of Christian generosity is embracing a lifestyle that acknowledges, "All that I have, all that I am, and all that I will ever become is a gift from God, a gift to be leveraged to advance the Kingdom."

How will you respond to that challenge — and amazing opportunity — in 2011?

Thanks, Ben! If you're a Twitterer, you can follow Ben @ben_stroup.

Well, we know you may have a New Year's Eve get-together to get ready for, so here's just one more thing: Check out SMI's special end-of-the-year offer (good through today only!): a 30-day free trial Web membership.

Don't wait. Time is running out!

Happy New Year from Sound Mind Investing!

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Category(s): Giving and Stewardship
Tag(s): generosity, giving, Personal Finance Friday

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A new year, a new issue of SMI — and a special offer

The January 2011 issue of the Sound Mind Investing newsletter (print edition) is rolling off the press! The online edition is already posted to the server — and even if you're not yet an SMI subscriber, you can access a few January-issue articles at the links below.

And, even better, if you sign up for our 30-day free trial, you can get the entire January issue — plus access to every issue over the past three years! (More about that in a moment.)

Here's a sampling of what's in the first issue of 2011:

• Washington's tax deal will create a year-long 2% tax cut for most workers. But if you want even more in your paycheck, it may be that all you have to do is ask. Really. Find out how in Take Home Pay Will Climb in 2011 — Here's How To Boost It Even More.
• A recent study suggests momentum investors — such as those using SMI's successful Fund Upgrading strategy — are likely to see even brighter days are ahead. Find out more in Momentum is Dead. Long Live Momentum.
• A new fund managed by SMI Advisory Services is opening in January! The SMI Balanced Fund will target a roughly 60% stock, 40% bond allocation. Introducing the SMI Balanced Fund (SMILX) has all the details.

Our subscribers'-only cover story, by financial author Ron Blue, offers a five-step process that'll help you create clearly-defined, target-oriented goals for 2011 — the kind you're likely to actually stick with and achieve. His article is titled "The Goals You Need to Survive and Thrive."

The January issue also includes our annual guide to allocating your investments over the next 12 months, plus advice on how to conduct a financial self-checkup!

So, how can you get all of the January issue if you're not yet a subscriber? It's simple. Just sign up for our 30-day free trial Web Membership!

Of course, as a Web Member, you'll get much more than just the January issue. As mentioned above, web members have access to our three-year(!) searchable archive of articles from the Sound Mind Investing newsletter — articles that will help you make the most of financial resources.

Plus you'll get:

• SMI's Retirement Plan Fund Tracker (shown at right) that generates a custom report that tracks the specific funds available in your retirement plan, so you can know which funds to choose and when. (If you have money in an employer-sponsored retirement plan, this feature alone makes our 30-day trial well worth checking out!)

• Our Fund Performance Rankings report — the latest data on the performance of more than 1,500 mutual funds.

You'll also gain access to our core investing strategy, Fund Upgrading, that's beaten the overall market in 10 of the past 11 years (and it looks like the record will be 11 out of 12 years once the numbers from 2010 are tallied!). During the 11-year period from 1999-2009, U.S. stocks gained a total of 21.5% (as measured by the Wilshire 5000). During that same time, SMI's Upgrading strategy gained 141.9%!

Still not sure? Consider what some of our readers have told us:

SMI was an answer to prayer! We've developed a workable budget, paid off debt, started a contingency fund, opened college savings accounts, and went from negative returns in our retirement accounts to positive returns — immediately. Best of all, we get our financial advice from a source that truly puts God first. Cate Brizzell, NY Subscriber since 2000
We so appreciate SMI! Thank you for all that you do. You are, without a doubt, the best "one stop" resource for anyone's total financial needs. Bobby and Carla Sullivan, KY Web Member since 2005
The Sound Mind Investing newsletter has given me access to a proven investing method that is simple to follow and will return the cost of my annual subscription many times over. The Sound Mind Investing website and message board are a great place to ask investing questions and get great advice from other subscribers. Craig Weeks, TX Web Member since 2005

NO LONG-TERM COMMITMENT. We want you to be completely satisfied. So if SMI doesn't live up to your expectations, just cancel your Web Membership within the first 30 days and you'll never be charged.

This special end-of-the-year offer is good only through this Friday, Dec. 31, so don't delay! Sign up today!

