Surgeon's Bulletin Board

May 25, 2007
Surgical Rounds, June 2006, Volume 0, Issue 0

Toning up your bottom line

Everybody knows a fitness program can improve one's health and well-being, but The Net Worth Workout (AMACOM; 2006) provides an exercise regimen for your wallet, not your waistline. Written by Susan Feitelberg, your "financial fitness trainer," this book offers helpful exercises to shape up your finances so you can enjoy a healthy and happy retirement. When you consider that the average American retires with less than a year's living expenses in his or her savings account, the need to whip your funds into shape before your twilight years becomes clear. Feitelberg merges her experience as a triathlete with her expertise as a financial advisor for JPMorgan Chase to develop a monetary regimen that focuses on positivity and discipline. Chock full of fitness allegories, The Net Worth Workout relates four areas of physical health to financial health: earning equals metabolism, spending equals calorie intake, saving equals strength training, and investing equals cardio fitness. This easy-to-read financial tome bills itself as a powerful conditioning program for your finances; try turning the pages of The Net Worth Workout while turning miles on your stationary bike.

Are college endowments going to good use?

When it comes to charitable giving, many surgeons spread their wealth to their alma mater, but your contribution may be getting tossed on a growing stockpile of money that the school isn't using. According to the Wall Street Journal, higher education receives around $24 billion in donations each year, yet most wealthy colleges spend less than 5% of that amount. The endowment surplus of Harvard University alone is nearly $26 billion, with $590 million more accumulated during 2005. In their defense, schools insist that they must be cautious with spending this money for the sake of future generations in the event of an economic downturn. They also state that the funds go toward student grants, funding beneficial research, and expanding their undergraduate student body. Still, the mammoth surpluses of these schools have some cynical donors giving their money to causes they deem more "in need."

Retirement savings personalities, in color

Maybe you're a worrier who wonders if you will have enough money for retirement yet didn't think twice when purchasing a new widescreen projection high-definition television. Or perhaps you epitomize the eternal optimist, believing you will effortlessly accumulate ample money to fund your golden years. According to InvestmentNews, either personality trait will land you in the same financial boat: not enough cash for retirement. Allstate Insurance Company's "Retirement Reality Check" survey of 1,600 people found five different retirement savings personalities. People in the red group, which includes 13% of respondents, believe they will have to work past retirement age. Orange respondents, making up 21%, are pessimistic worriers whose reckless spending leads them to regret purchases, neglect savings, and then spend more money to feel better. The largest group is the underachieving blues, at 27%, who know they should save but consistently fall short of their goals. Only 20% of respondents will transition smoothly into retirement. These make up the green group, which has the fiscal smarts to stick to a budget, invest with discipline, and monitor savings. One personality type that will be surprised to find themselves on the road to financial hardship is the 19% who qualify as optimists. These individuals are generally aged 45 and older with less than $100,000 in savings, yet they believe everything will come up roses in retirement and aren't the least bit worried that they may reap weeds instead.

Social Security maximum earnings outpace CPI

Despite a 3.5% inflation rate, the maximum earnings subject to Social Security tax rose 4.7% in 2006. Ac?cording to the Wall Street Journal, the federal government derives this percentage from changes in wages as measured by a national index?not the Consumer Price Index (CPI), which tracks the prices of all goods and sets the rate of inflation. Social Security tax previously applied only to the first $90,000 in annual income but is now capped at $94,200. If you earn more than $94,200, you will pay $5,840 in Social Security taxes this year and your employer will pay the same. In addition, a 1.45% Medicare tax applies to both employee and employer. For self-employed surgeons, the tax rate is still capped at the annual earnings amount of $94,200, but as employer and employee, a 12.4% tax rate applies, which can be offset by tax provisions. The Medicare tax rate for the self-employed surgeon is 2.9%. Unlike the Social Security tax, the Medicare tax is not capped. A self-employed surgeon who earns $150,000 maxes out the employee Social Security tax contribution at $5,840 ($11,680 total) and will pay an additional $4,350 in Medicare tax.

Will you get over your fear of the mouse?

