Surgeon's bulletin board

June 11, 2007
Surgical Rounds®, June 2007, Volume 0, Issue 0

? What's hot in real estate: undeveloped land

Wall Street Journal


Who would have thought that purchasing 400 acres of Illinois farmland would be a better investment than buying the cute colonial house at the end of your block? That seems to be the emerging reality in real estate. A recent article in the says that as the housing market has cooled, there has been a rush to snag undeveloped property, anywhere from New England to Montana. Farmland values rose 11%, their highest yearly increase since 1981, and rural land in Texas hit a historic high of nearly $1,500 an acre this past year, up about 75% since 2000. Property uses range from recreational enjoyment for deer hunters and drivers of off-road vehicles, to leasing the land to farmers. While the current market for undeveloped land is hot, the warns of many possible pitfalls. For example, property lines are not always well-defined, which is why it is important to have a survey conducted of any land you are considering purchasing. You also need to pay attention to how access to the land is gained. Some may require the use of makeshift roads that cross other peoples' property lines, providing illegal access to your property and the potential for lawsuits. Another consideration is mineral rights. In energy-rich Texas and the Rocky Mountain states, sellers can retain the rights to oil or minerals buried beneath the land you purchase, which allows them to drill or mine on your property, even if you object.

? Bargain opportunities for online shoppers


If you are a coupon cutter or a shopper who can smell a sale before you pull into a store parking lot, you won't want to miss out on the virtual blue-light specials online. magazine outlines various types of bargain hunters and recommends specific Web sites just for them.

Comparison consumers

- Price is recommended for the shopper who likes to compare prices and products. The Web site collects information from across the Web and allows consumers to view and contrast prices from a slew of retailers.

Coupon cutters

- is the Web's version of the Sunday newspaper circular, providing information on discounts being offered by various manufacturers and retailers. Sometimes you can obtain a special code to be used when you check out your online purchase.

Rebate seekers

- gives shoppers the opportunity to receive a rebate if they use their portals to access the Web sites of brand-name retailers. gets a commission for referring you and, in return, sends you rebates via check or PayPal. Amounts can be for as much as 7% of an item's purchase price and include popular retailers, such as Dell Home Systems, Staples, and Brookstone.

Outlet store shoppers

- provides the shopper with the same opportunities as a regular outlet store, offering discounts on excess inventory, such as closeouts and overstocked goods. has the broadest selection of online outlet stores and offers the best rates for shipping.

? Financial term of the day

variable cost

structured note

significant order, operating leverage,

Class A shares corporate bond.

If terms like or leave you scratching your head, you may be the perfect candidate for This free service gives visitors a financial word of the day. To subscribe, visit and enter your email address. That is all you need to do to gain access to an online financial glossary with over 6,000 terms, which you can search for by word or first letter. Recent ?Terms of the Day' include and The site also has a subject glossary for an in-depth look at specific investing or financial topics. Currently the service has over 58,000 subscribers, and is sponsored by advertisers, including Charles Schwab, Fidelity Investments, and Morningstar.

? Can life-cycle funds be life savers?

Life-cycle funds are a one-size-fits-all solution for retirement savings, which means that they fit no one perfectly. On the other hand, most investors will likely earn better returns over the years using life-cycle funds than by managing their own retirement portfolios. To understand why life-cycle funds may be a good choice for you, although they still may fall short of the ideal way to manage your retirement money, you must first understand what life-cycle funds are.

Invest more, spend less

—Life-cycle funds are based on two tenets of retirement investing: (1) Investors can and should invest more of their retirement savings in stocks when they are young, because that is when they can afford to take more risk, but as they move closer to retirement age and after retirement, the portfolio mix of equity and fixed-income should tilt toward fixed income; and (2) Investors can increase their expected long-term investment returns significantly by keeping investment costs low, which can be done by using mostly index funds.

It is easy to understand how life-cycle funds incorporate these two tenets by looking at the Vanguard's life-cycle funds, called Target Retirement funds. Vanguard offers target retirement dates at 5-year intervals. If you are planning to retire around year 2030, you invest in their Target Retirement 2030 fund. Right now, the money you invest in this fund will be allocated about 88% to equity and 12% to fixed income. Of the 88% allocation to equity, about 71% will be invested in domestic stocks through the Vanguard Total Stock Market Index fund, 10% will be allocated to the Vanguard European Stock Index fund, 5% to the Vanguard Pacific Stock Index fund, and 2% to the Vanguard Emerging Market Stock Index fund. The 12% allocation to fixed income will be invested in the Vanguard Total Bond Market Index fund.

Over the years, the stock allocation is reduced gradually and fixed-income allocation increased until an allocation of 30% to equity and 70% to fixed income is reached, somewhere between 5 years and 10 years after retirement in 2030.

Because all of the money will be invested in Vanguard's low-cost index funds, your annual investment costs will probably be around 0.3%—a very attractive, low number.

Cons to keep in mind

—Should you rush and shift all your retirement savings to such a life-cycle fund if you have the opportunity? Not necessarily. With these funds, you have no control over the allocation between equity and fixed income over the years. If you want to be more or less aggressive than the fund's underlying strategy, you will have to do it yourself, by allocating some of your retirement money into other funds on the side. That defeats the simplicity advantage of life-cycle funds.