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Category(s): SMI General Announcements

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"A Savior has been born to you"

God sent the angel Gabriel to Nazareth, a town in Galilee, to a virgin pledged to be married to a man named Joseph, a descendant of David. The virgin's name was Mary. The angel went to her and said, "Greetings, you who are highly favored! The Lord is with you."

Mary was greatly troubled at his words and wondered what kind of greeting this might be.

But the angel said to her, "Do not be afraid, Mary; you have found favor with God. You will conceive and give birth to a son, and you are to call him Jesus. He will be great and will be called the Son of the Most High. The Lord God will give him the throne of his father David, and he will reign over Jacob's descendants forever; his kingdom will never end."

"How will this be," Mary asked the angel, "since I am a virgin?"

The angel answered, "The Holy Spirit will come on you, and the power of the Most High will overshadow you. So the holy one to be born will be called the Son of God."...

In those days Caesar Augustus issued a decree that a census should be taken of the entire Roman world. (This was the first census that took place while Quirinius was governor of Syria.) And everyone went to their own town to register.

So Joseph also went up from the town of Nazareth in Galilee to Judea, to Bethlehem the town of David, because he belonged to the house and line of David. He went there to register with Mary, who was pledged to be married to him and was expecting a child. While they were there, the time came for the baby to be born, and she gave birth to her firstborn, a son. She wrapped him in cloths and placed him in a manger, because there was no guest room available for them.

And there were shepherds living out in the fields nearby, keeping watch over their flocks at night. An angel of the Lord appeared to them, and the glory of the Lord shone around them, and they were terrified.

But the angel said to them, "Do not be afraid. I bring you good news that will cause great joy for all the people. Today in the town of David a Savior has been born to you; he is the Messiah, the Lord. This will be a sign to you: You will find a baby wrapped in cloths and lying in a manger."

Suddenly a great company of the heavenly host appeared with the angel, praising God and saying,

Glory to God in the highest heaven,
    and on earth peace to those on whom his favor rests....

When the time came for the purification rites required by the Law of Moses, Joseph and Mary took [the child] to Jerusalem to present him to the Lord....

Now there was a man in Jerusalem called Simeon, who was righteous and devout. He was waiting for the consolation of Israel, and the Holy Spirit was on him. It had been revealed to him by the Holy Spirit that he would not die before he had seen the Lord's Messiah.

Moved by the Spirit, he went into the temple courts. When the parents brought in the child Jesus to do for him what the custom of the Law required, Simeon took him in his arms and praised God, saying:

Sovereign Lord, as you have promised,
   you may now dismiss your servant in peace.
For my eyes have seen your salvation,
   which you have prepared in the sight of all nations:
a light for revelation to the Gentiles,
   and the glory of your people Israel.

The child's father and mother marveled at what was said about him....

When Joseph and Mary had done everything required by the Law of the Lord, they returned to Galilee to their own town of Nazareth. And the child grew and became strong; he was filled with wisdom, and the grace of God was on him.

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Category(s): Christian Interest
Tag(s): Christmas

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Bond funds take a beating

The Wall Street Journal offers an update on something SMI's executive editor Mark Biller warned about in our Oct. 2009 issue (as well as several times since): "safe" bond funds can suffer short-term losses.

Bonds are supposed to be safe, but the world's five largest bond mutual funds have all posted losses in the past two months — with three of them losing more in December than in November....

A selloff in U.S. Treasurys is spreading to most bond sectors, including corporate and municipal bonds. The yield on the benchmark 10-year Treasury, which moves in the opposite direction of price, has jumped about a full percentage point in the past month on fears that aggressive monetary and fiscal stimuli could trigger inflation and higher interest rates down the road....

While the five biggest bond funds are still up for the year, they have performed poorly of late. The $250 billion Pimco Total Return Fund, the world's largest bond fund, lost 3.42% from Nov. 4 through Dec. 17, compared with a 2.51% loss in the BarCap U.S. Aggregate Bond Index over the same period, according to Morningstar. The second- and fourth-largest bond funds, the $89 billion Vanguard Total Bond Market Index Fund and the $38.4 billion American Funds Bond Fund of America Fund, respectively, have lost 2.64% and 2.79%.

The losses were smaller in the $38.3 billion Vanguard Short-Term Investment Grade Fund, which lost 0.91% over the period in part because of the fund's shorter-duration securities, and $43.7 billion Templeton Global Bond Fund, the world's third-largest, which lost 1.29%....

