Finance

A recent article by Scott Burns talked about investing in deferred fixed annuities with CD-like qualities, an example offered a 3% yield guaranteed for 5 years plus no surrender charges (similar to early withdrawal penalty) after 5 years. This is a better rate than current bank CDs offer, and annuities can grow tax-deferred for those saving for retirement (withdraw as early as age 59.5)*. After the 5 years, you roll the annuity over to another company if the new rate is no longer good enough. The catch? The annuities that have the best rates often don’t have the highest credit ratings.

A possible solution? Make sure you stay under the coverage limits of your state’s Life & Health Guaranty Association. From NOHLGA.com:

State life and health insurance guaranty associations are state entities (in all 50 states as well as Puerto Rico and the District of Columbia) created to protect policyholders of an insolvent insurance company. All insurance companies (with limited exceptions) licensed to sell life or health insurance in a state must be members of that state’s guaranty association.

These are not federally-backed like FDIC insurance. Instead, all the member insurance companies agree to cover each other in cases of insolvency up to the policy limits. In order to be a licensed insurer, you need to maintain a certain level of financial stability. But just like banks, some insurers are stronger than others. So if you’re going to go over the limits, the standard advice is to go with a top credit rating from AM Best, Moody’s, or S&P. However, credit ratings can go down over time, and you may be holding these annuities for many years. Therefore, it’s still safest to stay under the limits.

While they vary from state to state, virtually all states offer at least $100,000 in coverage for withdrawal and cash values for annuities. (Connecticut and Washington offer $500,000 in coverage. In California, the limit is 80% not to exceed $250,000.) Look up your specific state’s limits here or here.

In order to maximize your coverage, the process is similar to that for FDIC insurance – spread your money across different institutions and use different ownership titles. Let’s say you have $100,000 in state annuity coverage. That value is per owner designation, per company. The Mr. Annuity website has a helpful article [pdf] about how to structure your annuities to maximize your coverage.

If a client has $300,000 and wants to make certain all the money is protected, including future interest earnings, while taking advantage of the highest rate possible, we set up 3 contracts in Company A for $80,000 each. In annuity 1, the husband is the Owner and Annuitant. In annuity 2, the wife is the Owner and Annuitant. In annuity 3, the husband and wife are Joint Owners with the husband as the Annuitant. Then, we’ll put $60,000 in the next highest rate we can find in Company B, normally with the husband as Owner and Annuitant. That way, as the money grows, it will be protected under the guaranty laws because they are covered up to $100,000 per owner designation, per company.

I made a quick illustration of this theoretical example:

Notice that you need to leave some room for growth, that way your future earnings are covered as well.

* I’m not saying these annuities are a great deal for everyone. If you are in a situation with a high-income and are already maxing all your other tax-deferred accounts like IRAs, 401ks, and are still looking for safer retirement investments with steady growth then this might be an option to consider due to the ability to get tax-deferred growth with rates competitive with current bond yields. I’m still in research mode.

(You may not hear much about these guaranty associations because it is illegal for insurance brokers to use them in advertisements as a reason to buy annuities. I find this somewhat ironic, considering all the misleading statements they are allowed to make about equity-linked or equity-indexed annuity products.)

Fixed Annuities: Maximize State Guaranty Coverage Limits from My Money Blog.

© MyMoneyBlog.com, 2013.

HomeDepot.com has a coupon code JUNEHD that will take $10 off any purchase of $100 or more. Expires 6/23/13. You can have the item shipped or pick up in-store.

Get another 3% or so rebate via a cashback shopping portal like eBates ($5 new customer bonus), Mr. Rebates ($5 bonus), and BigCrumbs.

Stack the discounts even more with the 5% rotating cash back available currently on home improvement stores from the Citi Dividend and new Discover It card. Or, buy a Home Depot gift card at a grocery store using the American Express Blue Cash Preferred card which offers 6% cash back at supermarkets, or buy a Home Depot gift card for 7% off at a secondary market like Raise.com.

Home Depot Coupon Code: $10 off $100+ Purchase from My Money Blog.

