Below are the interesting personal finance links I have come across since my last post:

• Information about and photos of ATM skimmers: http://nyti.ms/d9jDdq
• New York Times writer Tara Siegel Bernard on social security jitters: http://nyti.ms/9t2aYu
• The Securities and Exchange Commission responds to investors questions about index funds and turnover rates: http://bit.ly/aLs0i5
• Mary Pilon of the Wall Street Journal on a pitfall of co-signing a private student loan: http://bit.ly/dDjxdP
• Insurance company complaint ratios for the State of Michigan: http://bit.ly/cRTmNH
• New York Times article by Stephanie Rosenbloom on spending habits and happiness: http://nyti.ms/afw0ZE
• University of Michigan lowers fees and broadens options for retirement plan participants: http://bit.ly/aeGNxf

1. Visit Dinkytown for free personal finance calculators.
2. If you invest in TIAA Traditional through your employer’s retirement plan with TIAA-CREF, I suggest you read this description of your withdrawal options at retirement.
3. Phased out of making Roth IRA contributions? Try the backdoor.
4. Check out Susan Beacham’s blog if you are interested in kids and money.
5. Vanguard recently rolled out new exchanged traded funds and a new index fund.
6. I see eye to eye with Rick Ferri who encourages Forbes readers to buy, hold, and rebalance.
7. Educate yourself on personal finance through NAPFA’s consumer series. It’s free but you have to register.
8. Do bonds confuse you? You’re not alone. Learn about bonds courtesy of Vanguard.
9. Morningstar’s Natalie Choate provides tips and traps about IRA conversions. Scroll down the page to May 4, 2010.
10. Get credit report tips from Gerri Detweiler via the Garrett Planning Network.
11. Rick Ferri writes about a new trend in index funds to keep an eye on.

I’m a staunch believer that emotions and investing do not mix. The right approach is to determine an appropriate asset allocation for yourself, let the markets do what they will, and then rebalance your portfolio back to its target allocation at pre-determined intervals. I encourage most of my clients to rebalance on an annual basis.

However, many investors do not take this type of approach and, instead, let their emotions determine their asset allocation. When the going gets tough, they abandon their allocation to stocks and flee to safety. Then they wait until the waters are calm and a sharp recovery has taken place before getting back into stocks.

What’s the big deal? On average, investors are getting a 5% lower return on their stock mutual fund investments than the funds’ reported returns. This is mostly due to investors buying in and out of funds based on emotions.

I encourage you to listen to FundAdvice.com‘s recent, four-minute podcast on the subject.

There are a number of clear signs that your financial advisor may not have your best interest in mind. Is your IRA invested in a variable annuity? Red flag! Do the names of your mutual funds end in “A” or “B”? Red flag!

When it comes to saving for college education expenses, it’s hard to beat 529 tuition savings plans. I regularly recommend them to my clients. Each state has its own plans and it usually makes sense to use a plan sponsored by your state. If your advisor recommended that you use another state’s plan, it’s another red flag that he or she may not be working in your best interest.

I’m advising new clients who are residents of Ohio but are using a 529 Plan from Maine. I happen to know that Ohio has a very strong 529 Plan that offers low-cost investment options and a state tax deduction for Ohio residents. It’s a no-brainer for Ohio residents to use it. So why is this couple using one of Maine’s plans? The answer is clear to me – because their former advisor can’t sell Ohio’s plan and earn a commission. Instead, he directed them to an advisor-sold plan that did pay him a commission.

Unfortunately, I see this breach of fiduciary duty on a regular basis. I’m not saying that there aren’t reasons to use another state’s 529 Plan, but when I see it, it’s usually for the wrong reasons.

How can you make sure that you are using the right 529 Plan?

• Research plans at savingforcollege.com.
• Use a Fee-Only financial advisor who is a fiduciary.

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Please note that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.

If you’ve ever talked to me about investing, you’ve likely heard me stress the importance of keeping your costs low. Part of your investing costs are the commissions you pay to buy and sell.

I encourage my clients to use a broker, the firm that holds your investments, that offers low cost investments and low to no trading fees. One of the brokers that I often suggest is Vanguard because it offers a broad array of its own index mutual funds with no transaction fees.

Follwing other discount brokers, Vanguard recently announced that it is lowering its commissions for stocks and exchange traded funds (ETFs.) Vanguard clients will now pay no commission for Vanguard ETFs and will pay $2 t0 $7 per trade for non-Vanguard ETFs and stocks.

This is good news for investors for a few reasons:

• Trading costs for self-directed investors continue to fall and are becoming trivial for investors who trade infrequently.
• Vanguard becomes a viable option for investors who like to buy ETFs and individual stocks.
• Investors can build well-diversified portfolios at Vanguard using ETFs for less initial investment than they can using Vanguard mutual funds, most of which require a $3,000 minimum investment.

Still, many other brokers are now offering very low trading costs for stocks and ETFs. Below are links to stock and ETF commission schedules at other well-known brokers:

• E-Trade
• Fidelity
• Schwab
• Scottrade
• T. Rowe Price
• TD Ameritrade

When choosing a broker, keep in mind that there are other factors to consider such as its customer service reputation, the ease of use of its website and statements, and any other costs like per account or low balance fees.

Want to know the main differences between mutual funds and ETFs? Check out a Vanguard presentation on the subject at this link.

I received this question recently from a reader who is wondering what her options are for refinancing her underwater mortgage:

A recent announcement by the Obama administration indicated that banks were now looking to help home owners whose mortgages are underwater by offering either a principal reduction or an interest reduction. I called our mortgage company’s modification department — CitiMortgage — and they didn’t know anything about it.  What do you recommend that I do next?  And, what do you think of companies like the Guardian Group (http://www.guardiangroupna.com/) that offer to buy your mortgage and sell it back to you?  Is this a legitimate way to get a principal reduction?