Kenneth Volpert, head of Vanguard's taxable-bond group, attributes the losses in Vanguard's bond funds to the rising-rate environment.

The WSJ suggests that bond yields are rising because of the expected impact of "aggressive monetary [i.e., Fed] and fiscal [i.e.. White House/Congress] stimuli" that are pumping lots of money into the economy. That's one possible explanation, though as this post from last week suggested, some observers feel the recent rise in bond yields could merely be a return to more "normal" historical bond yields. As the economy eventually recovers to health, one would expect yields to rise from the record lows of the past two years.

Either way, as yields rise, bond values fall. No one wants to pay $1,000 for a bond paying 3% interest if there are new $1,000 bonds paying 5%, so the price of those older bonds has to drop to make them competitive with the new reality of the marketplace.

This is why long-term bonds suffer the most as rates begin to rise — and it is why we've been steering our readers away from long-term bond holdings for some time now. Shorter-term bonds, in contrast, suffer from rising rates for only a brief time, so they're better choices in times of rising rates.

We'll have more on this in our annual allocation article — coming soon in the January issue of SMI!

Posted by Joseph at 1:50 PM | Comments (0) | TrackBack
Category(s): Current Market Events, Mutual Funds
Tag(s): bond funds

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Another Christian leader recommends SMI ... try it FREE!

This Christmas, we're offering a 30-day free trial Web Membership — just for the asking. But don't delay because the offer ends soon.

How reputable is SMI? Josh McDowell has just joined a list of others endorsing the work of Sound Mind Investing:

"As a communicator, I'm always on the lookout for resources that speak clearly and knowledgeably to the point at hand. My long-time friend Austin Pryor does exactly that in his financial newsletter and The Sound Mind Investing Handbook. They are thorough, easy-to-understand, and grounded in 30 years of successful investing experience. Both are valuable sources of practical guidance for anyone who wants their financial decisions to line up with biblical principles.

"Austin and Sound Mind Investing get my highest recommendation."

Josh McDowell
Josh McDowell Ministry
Author of More Than a Carpenter

"If you're looking for an attractive easy-to-follow investment guide written in plain English, look no further. Austin Pryor writes without vested interests in any specific plan or fund. This means greater candor and objectivity. I'm frankly skeptical of a lot of stuff coming out of the financial realm with its short-term 'for this life only' perspective. Austin is a man with a larger and better perspective. May every reader seek to make wise investments of money and time in God's kingdom, investments that will pay off not only in this life, but in the eternal life to come!"

Randy Alcorn
Director of Eternal Perspective Ministries
Author of Money, Possessions & Eternity

"I have had the privilege of knowing Austin Pryor since the beginning of my Christian life. There are few that I have as much respect for and confidence in than Austin. His counsel in the investment area has proven to be extraordinarily wise and discerning over a long time period. I can recommend this book without hesitation as a 'must read' for anyone interested in investing in very uncertain economic times. I consider it a privilege to be able to make this recommendation."

Ron Blue
Founding Partner of Ronald Blue & Co.

"When I wrote The Glorious Journey I had to include a quote by Austin Pryor in my book. Here is a man of great insight who has the ability to make difficult subjects easy to comprehend. It is obvious that Sound Mind Investing combines Biblical wisdom with very practical and understandable application. Anyone would profit from reading this book."

Dr. Charles F. Stanley
Senior Pastor / First Baptist Church of Atlanta

What do you get with an SMI Web Membership? Sign up today and you'll gain access to the online archive of both the Sound Mind Investing monthly newsletter and our daily Members' Weblog — that's hundreds of searchable articles on everything from investing strategies to biblical precepts of wise stewardship.

Plus you'll get:

• SMI's Retirement Plan Fund Tracker (shown at right) that generates a custom report that tracks the specific funds available in your retirement plan, so you can know which funds to choose and when. (If you have money in an employer-sponsored retirement plan, this feature alone makes our 30-day trial well worth checking out!)

• Our Fund Performance Rankings report — the latest data on the performance of more than 1,500 mutual funds.

You'll also gain access to our core investing strategy, Fund Upgrading, that's beaten the overall market in 10 of the past 11 years (and it looks like the record will be 11 out of 12 years once the numbers from 2010 are tallied!). During the 11-year period from 1999-2009, U.S. stocks gained a total of 21.5% (as measured by the Wilshire 5000). During that same time, SMI's Upgrading strategy gained 141.9%!

