For the past year or two it’s all been negative when we talk about the economy–stock markets were down, unemployment was rising, and more banks failing. We’ve sort of become numb to those things as they were commonplace, but lately the news has been a little different. Each week new reports come out that say manufacturing may be on the rise, some states are beginning to see an improvement in unemployment, and let’s not forget the 70% rally the markets have seen over the past year.

So, are these the green shoots we’ve been looking for, or are these just false signals that will ultimately lead to a double-dip recession? I’m no economist so I can’t really comment other than what I’ve heard on the news and seen first hand, but I can say that things are certainly better today than they were a year ago. Living in Michigan, the biggest problem we continue to face is the record unemployment and sagging real estate market. At least in manufacturing, I still know a lot of people are out of jobs. And when you look at the houses for sale around here, many have been on the market for two years now and still haven’t sold. So, I know we have a long way to come in this area, but I also realize we will be one of the last areas to recover. So, I feel that if the country as a whole is starting to gradually improve, we’re at least on the right track.

But what do you think? There are a lot of differing opinions out there still and I’m curious to hear your thoughts.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: Is the Economy Really Recovering?

Time to close your eyes and dream for a moment. What would you do if you suddenly had a million dollars? I’m not talking about a million in net worth. I mean a million dollars in cash, after taxes, sitting in the bank. This is no time for excuses or to say how implausible this may be. That isn’t the point. The point is to get you thinking about what you would do if you woke up tomorrow and had that kind of cash sitting in the bank.

Some of you could probably answer this question in a few seconds, but for others, I bet it makes you stop and think. A million bucks might not be the kind of money that buys you a private island that you travel to on your private jet, but it is no doubt a potential life-changing sum. What’s even more interesting are the different priorities that surface from person to person. Some may be content to park it all in an investment that churns out interest to live off of, others may donate it all to charity, while some would act like nothing happened and go about their daily lives.

You’re probably wondering what I’d do, so I’ll start things off. First things first, I’d pay off our second house and put a few thousands into some improvements. It needs new carpet, a few fresh coats of paint, some miscellaneous maintenance, and things like that. That would hopefully increase the chances of selling before the end of the year. We might not recover every penny that we have into it, but unloading that from the books would be nice in the long-term. Next, I’d put enough money into an interest-bearing account so that we could pay off our current mortgage in 5 years, which would probably take a little over a quarter of the money. Then I’d secure our daughter’s college fund. Our plan has a $350,000 total maximum, but with nearly 18 years until she heads to college I can let compound interest do most of the work. Just a $100,000 contribution given 18 years to grow at a modest 5% would yield around $240,000 for college. Hopefully she gets scholarships and doesn’t need a penny, but it’s a large enough sum that it’s there if need be, and hopefully enough left over for any possible future children or even pass it on to grandchildren in the future. After those necessities are taken care of the rest would be spread out across retirement accounts, taxable investment accounts, and some kept liquid so that opportunities could be taken advantage of as they come up. Last, but not least, I’d probably put a nice chunk aside to start a scholarship fund at my alma mater. I know, it’s kind of dry and practical, but I enjoy what I do too much to quit, so I might as well just put things in place to secure our future and keep doing what I’m doing.

Share Your Answer and Enter to Win $25

So, now it’s your turn. There’s a poll below that has some general answers, but I know these can’t entirely encompass the goals most of you have in mind. So, just pick the answer that closely resembles what your general action would be. Then, share your thoughts in detail in the comments. Each person who leaves a comment will be entered into a drawing to win a $25 gift card to Amazon. Hey, I can’t give you a million bucks, but $25 is a start! Make sure you include a valid email when leaving your comment and get your comments in before 10 pm EST Friday, February 5th, and I’ll randomly select one comment as the winner.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: What Would You Do If You Had a Million Dollars

It’s that time of year again and the tax documents will start filling your mailbox in a matter of weeks. That means you will need to begin thinking about your tax return. It isn’t the most exciting chore in the world, but it’s something that just becomes part of our annual routine after a while. That sort of leads me to today’s poll question. Most of us started out using a particular method and it just became habit. I know some older people who still do their taxes by hand with just a pen, some paper, and a calculator! Even with all of the great computer programs available they are still comfortable doing it the long way.

I know the same has been true for me over the years. Since college I was always one to just use TurboTax. I was computer savvy so I had no problem using the computer to punch in some numbers. Not only that, but over the years you could build up an electronic history of past returns so it made it easy to go back and print off a completed return if you needed to. But getting into habits can actually become costly. I spoke just the other week about determining when it’s time to hire a CPA to do your taxes. A lot of people are afraid to make this jump because they feel like they have a handle on their tax situation and fear the added cost that hiring a professional entails. Well, that may be true, but some circumstances can still warrant professional help and that small fee you pay may end up being nothing compared to the savings they find.

So, I’m curious to see how others are filing their taxes these days. Have you been using the same method for years, or did you just switch it up? And why do you prepare your taxes the way that you do? Are there advantages or disadvantages that you’ve encountered?