© MyMoneyBlog.com, 2013.

Limited-time offer update: As part of their Small Business Week, Chase is temporarily boosting the sign-up bonus of this card to 60,000 points, worth $600 cash or $750 in airfare. This is the highest bonus I’ve ever seen for this card. Offer expires 6/22. You are allowed to have both an Ink Bold and an Ink Plus card at the same time.

Chase has announced a new small biz credit card, called the Ink Plus® Business Card. It turns out to be very similar to the Chase Ink Bold Business card (full review), but with the important difference that the Ink Plus is a credit card where you can carry a balance and the Bold is a charge card that you must pay in full each month. The current APR for both purchases and balance transfers is 13.24%.

The good news is that the Ink Plus also has the same big sign-up bonus, offering 50,000 60,000 Ultimate Rewards points after your after spending $5,000 in the first 3 months your account is open. You can read about my Ink Bold bonus experience here. To briefly recap:

Ultimate Rewards points are very flexible:

• Cash. 1 point = 1 cent in cash, so 60,000 points = $600 cash.
• Travel. 1 point = 1.25 cents towards travel, so 60,000 points = $750 towards travel at the same prices at Expedia or Travelocity (no markups), split up however you like into multiple tickets, down to the penny.
• Frequent flier miles and hotel rewards points. Transfers directly to United miles, British Airways miles, Hyatt hotel points, and Marriott hotel points.

The card also has the following same Ink Bold features:

• Earn 5X points per dollar on purchases made at office supply stores, and on cellular phone, landline, internet, and cable TV service on the first $50,000 spent annually.
• Earn 2X points per dollar on purchases made at gas stations and hotels (booked directly with the hotel) on the first $50,000 spent annually.
• No foreign transaction fee.
• Annual fee waived for the first year, $95 after that.

I noticed that you can buy Amazon.com gift cards at Staples and OfficeMax and get the 5x points, effectively discounting them 5% in cash (6.25% in travel), which may also help you with the spending requirement. Based on past experiences, you should be able to get this card and bonus in addition to the Ink Bold card as they are different cards. I already have the Chase Sapphire Preferred personal card and the Ink Bold card, so I’ll probably wait for a bit during my no-annual-fee first year and then try out this new card as well for my business.

Many people aren’t aware of the fact that they can apply for business credit cards, even if they are not a corporation or LLC. The business type is called a sole proprietorship, and you may be a consultant, freelancer, or other one-person business. This is the simplest business entity, but it is fully legit and recognized by the IRS. On a business credit card application, you should use your own legal name as the business name, and your Social Security Number as the Tax ID.

Chase Ink Plus® Business Card application link

“Disclaimer: This content is not provided or commissioned by the issuer. Opinions expressed here are author’s alone, not those of the issuer, and have not been reviewed, approved or otherwise endorsed by the issuer. This site may be compensated through the issuer’s Affiliate Program.”

Chase Ink Plus Business Card Review: $600 Cash, $750 Travel Bonus (This Week Only) from My Money Blog.

© MyMoneyBlog.com, 2013.

Limited-time offer! As part of their Small Business Week, Chase is temporarily boosting the sign-up bonus of this card to 60,000 points, worth $600 cash or $750 in airfare. This is the highest bonus I’ve ever seen for this card. Offer expires 6/22. See review below for the details; I’ve had this card for a while already.

The Ink Bold® Business Card is a premium small business being offered by Chase, directly competing with the biz cards from American Express. If you have a small business including freelance or online eBay/Etsy sales, using a business card allows you to separate your personal and business expenses as well as get some nice rewards in the process. Just to get you to try it out, Chase is offering 500 bucks in the form of 50,000 60,000 bonus Ultimate Rewards points after spending $5,000 in the first 3 months your account is open.

60,000 Ultimate Rewards points can be redeemed for $600 cash (real money, via statement credit or check) or 25% extra = $750 when used towards airfare, split up however you like into multiple tickets. If your total is more than $750, you simply pay the difference. I’ve used this feature and it’s very easy and flexible to book airfare using their points (system and prices are like Expedia, Travelocity, etc). Here’s an example of combining cash and points:

If you prefer, you can also transfer points to British Airways Avios miles, United Airlines miles, Hyatt hotel points, and Marriott hotel points. 1 Chase point = 1 mile/hotel point for these transfers, so that’s 50,000 miles.