The graph above puts Upgrading's performance in dollar terms. If you had invested $25,000 in the overall market at the beginning of 1999, it would have grown to $30,372 by the end of last year. But if the same money had been invested according to SMI's Upgrading strategy, it would have grown to $60,532. In other words, the Upgrading portfolio was worth almost twice as much after 11 years than a portfolio that simply earned the market's return!

Our simplified Just-the-Basics strategy has done pretty well, too, returning 39.3% over those 11 years (compared to just 21.5% for the overall market).

NO LONG-TERM COMMITMENT. We want you to be completely satisfied. So if SMI doesn't live up to your expectations, just cancel your Web Membership within the first 30 days and you'll never be charged.

This special end-of-the-year offer is good only through Dec. 31, so sign up today!

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Category(s): SMI General Announcements
Tag(s): free web membership

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A Ponzi-scheme epidemic

The sad tale of Bernard Madoff — a multi-billion dollar swindle in which trusting investors lost huge sums — is only the most prominent of many such stories, reports Dow Jones columnist Al Lewis.

Confessed Ponzi schemer Sean Mueller received a 40-year prison sentence last week.

I watched as he pleaded for mercy in Denver District Court, but the damage was done. He'd fleeced the Mile High City's elite, including football great John Elway, and many not-so-elite, out of more than $70 million.

Mr. Mueller, 42 years old, did this with one of the oldest tricks around: A classic Ponzi scheme, taking money from new investors to pay off the old. He touted an amazing, risk-free stock-trading strategy until April, when he sent his investors an email saying he was sorry he blew it. He was then intercepted by police while considering a jump from a parking garage.

Lewis notes that the Justice Department recently announced the results of a crackdown on financial fraudsters called Operation Broken Trust. The effort "rounded up 343 criminal defendants and 189 civil defendants," he reports, with a tally of "120,000 victims and $10.3 billion in losses."

In remarks (text) at a Dec. 6 news conference, Shawn Henry, executive assistant director of the FBI, noted that the most successful financial fraudsters excel at building trust.

The perpetrators of these crimes are those who you might trust: friends and colleagues, people from your workplace, your child's soccer team, even your church.

Criminals have always preyed on the trust of individuals with offers too good to be true — and while the schemes might change, the underlying greed does not.

One victim of a large Ponzi scheme in Tennessee said, "He sat about four rows behind us in church. We were very good friends. We went to his house often. He was a brilliant man. That's how he was able to con people for eight years."

The FBI offers this summary of some of the frauds stopped by Operation Broken Trust and suggests a few ideas (at right) that can keep you from being taken.

And keep in mind, as columnist Lewis points out, that that most financial fraud is small-scale, not large.

[There are] penny-ante Ponzis just about everywhere.

You know, $10 million here, $50 million there. Many of them get only a brief in a local newspaper, aren't a matter for the Feds and don't generate loud complaints from victims.

The characters, the settings and the dramas differ, but Ponzis are all the same. Someone gains trust, promises profits that are too good to be true and fabricates statements. The money is then either blown in desperate trades or on mansions, cars, planes, art and jewelry....

Why do people keep falling for these sorry characters after Charlie Ponzi pulled his frauds a century ago? Colorado Securities Commissioner Fred Joseph, who has handled his share of Ponzis, puts it this way: "People want to believe."

Be wary.

Posted by Joseph at 12:55 PM | Comments (0) | TrackBack
Category(s): Investing Principles
Tag(s): financial fraud

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Rising rates? That's a good sign, Prof. Siegel says

Interest rates on U.S. Treasury notes have jumped sharply in the past month, leading some pundits to argue that the rising rates are evidence that the Fed's QE2 policy is backfiring.

On the contrary, says Jeremy Siegel of the University of Pennsylvania's Wharton School (and author of Stocks for the Long Run), writing in yesterday's Wall Street Journal (subscribers' link):

Long-term Treasury rates are influenced positively by economic growth — which encourages consumers to borrow in anticipation of higher incomes and causes firms to seek funds to expand capacity — and by inflationary expectations.

Long-term Treasury rates are affected negatively by risk aversion: Seeking a safe haven, investors pile into Treasury bonds, running up their prices and lowering their yields.

The Fed's QE2 program has raised expectations of growth and inflation, sending long-term Treasury rates up. It has also lowered risk aversion, which implies rising long-term rates.

