Residential Space A creative outlet during residency, turned ongoing virtual soap box

The Dow rises above 11,000  1

Posted on January 11th, 2006. About Money.

I was intrigued to see the Dow Jones Industrial Average climb above 11,000 this week, because I could not recall it being that high since I first started investing a year ago. Then, my local news informed me last night that this is actually the first time it has hit 11,000 since the September 11th catastrophe. I find it exciting and unsettling – exciting because, of course, MS Money is much more fun to open in the evenings. ūüôā Unsettling, though, because I am hearing so many gloom and doom forecasts already. Billionaire investor George Soros is predicting recession again in 2007.¬†Of course, every investor has been incorrect at some point, and perhaps the financial experts are wrong now, in which case they will miss out if they are too cautious. By the way, I do find Soros’ comment in the article about the two greatest threats to our economy being the War on Terror and global warming. However, it’s another topic for another day.

It always infuriates me when the markets aren’t that hot, and public figures (ie, President Bush) and “experts” in the media (are you also intrigued by how CNN’s Miles O’Brien is an “expert” on both astronomy and finance?) use words like “tanking” to describe the market before an audience of millions. Wow, what a way to boost investor confidence. We have to be harshly pessimistic about our markets, but we can’t show flag-draped coffins returning from Iraq.

¬†Now everyone is freaking out over the housing market and how it, too, will deflate very soon. Will this be a self-fulfilling prophecy? It makes sense that rising interest rates will detract from the amount people can afford to spend on housing, but at least in Seattle the housing market seems strong, and it’s a great place to live, and our prices aren’t nearly what they are in California, so why can’t the market remain strong? (Sorry for the run-on sentence, but you get the point.) There are many arguments against this¬†but I think there is also good reason to be optimistic.

Finally, I would like to announce that I just started taking advantage of yet another wonderful benefit offered by most employers Рthe Flexible Spending Account. I got braces on my bottom teeth in December and figured Рhey, if I have to pay for half of my orthodontic care (insurance covers the other half, another great benefit!), then I might as well do it on income that is tax-free. I do not believe in paying ATM fees, paying for parking when I could take the bus, or paying late fees when a bill can easily be paid on time. That being said, I do not believe in paying tax on income that is going straight to medical or dental bills when there is a tax-free option available. Waste Рugh Рit makes me shudder to think of it.

Introducing the Roth 401(k)/403(b)  2

Posted on January 4th, 2006. About Money.

Evan was telling me recently about a new retirement account offered for 2006 in which I very much wish I could participate Рthe Roth 401(k) (or, in my case, it would be the Roth 403(b), although my employer does not offer it). Taxwise, it functions similarly to a Roth IRA in that the tax on the money is paid now and the growth can be withdrawn tax-free at 59 1/2 years of age. This is beneficial for people who expect to earn more at the age of retirement than they currently earn РI am an example of such a person, and I pay lower taxes now than I expect to at 60. The Roth IRA also has contribution limits of $4000 annually and $5000 if you are over 50 (this is no different than in 2005), whereas the Roth 401(k) allows up to $15,000 annually ($20,000 for those over 50). You can skim the new contribution rules for 2006 by clicking here. Happy investing.

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