Until 6/30/13, Chase is offering a special 10% discount on gift cards from the following retailers: Kohl’s, Land’s End, Olive Garden, Outback Steakhouse, and Regal Movie Theatres. This means that 9,000 points = $100 gift card, a savings of 1,000 points off the usual prices. This means you can get over $550 in gift cards using 50,000 points.

You’ll also earn up to 5 points per $1 spent on the first $50,000 spent annually on eligible business purchases:

• Earn a total of 2 points for each $1 of net purchases made at merchants that classify themselves the following categories: gas stations and hotels stays booked directly with the hotel. (on the first $50,000 spent annually)
• Earn a total of 5 points for each $1 of net purchases made at merchants that classify themselves the following categories: wireless/telecommunications services (excluding equipment such as phones and fax machines), cable and satellite television services, office supply stores and wholesale distributors of office supplies. (on the first $50,000 spent annually)
• All other purchases will earn 1 point for each $1 of net purchases.

Getting 5X points back at Office Depot, Staples, and Office Max also means that you get 5X points back on the gift cards sold at these office supply stores. This includes places like Home Depot, Lowe’s, Kmart, Starbucks, TJ Maxx, and more.

There is no annual fee for the first year, $95 after that if you decide to keep it. You also get a free annual membership in Lounge Club, which gets you 2 complimentary visits to participating “first class” airport lounges each year and discounted rates on future visits. After you get the Ink card, register at loungeclub.com/inkcard. The Chase Ink Bold Charge Card is a business charge card where you must pay in full each month after a 30-day grace period with no interest.

Jot business receipt management. Chase has now partnered with Jot, so now I can snap a picture of my business receipts with my smartphone and link it to my card purchases. No more shoeboxes or scanning, and it exports into Quickbooks. I haven’t tried this yet, but it sounds like a good backup in case the IRS comes knocking.

Many people aren’t aware of the fact that they can apply for business credit cards, even if they are not a corporation or LLC. Why? Because any individual can be a business as well. The business type is called a sole proprietorship. Perhaps you sell items on eBay, Craiglist, or Etsy. Maybe you do some freelancing and/or consulting. You might have gotten a 1099 tax form and filled out a Schedule C. Boom! You’re a sole proprietorship. This is the simplest business entity, but it is fully legit and recognized by the IRS. On a business credit card application, you should use your own legal name as the business name, and your Social Security Number as the Tax ID.

In addition, Chase business cards won’t show up on your personal credit report. Now, this card will require you to personally guarantee that you’ll pay them back what you charge on the card, which means they’ll check your personal credit score like any other consumer card. However, it won’t affect your credit score otherwise, since it doesn’t change things like your credit limits, average account age, or credit utilization ratio.

• Ink Bold® Business Card by Chase application link

This card is essentially the small business version of the Chase Sapphire Preferred(SM) Card, a consumer card which offers 40,000 Ultimate Rewards points = $400 cash = $500 in airfare.) Compare with the other $500+ Bonus credit card promotions currently available.

If you have any issues with approval, call the Chase small business credit reconsideration line at 800-453-9719. Ask them politely for the exact reason why you were denied, and offer to cancel and/or lower your existing credit lines in order to get the new card you want. You should be offered some way to get approved, I have heard many success stories. They want your business.

“Disclaimer: This content is not provided or commissioned by the issuer. Opinions expressed here are author’s alone, not those of the issuer, and have not been reviewed, approved or otherwise endorsed by the issuer. This site may be compensated through the issuer’s Affiliate Program.”

Chase Ink Bold Review: Business Card Bonus Worth $600 Cash, $750 in Airfare from My Money Blog.

© MyMoneyBlog.com, 2013.