For help answering this question, I turned to Kim Clugston, Vice President and Senior Mortgage Loan Officer at Bank of Ann Arbor. She explained that few banks are actually offering loan reductions and that they are not required to do so. Each lender can offer “work out” programs to its customers, but the lender makes up the rules.

Ms. Clugston further explained that the Obama Administration created standard refinancing programs through the Making Home Affordable plan as part of its Financial Stability Plan. Making Home Affordable refinancing at current market rates is available to all lenders if the mortgage is held by Fannie Mae or Freddie Mac. Check here to find out if your mortgage is eligible.

The rub for most homeowners is that the new loan cannot be for more than 105% (Freddie Mac) or 125% (Fannie Mae) of their home’s current appraised value. Moreover, principal is not forgiven under these programs and second mortgages cannot be rolled in.

Regarding companies offering to buy your mortgage and sell it back to you, Ms. Clugston pointed out that the Making Home Affordable website’s homepage currently has a warning against foreclosure rescue scams. The site warns: “Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.”

If you have an underwater mortgage, I recommend that you research Making Home Affordable and check your eligibility for its programs. You can also get free help from housing counseling agencies approved by the U.S. Department of Housing and Urban Development. Ultimately, you will likely need to work directly with your loan servicing company if you are an eligible and good candidate for refinancing.

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Please note that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.

I attended the national conference for the National Association of Personal Financial Advisors (NAPFA) in Chicago this week. NAPFA is a professional organization for financial advisors who are committed to Fee-Only and comprehensive financial planning. Below are some of the new ideas and time-tested reminders that I took away from the conference.

Estate Planning

• If you are the parent of a minor and you do not have a Will, a court will determine his or her guardian. Please prioritize putting a Will in place if you are in this boat.
• You may need to appoint a short-term guardian in your Will if the primary guardian for your minor child does not live nearby. This will prevent your child from ending up in the care of an agency until your primary guardian arrives.
• A presenter recommended the book Who Gets Grandma’s Yellow Pie Plate for help in determining how to divide assets in your estate plan.
• Use an attorney who specializes in estate planning to draft your estate planning documents. You wouldn’t let your general practitioner perform brain surgery on you, so don’t let your real estate attorney draft your estate planning documents.
• Visit www.martindale.com and www.actec.org to find attorneys in your area who specialize in estate planning.
• Use this checklist provided by the American Bar Association to think through decisions you will need to make in your medical directives.

Property Division in Divorce

• Each party must be careful when agreeing to take an asset that is difficult to value such as real estate. You may be better offer selling the asset and splitting the proceeds so that you will know its true worth.
• A presenter recommended Divorce & Money: How to Make the Best Financial Decisions During Divorce by Violet Woodhouse.

Debt Management

• Visit www.whatsthecost.com to calculate how long it will take you to pay off your debt.
• It’s difficult to separate the legitimate counselors from the snake oil salesmen in the credit and debt counseling business. A presenter recommended The National Foundation for Credit Counseling as a reliable source for credit counselors.
• If you have questions about options for your mortgage or housing in general, visit the Department of Housing and Urban Development website for information about free or low-cost counseling.
• Check out www.creditcard.com to compare credit card offers and for information on credit cards.
• A presenter recommended www.consumerworld.org as her preferred resource for consumer education.

Healthcare Reform

• Visit www.statehealthfacts.org for state-specific health plan information and a summary of healthcare reform.

College Education Savings

• A speaker, Jean Chatzky, recommended paying for college education in thirds: 1/3 from savings, 1/3 from cash flow while your child is in college, and 1/3 from student loans taken by the student. She feels that this approach allows the student to have some skin in the game. Research has shown that students who pay for part of their tuition take college more seriously.
• In 2011, all colleges that participate in Title IV student financial aid programs will required to have net price calculators on their websites.

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Please note that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.

Are you married? Do you have trouble talking to your spouse about money?

If you answered “yes” to the first question above, you almost certainly answered “yes” to the second one. If so, you may benefit from a workshop that will help you explore your habits and attitudes toward money in the context of your relationship.

Marriage Matters of Jackson, Michigan is sponsoring such a workshop for married couples on Saturday, May 1, 2010 at 6:00PM. It’s $45 per couple, including dinner. Visit http://www.marriagemattersjackson.org/date.php for details.

By the way, Oliver Financial Planning is in no way affiliated with the workshop or Marriage Matters of Jackson. I just happen to like the work of the speaker, Syble Solomon, and think we can all use some assistance in learning to talk about money with those we love.

If you are in search of a financial planner and have found my website, you can rest assured that you are on the right track. But don’t take my word for it. Writers at two of the nation’s most respected periodicals would agree.

In its article How to Find a Financial Planner, The New York Times recommends that its readers research Fee-Only financial planners at www.napfa.org and www.garrettplanning.com. The Wall Street Journal points you to the same organizations in its article, How to Choose a Financial Planner.

Why would both The New York Times and The Wall Street Journal recommend that you work with a Fee-Only financial planner? It’s quite simple, really. Fee-Only planners take on a fiduciary responsibility to act in your best interest and do not try to sell you anything other than their professional advice.

You will find Oliver Financial Planning at both napfa.org and garrettplanning.com.

Penelope Wang wrote an article for CNNMoney and the March issue of Money Magazine on how to Make the Best of a Bad 401(k). It includes solid advice on how to work around limitations and poor features in employer-sponsored retirement plans. I am mentioned in the section on what to do if your employer does not provide a matching contribution.