The evidence for a decline in risk aversion among investors is the shrinkage in the spreads between Treasury and other fixed-income securities, the strong performance of the stock market, and the decline in VIX, the indicator of future stock-market volatility. This means that expectations of accelerating economic growth — and a reduction in the fear of a double-dip recession — are the driving forces behind the rise in rates.

Siegel concedes that growth expectations have also been boosted by the tax deal currently before the Congress, "[b]ut long-term Treasury rates were rising even before Mr. Obama announced his policy switch."

The Wharton professor isn't the only one who thinks the combined impact of Fed's QE2 policy and the tax deal will juice the economy. PIMCO, which runs the world’s largest bond fund, last week upped its growth estimate to a range of 3.0-3.5 percent (by the end of 2011) from an earlier estimate for 2.0-2.5 percent.

PIMCO CEO Mohamed El-Erian told Bloomberg the revision came in light of the "massive amount" of fiscal and monetary stimulus expected to be pumped into the economy.

Posted by Joseph at 9:05 AM | Comments (0) | TrackBack
Category(s): Current Market Events
Tag(s): economy, interest rates

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The market is back where it was a dozen years ago — but...

The Big Picture website provides this illuminating chart of the S&P 500 Index over the past 12 years:

The site notes that the S&P 500 closed on Dec 31, 1998 at 1229.23. That's just 11 points below its close last Friday of 1240.40. Eleven points — in 12 years!

Naturally, a chart like this is quite persuasive in the hands of an advisor pushing market timing, or "tactical asset allocation," or any of the other nuances that seek to move investors in and out of the market. It seems so obvious that such an approach must be better than a buy-and-hold approach.

As the Big Picture's Barry Ritholtz explains:

Over the course of these dozen years, we have seen a 68% rally (to the 2000 top), a 50% sell off (March '03 lows), a 104% rally (October '07 top), a 58% drop (March '09), and an 83% move up (April 2010 highs).

The fee-driven industry continues to push buy & hold as the investing strategy of choice. I prefer to adjust my risk exposure relative to multiple inputs, one of the major aspects of which is Trend.

Of course, some academics will argue this point, but the chart above speaks volumes.

It is indeed difficult to defend a general buy-and-hold approach in light of the past dozen years. However, not all buy-and-hold approaches are created equal. I'm not criticizing Ritholtz here, but many people assume buy and hold equals a specific indexing approach or a strategy of buying certain "special" funds or stocks and holding them forever, come what may.

SMI's flagship strategy, Fund Upgrading, is different from either of these approaches. It is definitely buy-and-hold, and yet it is relentlessly active in its management of the underlying funds it recommends, requiring its adherents to check their holdings every month. Upgrading also makes no attempt to move investors in and out of the market.

Contrary to what the above chart might imply, Upgrading's version of buy-and-hold has been quite successful — despite the fact that the overall market has gone nowhere. Far from the 0% return implied by the chart, Upgrading has delivered a gain of roughly 165% over the past 12 years. That's approximately 8.5% annualized. In a perfectly flat market.

(You can review the 1999-2009 numbers yourself using this Performance History. This year, Upgrading is running about 3% ahead of the overall market, as measured by the Wilshire 5000.)

The next time you see or hear someone disparage buy-and-hold investing, keep in mind that there's more than one kind of buy-and-hold approach. Yes, if you had bought an S&P 500 index fund and held it for the past 12 years, you would have done poorly. However, that does NOT mean you necessarily have to subject yourself to the perils of market timing in order to succeed.

Someone who ignored the market's dramatic bull and bear markets over the past 12 years and simply kept on Upgrading would have done quite well — without the emotional roller coaster of constantly wondering if they needed to exit or re-enter the market.

Learn more about Upgrading by signing up for a FREE 30-day SMI Web Membership. This special end-of-the-year offer is good only through Dec. 31, so sign up today!

Posted by Mark at 9:55 AM | Comments (0) | TrackBack
Category(s): SMI Model Portfolios
Tag(s): buy-and-hold, Upgrading

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Social Security closes "tax-free loan" loophole

People aren't stupid. If they see a way to earn a return with little risk, they'll act on it.

And that brings us to the topic of today's post: Did you know that for many years, some people have been getting interest-free loans from the Social Security Administration?

It's true. Social Security effectively allowed seniors to get temporary use of tens of thousands of dollars interest-free — until this week.