Here’s a condensed June 2013 update for my Beat the Market Experiment, a series of three portfolios started on November 1st, 2012:

1. $10,000 Passive Benchmark Portfolio that would serve as both a performance benchmark and an real-world, low-cost portfolio that would be easy to replicate and maintain for DIY investors.
2. $10,000 Beat-the-Benchmark Speculative Portfolio that would simply represent the attempts of an “average guy” who is not a financial professional and gets his news from mainstream sources to get the best overall returns possible.
3. $10,000 P2P Consumer Lending Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment class of person-to-person loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

Summary. Values are as of June 1, 2013. 7 months into this experiment, the passive benchmark portfolio remains the leader although last month it was pretty flat. The speculative portfolio is bouncing back quite nicely, almost matching the benchmark portfolio. The P2P lending portfolio is still rather young, but I’m satisfied with the current trend of having 5 out of 450+ loans that are over 30 days late.

$10,000 Benchmark Portfolio. I put $10,000 into index funds at TD Ameritrade due to their 100 commission-free ETF program that includes free trades on the best low-cost, index ETFs from Vanguard and iShares. The portfolio was based loosely on a David Swensen model portfolio. Screenshot, click to enlarge:

$10,000 Speculative Portfolio. Many people speculate with their money, buying and selling stocks now and then, but they rarely track their performance even though they may brag about their winners. Honest tracking is the primary reason for this “no-rules, just make money” account. I dropped $10,000 into a TradeKing account for this portfolio due to their low-cost $4.95 trade structure, free tax-management gain/loss software, and free dividend reinvestment. Screenshot:

$10,000 Prosper and LendingClub Portfolio. For this one, I started with $10,000 split evenly between Prosper Lending and Lending Club, and went to work lending other people money and earning interest with an 8% target net return. So it’s also a race-within-a-race to see which option offers the best returns.

The LendingClub portfolio now has 211 current and active loans, 17 loans that were paid off early, and several in funding. Two of the active loans are currently between 31-120 days late, which to be conservative I am going to write off completely ($48).

My Prosper portfolio now has 225 current and active loans, 18 loans that were paid off early, and the rest in funding. 7 of the active loans are between 1-30 days late. Three are over 30 days late, which to be conservative I am going to write off completely ($73).

My plan going forward is to go into the portfolio holdings in more detail on a quarterly basis instead of the previous monthly basis.

$30,000 Beat-the-Benchmark Experiment Update – June 2013 from My Money Blog.

© MyMoneyBlog.com, 2013.

AutoCheck and CarFax are popular ways to check on a used vehicle’s history before buying or selling. They aren’t always 100% accurate, but can still be a useful tool and possibly worth the $30+ retail price. But AutoCheck also lets car dealers check show free basic VIN checks to show their customers, and people (not me) figured out you can piggyback on this feature rather easily. Here are my adapted instructions:

1. Go to Google.com, and run a search for “dealer autocheck inurl:vin“
2. Click on the first result that is not an ad. (Also ignore other car forums that are talking about this trick.)
3. Look at the URL toolbar. It will look something like:
   

   http://www.autoexact.com/autocheck.aspx?vin=LONG_VIN_NUMBER&Id=5122742

   Replace LONG_VIN_NUMBER with your own car or motorcycle VIN, something like:

   http://www.autoexact.com/autocheck.aspx?vin=5TETX22N66Z267004&Id=5122742

   (No spaces. Again this URL is only an example.)

4. Hit Enter, or copy/paste the new address into a new window and hit Enter. If it doesn’t work, use the next dealer website URL that comes up.

If you’d like a 3rd-party website to do this all for you, then try www.geniusvin.com. Salvage titles are known to generate errors with this method. To perform a basic check of whether your car has been reported stolen or has a salvage title, use this NCIB.gov VINcheck tool.

This worked for my personal cars to make sure there was no incorrect information out there. The report is pretty detailed, with ownership histories and odometer readings. Overall my reports were clean, although there were some gaps in the information.

Credit: Butcherboy/FW, Genius/E46Fanatics, Melania Pinola/Lifehacker

Free VIN Check Trick, Free Vehicle History Report from My Money Blog.

© MyMoneyBlog.com, 2013.