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: How Do You Prepare Your Taxes?

When I woke up this morning and looked at the calendar I couldn’t believe it said December 21st. That means Christmas is in just a few short days! Then I started to think about what was left that had to be done before we begin our travels. Luckily, we don’t have to buy for very many people and for those that we do, most of the shopping has already been completed. But there are always a few people that seem to fall through the cracks until the last few days.

Speaking of last-minute gifts, do you have a go-to gift that you give when you run out of time and can’t shop for what you really want? Maybe a holiday food basket of some sort, some DVDs, or the classic gift card?

So, where do you stand on your holiday shopping with just a few days left? And if you’re under the gun, what are your plans to make sure everyone gets something this year?

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: Have You Finished Your Christmas Shopping Yet?

Coupons have been around forever, but it sometimes takes a economic crisis like we have today to get people to start using them. On the other hand, many people have been using coupons long before we entered a recession. So, where do you stand? Have you been a coupon user all along or has the recession led you to begin using them? Or do you simply find them not worth the trouble and don’t use them at all?

For me, I use coupons if I stumble across one that is for something I know I’ll need but rarely do I actively sit down and cut out coupons on a regular basis. For one, the only daily newspaper that we have delivered is the Wall Street Journal and you won’t find any coupons in there. Another prohibiting factor is that our grocery store doesn’t print their own in-store coupons. Instead, they just have some killer weekly sales and I typically just base my shopping around the sales. But one area we have really took to coupons is with baby items. Baby food, formula, diapers, etc. You just can’t go without coupons for those things, and most of the time you get those coupons sent directly to you in the mail.

That being said, I wonder where people go for coupons if they don’t get them in their weekly newspaper? Surely there are some online sites that have some, but I’ve never really paid much attention. So, if you want to share your coupon experiences in the poll and comments it could help people like me who wouldn’t mind using more coupons but just doesn’t know where to look.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: Do You Use Coupons?

In the discussion about income for life and annuities earlier this week a lot of interesting points were brought up. We all know that we need to save something for retirement, but just how much are people expecting to save? You hear all sorts of numbers thrown out there saying you need to have a million dollars by retirement, or save up ten times your annual pre-retirement income, and so on. But these are just broad assumptions and most people’s true needs are going to vary significantly.

So, have you thought about how much money you should have saved up by the time you retire? One way to figure this out is to work backwards. Instead of just shooting for a big number, start with the amount of income you’ll likely need to receive from your investments in retirement. From there, you can then calculate how much you need to have saved up so that you can sustain that income without depleting your nest egg. Here’s an interesting calculator that can do just that. It will take into account your age, expected retirement, expected rate of return and rate of inflation, and then ask you for how much money you’d like to receive each month from your investments. Then, it calculates how much you should try to save by retirement, both adjusted and non-adjusted for inflation.

According to my numbers, after factoring in inflation I need to save up between $5 and $6 million to reach my monthly income goal. Of course, this is based on an early retirement, assuming no pension, no Social Security, and high income since I plan on doing a lot of things in retirement that cost money instead of just sitting at home. It seems like a lot, but it could be doable. Granted, we’re not able to save enough each year to hit that target yet but it gives me a number to shoot for.

So, how much money do you need to retire? Were you shocked at the results?

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: How Much Money Do You Feel You’ll Need to Save For Retirement?

The Dow is at 10,000. Big deal, right? After all, it is just a number, but there has been a lot of emphasis placed on this milestone recently. Why is the media obsessed over this number? It has been over a year since we’ve seen the market at these levels, so whether it is an indication of good things to come or not, it’s welcome relief.

But why all of the hype and predictions? Is it just something for people on TV and the newspapers to talk about? Besides, the Dow isn’t even a very good representation of the market as it consists of only 30 companies. Most investors follow (or should) the S&P 500 for a better gauge of what’s going on in the market. Where was the fanfare when the S&P cracked 1,000 again?

Regardless of the Dow milestone I think we can all agree that it’s nice to see our investment account statements going up instead of down. That being said, we still have a ways to go. We’re still down around 40% from the highs in 2007 so we haven’t come completely back around yet, but it’s a good start.

So, what do you think about this milestone? Does it mean anything, even if it’s just at a psychological level? Do the markets continue to improve or are we just delaying the inevitable and we’re headed back to test the recent lows once again?

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

The Dow at 10,000 – Where Do We Go From Here?

I don’t think you can find a single person out there who enjoys paying taxes, but I encountered an interesting article on CNN this morning that said nearly half of all U.S. households will not owe any federal income tax for 2009. At first I thought I was reading it wrong or that they were using a provocative headline to grab attention, but after reading the story it seems as if it’s true.

While it doesn’t come as a surprise that lower income households make up the bulk of the households that don’t pay taxes, it was a bit shocking to see that over 25% of those who don’t pay taxes earned more than $50,000 a year, and even 7% came from the $100,000 a year or more group. That means there is a lot of money being left on the table in terms of tax revenue. To be more specific, that’s over 70 million households.

