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John Vila
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A
What is the most important
information I should know
about ELIQUIS (apixaban)?
For people taking ELIQUIS for
atrial brillation: Do not stop
taking ELIQUIS without talking
to the doctor who prescribed
it for you. Stopping ELIQUIS
increases your risk of having
a stroke. ELIQUIS may need to
be stopped, prior to surgery or
a medical or dental procedure.
Your doctor will tell you when
you should stop taking ELIQUIS
and when you may start taking
it again. If you have to stop
taking ELIQUIS, your doctor may
prescribe another medicine to
help prevent a blood clot from
forming.
ELIQUIS can cause bleeding
which can be serious, and
rarely may lead to death. This
is because ELIQUIS is a blood
thinner medicine that reduces
blood clotting.
You may have a higher risk of
bleeding if you take ELIQUIS
and take other medicines that
increase your risk of bleeding,
such as aspirin, nonsteroidal
anti-inammatory drugs (called
NSAIDs), warfarin (COUMADIN

),
heparin, selective serotonin
reuptake inhibitors (SSRIs)
or serotonin norepinephrine
reuptake inhibitors (SNRIs), and
other medicines to help prevent
or treat blood clots.
Tell your doctor if you take any of
these medicines. Ask your doctor
or pharmacist if you are not sure
if your medicine is one listed
above.
While taking ELIQUIS:
you may bruise more easily
it may take longer than usual
for any bleeding to stop
Call your doctor or get medical
help right away if you have any
of these signs or symptoms of
bleeding when taking ELIQUIS:
unexpected bleeding, or
bleeding that lasts a long
time, such as:
unusual bleeding from the
gums
nosebleeds that happen
often
menstrual bleeding or
vaginal bleeding that is
heavier than normal
bleeding that is severe or you
cannot control
red, pink, or brown urine
red or black stools (looks like
tar)
cough up blood or blood clots
vomit blood or your vomit
looks like coffee grounds
unexpected pain, swelling, or
joint pain
headaches, feeling dizzy or
weak
ELIQUIS (apixaban) is not for
patients with articial heart
valves.
Spinal or epidural blood clots
or bleeding (hematoma).
People who take a blood thinner
medicine (anticoagulant) like
ELIQUIS, and have medicine
injected into their spinal and
epidural area, or have a spinal
puncture have a risk of forming
a blood clot that can cause
long-term or permanent loss of
the ability to move (paralysis).
Your risk of developing a spinal
or epidural blood clot is higher if:
a thin tube called an epidural
catheter is placed in your back
to give you certain medicine
you take NSAIDs or a medicine
to prevent blood from clotting
you have a history of difcult
or repeated epidural or spinal
punctures
you have a history of problems
with your spine or have had
surgery on your spine
If you take ELIQUIS and receive
spinal anesthesia or have a spinal
puncture, your doctor should
watch you closely for symptoms
of spinal or epidural blood clots
or bleeding. Tell your doctor
right away if you have tingling,
numbness, or muscle weakness,
especially in your legs and feet.
What is ELIQUIS?
ELIQUIS is a prescription medicine
used to:
reduce the risk of stroke and
blood clots in people who have
atrial brillation.
reduce the risk of forming
a blood clot in the legs and
lungs of people who have just
had hip or knee replacement
surgery.
It is not known if ELIQUIS is safe
and effective in children.
Who should not take ELIQUIS
(apixaban)?
Do not take ELIQUIS if you:
currently have certain types of
abnormal bleeding
have had a serious allergic
reaction to ELIQUIS. Ask your
doctor if you are not sure
What should I tell my doctor
before taking ELIQUIS?
Before you take ELIQUIS, tell
your doctor if you:
have kidney or liver problems
have any other medical
condition
have ever had bleeding
problems
are pregnant or plan to become
pregnant. It is not known if
ELIQUIS will harm your unborn
baby
are breastfeeding or plan to
breastfeed. It is not known
if ELIQUIS passes into your
breast milk. You and your
doctor should decide if you
will take ELIQUIS or breastfeed.
You should not do both
Tell all of your doctors and
dentists that you are taking
ELIQUIS. They should talk to the
doctor who prescribed ELIQUIS for
you, before you have any surgery,
medical or dental procedure.
Tell your doctor about all the
medicines you take, including
prescription and over-the-counter
medicines, vitamins, and herbal
supplements. Some of your other
medicines may affect the way
ELIQUIS works. Certain medicines
may increase your risk of bleeding
or stroke when taken with ELIQUIS.
How should I take ELIQUIS?
Take ELIQUIS exactly as
prescribed by your doctor. Take
ELIQUIS twice every day with or
without food, and do not change
your dose or stop taking it unless
your doctor tells you to. If you
miss a dose of ELIQUIS, take it as
soon as you remember, and do
not take more than one dose at
the same time. Do not run out
of ELIQUIS (apixaban). Rell
your prescription before you
run out. When leaving the
hospital following hip or knee
replacement, be sure that you
will have ELIQUIS available to
avoid missing any doses. If you
are taking ELIQUIS for atrial
brillation, stopping ELIQUIS
may increase your risk of
having a stroke.
What are the possible side
effects of ELIQUIS?
See What is the most
important information I
should know about ELIQUIS?
ELIQUIS can cause a skin rash
or severe allergic reaction.
Call your doctor or get
medical help right away if
you have any of the following
symptoms:
chest pain or tightness
swelling of your face or
tongue
trouble breathing or
wheezing
feeling dizzy or faint
Tell your doctor if you have any
side effect that bothers you or
that does not go away.
These are not all of the possible
side effects of ELIQUIS. For more
information, ask your doctor or
pharmacist.
Call your doctor for medical
advice about side effects. You
may report side effects to FDA at
1-800-FDA-1088.
This is a brief summary of the
most important information
about ELIQUIS. For more infor-
mation, talk with your doctor or
pharmacist, call 1-855-ELIQUIS
(1-855-354-7847), or go to
www.ELIQUIS.com.
Manufactured by:
Bristol-Myers Squibb Company
Princeton, New Jersey 08543 USA
Marketed by:
Bristol-Myers Squibb Company
Princeton, New Jersey 08543 USA
and
Pzer Inc
New York, New York 10017 USA
COUMADIN