A 2009 U.S. News article described how it worked:

A little-known law allows Social Security recipients who are already collecting benefits to change their mind[s] and start over. An individual can claim Social Security at age 62 and then reclaim again for an enhanced payout at age 70, provided he or she pays back every cent already received.

No interest is charged on this "loan" from Social Security. So, an individual who doesn't need to spend their Social Security income on immediate expenses could feasibly invest the money and keep the interest. Upon paying back the principal, these investors will get higher Social Security checks for the rest of their life....

In order to take advantage of this zero-interest loan you need to be able to afford retirement without the monthly benefit. Boston College calculated that approximately 30 percent of men and 32 percent of women have enough financial assets in 401(k), IRAs, and other liquid investments to make it to age 70 without using their checks.

The Boston College study (PDF) referenced above didn't say how many households have been taking advantage of the claim/withdraw strategy, but it estimated that between $5.5 billion and $11 billion has been paid out annually to Social Security recipients who use the money for a while, earn a return on it, and then pay it back.

This week, however, the Social Security Administration slammed the door on that strategy, shortening the legal period between taking benefits and later withdrawing an application to one year. SSA also restricted the suspension period.

Here's an excerpt from a Social Security news release (PDF):

The Social Security Administration today published final rules, effective immediately, that limit the time period for beneficiaries to withdraw an application for retirement benefits to within 12 months of the first month of entitlement and to one withdrawal per lifetime.

In addition, beneficiaries entitled to retirement benefits may voluntarily suspend benefits only for the months beginning after the month in which the request is made.

The agency is changing its withdrawal policy because recent media articles have promoted the use of the current policy as a means for retired beneficiaries to acquire an "interest-free loan." However, this "free loan" costs the Social Security Trust Fund the use of money during the period the beneficiary is receiving benefits with the intent of later withdrawing the application and the interest earned on these funds.

The interesting thing is that Social Security rules have allowed for this "interest-free loan" arrangement since the 1960s, but the matter got little attention until the Boston College study mentioned above was published last year.

Here's something to think about: Were the people using the claim/withdraw strategy unethical? Or were they simply wise to use the regulations to their advantage?

We'll leave that for you to ponder.

Posted by Joseph at 1:20 PM | Comments (0) | TrackBack
Category(s): Retirement
Tag(s): Personal Finance Friday, Social Security

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Ain't nobody happy

It's difficult to know what to make of the tax-policy deal struck (click link for key highlights) between President Obama and congressional leaders (including Republicans this time around). As with the report issued last week by the National Commission on Fiscal Responsibility and Reform, everyone is finding something to dislike.

Critics on the left think the president has betrayed their ideals by not standing firm for an income-tax hike for high earners (and many small-businesses).

"Some in my caucus still have concerns," Senate Majority Leader Harry Reid (D-Nev.) said, quoted by the New York Times. Vermont Sen. Bernie Sanders (a Socialist independent who caucuses with the Democrats) is threatening a filibuster.

On the House side, Bloomberg quotes House Democratic Caucus Chairman John Larson (Conn.) as saying it will be "very difficult" to sell the tax deal to House Democrats.

Meanwhile, critics on the right, such as conservative blogger and radio talk show host Hugh Hewitt, think Republicans could have held out for a much better deal, including one that would not have brought back the so-called death tax (i.e., the now non-existent federal estate tax).

[A]ny conservative who votes for the deal is voting to resurrect the death tax. The death tax is at zero right now, driven there by a decade of step downs and a moral argument, widely and deeply held, that this vampire tax is wrong on many levels. Any Republican who votes for the deal is voting to undo that demise.

Any future primary opponent will be sure to campaign on the fact that the incumbent voted to resurrect the death tax — a powerful club with which to beat a senator facing a Tea Party challenge, and some of the redistricted old bulls of the House as well.

The editorial board of the Wall Street Journal, however, largely sides with Republican leaders who argue that the good in the deal outweighs the bad.

Should Republicans have held out for more, since they would return in January with a stronger position? We wish they had won a longer extension [of current tax rates], kicking the next possible tax hike further into the future.... Yet this deal is superior to anything we could have imagined six months ago.

Critics from the right and the left are united on one thing: a belief that this tax deal is not a fait accompli. The title of the NY Times article quoted above is "Obama Defends Tax Deal, but His Party Stays Hostile." The title of Hugh Hewitt's post is "Why Conservative Support for the Deal May Unravel."