Obviously, we have a progressive tax system that ensures those with lower incomes pay fewer taxes and may even get some tax credits back, but it also looks like there is a lot of money out there that isn’t getting taxed even by some with higher incomes. Now, I’m not suggesting we need to tax people more to make up the lost revenue, because frankly, I hate paying taxes and feel I pay way more than I should. But, as we continue to operate at such a deficit and people want to spend even more money and expand government programs I have to wonder where this money is going to come from.

Is it fair that roughly half of all households earning an income are getting away without paying Uncle Sam? I’m just curious to see where you guys stand on this issue. Has the tax system become too progressive and it’s leaving a wider tax gap between the rich and the poor? Or are things not progressive enough and we should tax those who earn more money at an even higher rate to recover tax revenue?

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: 47% of Households Will Not Owe Taxes in 2009 – Is That Fair?

Not long ago we heard that for the first time in years Social Security beneficiaries won’t be receiving their annual cost of living adjustment. This means those who draw a monthly Social Security check won’t see an increase in 2010. A lot of people are understandably upset about this. While the cost of living adjustment is based on inflation, we have a situation right now where there is no inflation. So, in theory it makes sense to eliminate the increase since the actual cost of living should be staying the same or going down.

The problem is that inflation is measured on very broad terms. While a gallon of milk or a pair of jeans might not be going up in price, many item that seniors do spend their money on are still increasing–namely health care. So, the government says that there’s no inflation to base the cost of living adjustment to, therefore there is just no adjustment. While it’s a big story, as members of Generation X we aren’t too concerned. That doesn’t mean we’re out of the woods.

There has been some discussion about the 401(k) contribution limit in 2010. As you probably know, right now the annual limit is $16,500 a year, or $22,000 if you’re over 50 years old. In the past this limit has slowly increased over time to keep up with inflation. But guess what? We have the same problem as with Social Security. The government reports that there is no inflation or possibly even deflation, so they are considering actually reducing the 401(k) contribution limit. Right now it is proposed to drop it by $500 and make the 2010 limit an even $16,000.

Is This Good or Bad?

Personally, I think it sends the wrong message to savers. Without pensions and dwindling Social Security the message has always been that we need to save as much as we can on our own so that we can have enough money in retirement. Now the government wants to say that we should save less just because we’ve had a year where inflation wasn’t that bad. The government is stingy enough and has very few incentives to get people to save, so cutting the contribution limit won’t help that. Instead, they should be finding more ways to encourage people to save even more.

Although, the main argument is that very few people actually max out their 401(k)s as it is so very few people would even be affected. That’s true, but I have to argue that this same argument also backs up the idea of leaving the limit the same or actually increasing it. If the government doesn’t want to lose additional tax revenue by people saving a little more and think they can curb that by decreasing the limit, I’d argue that since very few people do reach the max anyway they would see very few changes to tax revenue loss while still promoting the message of saving.

What Do You Think?

I’m curious to see what others think about this idea. I know a lot of people might not personally be affected since they might not be maxing out anyway, but it will be interesting to see where people stand on this. I’m not even allowed to max out my 401(k) because my employer has a limit set at 25% of my pay, which also stinks. I should be entitled to whatever the IRS allows, but that is another discussion for a different day. So for now, what do you think about the proposed 401(k) contribution drop?

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: Should the 401(k) Contribution Limit be Reduced in 2010?

If you spend any time listening to the news, it’s no surprise that we’re still in the midst of a real estate slump. Certainly,  some areas have fared worse than others, but as a whole, most real estate values have dropped over the past few years. While this is bad news for those who are trying to sell a house in this market, it also presents an opportunity for those looking to buy.

People who are considering a new home purchase right now have a wide selection of homes to choose from on the market, and in most cases, very attractive prices. Those who have their home on the market and are trying to sell are faced with just the opposite problem. They are competing with a flooded market and lower prices, so it’s increasingly difficult to unload the property for what it was worth just a year or two ago.

So, I’m just curious to see what others are doing right now. Have you been trying to sell? Or are you looking to buy something? If you’re a renter and have considered buying a first home, is this market luring you in? We have actually been looking a bit at new homes and could use an upgrade, but the idea of trying to sell our existing home right now isn’t very attractive. At this point we’d be lucky to break even. At the same time, we’ve thought about possibly buying a new home without putting the existing one up for sale yet. This would allow some time to make some minor improvements and wait a little longer for the market around here to recover. Obviously, the downside to that would be having two mortgage payments for a while.

But I’m just interested in seeing what others are doing out there and whether this real estate market is luring in new buyers or simply giving sellers a lot of grief.

About the Author: Jeremy is a retirement planning specialist and founder of Generation X Finance and the guide to Financial Planning at About.com. To learn more, follow Jeremy on Twitter.

Poll: Are You Looking to Buy or Sell a House Right Now?