Another consideration is that, within equity, you will probably be better off allocating more money to smaller cap and value stocks, but in most life-cycle funds you will be stuck with a total market index fund, which is heavily weighted in large cap stocks and equally weighted between value and growth stocks. You may also prefer a higher allocation to international and emerging market stocks. Finally, on the fixed income side, you may prefer to keep your average maturities at about 5 years, because studies show that you generally do not get compensated for the higher risk you take by investing in longer-term bonds.

—Chandan Sengupta

Your home as a retirement fund

Bob Carlson's Retirement Watch

A recent article in newsletter discusses a retirement option that a number of baby boomers seem to be banking on: their home. Most people plan on using this retirement strategy in a couple of ways. For example, a soon-to-be retiree who bought a house in Washington DC in the 1960s or 1970s for $50,000 now plans to sell it for upwards of $600,000, after which the retiree will relocate to a less expensive region and buy a smaller home, using only a portion of the proceeds from the sale and using the remainder to fund a large portion of his or her retirement expenses. Another example may be someone who currently owns two homes, one being a vacation home that the retiree intends to occupy during retirement. At that time, the principal residence will be sold, and the proceeds will be dedicated to retirement expenses. While these two examples seem solid and foolproof, the article warns of drawbacks and uncertainties. While the house market was booming from 2000 to 2005, it has since declined, and the market at the time of your retirement is uncertain. Prices could fall and homes could be difficult to sell. A home should not be considered a liquid asset, the way a stock or mutual fund is, and surgeon investors should not put all their eggs in that one basket.

? Dealing with the burden of inheritance

Wall Street Journal



Today's increasingly complex tax laws can make an inheritance an additional burden for you to bear at a time of grief. Making the wrong financial decision could have irreversible effects. The says that an heir who makes rushed decisions on inherited assets could create devastating tax issues or financial problems. Inherited retirement accounts, in particular, can create a huge headache because of the complicated rules and potential tax bites. The warns against liquidating an IRA all at once, because it could lead to significant income taxes. For example, rolling over an IRA inherited from your parents into your own retirement account or withdrawing it and depositing it into a new account could lead to a big tax hit if it is not titled properly. Instead, financial advisors recommend you maintain it intact and carefully retitle the IRA as an "inherited IRA" to make it clear to tax authorities that the owner passed away and you are the beneficiary. In a worst case scenario, the advises turning down the inheritance altogether if you don't need the money, because an inheritance could cause your own estate to be taxable. The following is a list of some companies that offer services geared toward inheritors:

  • Fidelity Investments' Inheritor Services Specialists (800-544-0003)
  • Sudden Money Institute (
  • JP Morgan Private Bank (
  • Sowing Seeds (
  • IFF Advisors (
  • Heirs, Inc. (

? Do your homework and avoid home repair rip-offs

Bottom Line Secrets

Almost everyone is good at something, and that is usually why we are employed in a chosen field. Rarely, however, is anyone good at everything, and for busy surgeons, it may not be cost-efficient to do your own household repair work. So, to repair a leaky sink, you hire a plumber, and to install a new outlet, you hire an electrician. But how do you know whether you're getting a good deal when you hire an expert in the home repair field or just getting ripped off? A ( article offers the following helpful hints for finding the right person for the job:


—The best way to find a reputable plumber is to get a referral. Real estate agents might be your best bet, because many home sales hit a snag due to interior water stains, and agents may know a reputable plumber for your needs. Before hiring, check the plumber's state license and certificate of workers' compensation insurance. Copies of these documents should be shown when you accept a bid. If you suspect a plumbing problem, seek out a plumber before it becomes an emergency-last minute service usually brings top dollar, and some plumbers charge triple on weekends.

Also, don't buy plumbing parts on your own. You might think you're saving money, but plumbers can purchase supplies at professional discounts of up to 35%. In addition, a plumber might not warranty his work if you do the purchasing. After all, would you want someone else ordering your medical supplies?


—General contractors are your best bet for getting a recommendation on an electrician, because they see the electrician's work before it is covered over by walls and ceilings and will recommend someone they trust. When evaluating an electrician, ask if he or she has handled jobs similar to yours. If so, make certain to check with at least one reference to see whether the job was completed on time and within budget. If an electrician provides you with an estimate, make certain that repair items, such as the cost to repair holes cut in walls, are included. It is also a good idea to learn how to reset a circuit breaker or change a blown fuse yourself, because service calls can cost between $70 and $120 for the first hour.


—Your local police department is a good source for getting a recommendation on a reputable locksmith or alarm specialist. If you use the Yellow Pages, make sure the locksmith has a physical location at the address listed. Also, get an estimate before work is started. Before having an alarm system installed in your home, check to see if the system qualifies you for discounts on homeowner's insurance. For example, a monitored system should reduce your annual premium by 15% to 20%. Most companies insist you sign a 5-year contract to use their service, which could run $1,500. If you do have an alarm system installed, make certain you receive operating instructions, and be sure to keep them handy.

—Ed Rabinowitz