So much for the politics. Barron's editor-in-chief Randall Forsyth notes that the announced deal is roiling the bond market.

Yields soared in the wake of the plan that will add upwards of $900 billion to the federal deficit, sending bond prices tumbling, especially in the municipal market....

The potential for the Treasury to sell more securities to fund the larger deficit, plus the likelihood that the Fed could buy fewer notes in [a] more robustly growing economy sent yields soaring. The benchmark 10-year Treasury's yield jumped 24 basis points (hundredths of a percentage point), to 3.17%, a five-month [high]; its price fell nearly two points, or $20 per $1,000 note....

Especially hard hit again was the municipal market, which suffered from an omission from the tax deal — the expected extension of the Build America Bond program, which expires at year-end....

The sharp rise in bond yields potentially could blunt the impact of the fiscal thrust from the tentative bipartisan tax deal.... States and localities, already reeling under budget pressures, hardly need higher borrowing costs.... Only corporations, which already having taken advantage of ultra-low borrowing costs and are flush with cash anyway, would be immune from an uptick in bond yields.

So will the tax deal pass? Tough to say, especially when there is no actual bill yet, just an agreement in principle. When the bill is written, there is likely to be even more "devil in the details."

Update: The Wall Street Journal provides a helpful summary of the deal's major provisions here.

Posted by Joseph at 12:50 PM | Comments (0) | TrackBack
Category(s): Taxes

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The unloved deficit commission report

SMI's assistant editor Joseph Slife, who's been tracking federal spending issues for more than 20 years (he did research for Larry Burkett's 1990's bestseller, The Coming Economic Earthquake), has been reading "The Moment of Truth" (PDF) — the report issued last week by the National Commission on Fiscal Responsibility and Reform (aka the deficit commission).

In a discussion yesterday with host Bob Crittenden on The Meeting House (on Alabama's Faith Radio), Joseph explained why the report is proving to be so unpopular — and why some of its recommendations may be sorely needed.

Listen below (17 min.) — or download an mp3 file (right click/save as).

During the discussion, Joseph mentions this column by Robert Samuelson that appeared in yesterday's Washington Post.

Posted by Matthew at 11:55 AM | Comments (0) | TrackBack
Category(s): Taxes
Tag(s): federal budget, federal spending, radio

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What would it be like if you didn't own a single thing?

Once a month, we invite a guest blogger to write our Personal Financial Friday post.

Today we're pleased to introduce you to Jason Price of OneMoneyDesign.com, a site aimed at helping people "achieve true financial freedom." The title of his blog comes from three key truths:

• There is One owner of money (God);
• Our job is to manage Money as stewards;
• We can manage wisely if we follow God's Design.

Jason is also a Money Map Coach for Crown Financial Ministries and, in his spare time, he's pretty fair soccer player (so we're told). Jason and his family make their home in Texas — so, we take you now to the Lone Star State and Jason Price!

      No, it's mine!
            MINE, MINE, MINE!
      Give it back to me!
            It's my toy!

If you have small children running around your house, you probably hear these words often. I have two little ones. The two-year-old is now old enough to walk over to his five-year-old sister and take something away from her when she's not looking. Within a few seconds, my wife and I starting hearing all the words I quoted above — and at a pretty loud volume!

Even if you don't have small children running around your house, I am sure you've heard strong claims to ownership. In fact, if you're like most of us, you've probably made such claims yourself.

The sense of ownership ("It's mine! Mine!") is buried deep within our imperfect human nature. Even as adults, we tend to have powerful feelings about owning our money and resources. Do any of these phrases ring a bell?

• "It's my money and I'll do with it as I please."
• "I've worked hard all week — now I'm going to go buy something with my money."
• "I deserve it!"

But let me challenge these assumptions. Is what we have really "ours"? Is it really "our" money to do with as we please? God's Word tells a different story:

To the LORD your God belong the heavens, even the highest heavens, the earth and everything in it. (Deut. 10:14)

The earth is the LORD's, and everything in it, the world, and all who live in it. (Psalm 24:1)

Scripture says God has full ownership of this world. And yes, "our" money is included! A recent Crown Financial Ministries devotional discussed the implications of that truth:

Ownership: God or you?

Once you accept the fact that God owns everything, it's important to manage all you have according to His rules (emphasis added). It's how you manage money that determines how you will manage greater things.