Are you still licking stamps? Maybe 2006 will be the year that you join the 27 million Americans who pay their bills online?up from 10.6 million in 2001. According to US News and World Report, most large banks and credit unions offer the service for no fee, while services such as Check?Free.com and PayTrust.com charge. Aside from the ease of completing money transactions with the click of a mouse, paying your bills on time is the biggest benefit. You can arrange automatic and recurring payments, such as for your mortgage or car loan, and credit card companies can alert you when you are dangerously close to missing your payment due date. You can also transfer money between checking and savings accounts at any time. Convenience does come with risk, and many people are wary about the very real threat of identity theft and question the safety of conducting financial transactions over the Internet. Although any Web site that involves banking transactions takes the highest level of precautions to ensure security, an online thief needs only a username and password to access your information. Federal banking laws stipulate that consumers are responsible for no more than $50 of unauthorized online transactions, provided they report the incident within 2 business days. If you bank or pay bills via the Internet, check your online statements often and watch for suspicious transactions. More importantly, every time you pay a bill or conduct a financial transaction via the Web make sure that the URL reads "https" instead of "http." Another safeguard is to look for the tiny padlock that should appear at the bottom of your screen; this icon ensures the identity of the particular Web site as well as its safety.

Find the hidden wealth inside your home

A recent Federal Reserve study found that Americans extracted $600 billion in cash from their homes in 2004. The upsurge in home values has prompted many owners to sell their house and capitalize on their investment. Thinking of putting a for sale sign on your front lawn? Bottom Line/Personal reminds surgeoninvestors that generating a large profit will trigger capital gains taxes. If you are married and file jointly, profits up to $500,000 from the sale of a primary residence are excluded from capital gains taxes. If you are single, profits up to $250,000 are tax-exempt. After that, homeowners may pay as much as 15% in federal taxes, in addition to state taxes. While paying $60,000 in taxes on a $550,000 capital gain may seem steep, parents and grandparents could do a lot of good for the next generation by investing a portion of those proceeds into a 529 college savings plan. And what if you don't sell your home? If you or your spouse is suddenly without a job and your emergency fund has run out, for example, your home can be used as collateral to obtain a home equity line of credit usable for any purpose. Rather than taking on the long-term interest payments associated with a second mortgage, a credit line can give you the help you need with an interest rate well below that of a credit card.

Ready to call it quits?

Emotionally, you may have been ready for retirement years ago. But do you have what it takes financially? To see where your finances stand, check out Vanguard's retirement tools at www.vanguard.com (click on the personal investing portal and then "IRAs, 401(k) rollovers, retirement investing"). Vanguard's calculators and worksheets can help you discover your asset allocation and determine the best retirement vehicle, including IRAs and annuities. You can also determine whether you are on the right track or discover how much more you need to allocate to retirement savings. Simply input your salary, retirement goals, current savings balance, and projected investment returns, and the calculator will reveal your retirement asset needs, the total value of your current assets, and the percentage of annual income you should save to meet your goals. Ac?cording to the Web site, a 27-year-old who earns $100,000 per year and wants to retire at age 67 needs to save 13% of his or her income each year for the next 40 years, assuming he or she will survive 25 years post-retirement. A 37-year-old with no retirement savings must save 21% over 30 years, and a 47-year-old would have to squirrel away 36% of income over the next 20 years to retire. The 47-year-old would have to save $23,000 more than the 27-year-old each year in order to retire with enough money, which illustrates the importance of early planning and saving.

Refurbished items may be a good deal

Retailers return billions of dollars worth of brand-name electronics and appliances to manufacturers each year. Sometimes an item is damaged or defective, and other times a customer has simply changed his or her mind. Either way, once an item is returned to the store, retailers can no longer legally sell it as new, according to Bottom Line/Personal. In the past, opened returns were destroyed or sold to liquidators. Now, with an increasingly competitive market, manufacturers market repaired and repackaged items as refurbished. DVD players, digital cameras, televisions, computers, golf clubs, and office equipment are some examples of what you can find. Surgeons can save up to 80% off retail prices and buy a great deal for their home or practice if they know what to look for. No federal regulations exist that define the language of "refurbished" versus "factory reconditioned" or simply "open-box," but many sellers will tell you, if asked. The best refurbs are items that were returned unused, functional items with minor cosmetic damage, and overstock items that may be last year's model. Try to avoid demonstration units, which have substantial wear from use in stores and trade shows, and defective products that may or may not have been repaired. Also look for a good warranty and return policy and make sure the product includes all components, such as cables, software, and headphones. These retailers provide refurbished products at big discounts.