"For we have brought nothing into the world, so we cannot take anything out of it either" (1 Timothy 6:7).

Even though God is the owner, He's entrusted money and resources into our care. He expects a lot from us in this area of life. As the Crown devotional suggests, perhaps he's testing us to see how we might manage greater responsibilities than a paycheck. Consider these verses.

Now it is required that those who have been given a trust must prove faithful. (1 Corinthians 4:2)

Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much. (Luke 16:10)

In our personal money management, we prove ourselves to be good stewards of what belongs to God. And Scripture suggests that performing such financial duties faithfully puts us in a position that allows God to entrust us with even greater things.

These "greater things" may or may not be financial. That is up to the Lord. But regardless of the form they take, the Bible says that God looks to his trustworthy stewards to bear even greater responsibilities in His kingdom mission.

Are you claiming to be an owner? Or are you recognizing that you're a steward?

Thanks, Jason!

Hey, if you're a financial blogger and would like to offer a guest post for our Personal Finance Friday slot, we'd love to hear from you. Just send us an e-mail with your idea for a post.

Just one more thing: Be sure to check out SMI's special Christmas offer: a 30-day free trial Web membership (offer good through Dec. 31)!

Spend wisely — and have a great weekend!

Posted by Joseph at 1:35 PM | Comments (0) | TrackBack
Category(s): Christian Interest
Tag(s): Personal Finance Friday, stewardship

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FREE 30-day SMI Web Membership — try us out!

SMI wants to give you something for Christmas! Right now, we're offering a 30-day free trial Web Membership — just for the asking. But don't delay because the offer ends Dec. 31.

What do you get with an SMI Web Membership? Sign up today and you'll gain access to the online archive of both the Sound Mind Investing monthly newsletter and our daily Members' Weblog — that's hundreds of searchable articles on everything from investing strategies to biblical precepts of wise stewardship.

Plus you'll get:

• SMI's Retirement Plan Fund Tracker (shown at right) that generates a custom report that tracks the specific funds available in your retirement plan, so you can know which funds to choose and when. (If you have money in an employer-sponsored retirement plan, this feature alone makes our 30-day trial well worth checking out!)

• Our Fund Performance Rankings report — the latest data on the performance of more than 1,500 mutual funds.

You'll also gain access to our core investing strategy, Fund Upgrading, that's beaten the overall market in 10 of the past 11 years (and it looks like the record will be 11 out of 12 years once the numbers from 2010 are tallied!). During the 11-year period from 1999-2009, U.S. stocks gained a total of 21.5% (as measured by the Wilshire 5000). During that same time, SMI's Upgrading strategy gained 141.9%!

The graph above puts Upgrading's performance in dollar terms. If you had invested $25,000 in the overall market at the beginning of 1999, it would have grown to $30,372 by the end of last year. But if the same money had been invested according to SMI's Upgrading strategy, it would have grown to $60,532. In other words, the Upgrading portfolio was worth almost twice as much after 11 years than a portfolio that simply earned the market's return!

Our simplified Just-the-Basics strategy has done pretty well, too, returning 39.3% over those 11 years (compared to just 21.5% for the overall market).

Still not sure? Consider what some of our readers have told us:

SMI was an answer to prayer! We've developed a workable budget, paid off debt, started a contingency fund, opened college savings accounts, and went from negative returns in our retirement accounts to positive returns — immediately. Best of all, we get our financial advice from a source that truly puts God first. Cate Brizzell, NY Subscriber since 2000
We so appreciate SMI! Thank you for all that you do. You are, without a doubt, the best "one stop" resource for anyone's total financial needs. Bobby and Carla Sullivan, KY Web Member since 2005
The Sound Mind Investing newsletter has given me access to a proven investing method that is simple to follow and will return the cost of my annual subscription many times over. The Sound Mind Investing website and message board are a great place to ask investing questions and get great advice from other subscribers. Craig Weeks, TX Web Member since 2005

These are just a few of the thousands of readers who benefit day after day from the information provided by Sound Mind Investing. (More testimonials here.)

NO LONG-TERM COMMITMENT. We want you to be completely satisfied. So if SMI doesn't live up to your expectations, just cancel your Web Membership within the first 30 days and you'll never be charged.

This special end-of-the-year offer is good only through Dec. 31, so sign up today!

Posted by Joseph at 9:05 AM | Comments (0) | TrackBack
Category(s): SMI General Announcements

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