Did you know...

74%?Percentage of Americans who say the US economy was strong in 2005. (Avalara, 2005)

72%?Percentage of Americans who said that the US economy would be even better in 2006. (Avalara, 2005)

55%?Percentage growth in spending for online advertising in the third quarter of 2005. (BusinessWeek, 2005)

50%?Percentage of electronics pur?chases made by women. (BusinessWeek, 2005)

33%?Percentage of baby boomers who volunteered at an organization at least once in the past year. (Wall Street Journal ,2005)

$1.13 trillion?Total net worth of America's 400 wealthiest people. (Forbes, 2005)

$4.3 billion?Amount that Ameri?cans will pay to withdraw cash from ATMs in 2006. (BusinessWeek, 2005)

$520 million?Annual revenue of the online dating industry. (Smart?Money, 2006)

270 million?Cases of wine bought in the United States in 2004. (Money, 2006)

20?Average number of hours work?ed by high school students, at a rate of $6 per hour. (Money, 2005)

Mistakes to avoid when headed for bankruptcy

As if declaring bankruptcy isn't bad enough, there are still slip-ups you can make during the process that will deepen your troubles. Bankrate.com advises you to steer clear of the following bankruptcy blunders:

Not disclosing a previous personal bankruptcy is a big mistake, because the court can easily find out about previous filings.

Not disclosing all of your assets to your attorney or the court or trying to hide an asset by transferring it out of your name puts your bankruptcy petition in jeopardy of being refused and puts you at risk for additional legal trouble.

Employing a paralegal to handle your case is a bad idea, because it's not a paralegal's job to supply reliable legal counsel. Hire a reputable attorney who understands the ins and outs of the new bankruptcy laws.

Using your credit cards heavily or taking out a cash advance in the 3 months before filing for bankruptcy puts you at risk for having to return some or all of the money for the charges and could trigger creditor challenges to your bankruptcy.

Tip for exemplary service, not expectations

While most patrons agree that the wait staff member who attends to your every need throughout a meal merits a 15% to 20% tip, many consumers are up in the air as to how much other food service employees should be tipped?or whether they should be tipped at all. The Wall Street Journal offers guidelines on how to show your gratitude in other restaurant situations. Your sommelier, who recommends a perfect wine pairing to your duck, may garner a tip of 8% of the cost of the wine, although etiquette expert Emily Post recommends 15% to 20%. Because sushi chefs handle food and not money, you should not tip, even if your tuna roll was extra spicy and plated with an extra curl of ginger. When picking up takeout food, leave 10% to 15% if you are a regular and the establishment tosses in extras, like fortune cookies or fresh bread. When a coffee house worker serves your coffee in espresso time, toss a little change in his or her tip jar. Of course, not everyone feels obligated to do so. According to a survey on EmilyPost.com, 70% do not tip at counter service establishments.

Find a safe home for your aging parent

Surgeons from the baby boom generation may soon be faced with a difficult decision: finding a safe facility to care for aging parents. According to Forbes, assisted living remains a popular choice for older adults who do not yet need nursing care, which costs 50% to 60% more. For an average of $2,500 per month, residents receive private rooms, meals, housekeeping services, and activities. Trained professionals help with daily living tasks, and medical help is nearby. Finding a good facility is difficult because no federal standards exist for assisted living centers and no database is available. So how do you find a safe place that your parents can call home? Many nursing centers have assisted living facilities attached or right next door. While assisted living is unregulated, nursing homes must be inspected at least every 15 months, and you can obtain nursing home records from your state health department. Once you decide which facilities to visit, ask residents about the quality of medical care they receive. Look for facilities that have at least one nurse on staff at all times. Make sure units have safety bars in the bathroom and panic buttons throughout the apartment to alert staff in case of a medical emergency. Good facilities will have a daily check-up system in place in which residents must go to the lobby and flip a switch to notify staff that they have received their mail; otherwise, they receive a phone call or visit from a staff member. And don't forget about transportation. The facility should assist residents with doctor appointments and shopping, providing van service to off-site locations.

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