is a trademark of
Bristol-Myers Squibb Pharma Company.
IMPORTANT FACTS about ELIQUIS

(apixaban) tablets
The information below does not take the place of talking with your healthcare professional. Only your healthcare
professional knows the specics of your condition and how ELIQUIS

may t into your overall therapy. Talk to your healthcare
professional if you have any questions about ELIQUIS (pronounced ELL eh kwiss).
2014 Bristol-Myers Squibb Company
ELIQUIS is a trademark of Bristol-Myers Squibb Company.
Based on 1289808A0 / 1289807A0 / 1298500A0 / 1295958A0
March 2014
432US14BR00770-04-01
This independent, non-prot organization provides assistance to qualifying patients with nancial hardship who
generally have no prescription insurance. Contact 1-800-736-0003 or visit www.bmspaf.org for more information.
ELIQ_0314iFacts432US14BR00770_0401_675x9wip2.indd 1 4/1/14 5:28 PM
3
11/2014 KIPLINGERS PERSONAL FINANCE
LIVING

72 BEST PHONE PLANS Weve made
it easy to pick a plan that matches your
usage, whether you share with the
clan, just talk and text, or rely on your
phone to stream audio and video.
77 TECH Remote-control your home,
by JEFF BERTOLUCCI.
78 DRIVE TIME Expect deals on new
models, by JESSICA ANDERSON.
79 THE LOWDOWN What you need
to know about saving photos, by
PATRICIA MERTZ ESSWEIN.
IN EVERY ISSUE

8 FROM THE EDITOR A reset on
student debt.
10 LETTERS
K
E
V
I
N

M
I
Y
A
Z
A
K
I
/
R
E
D
U
X
AHEAD

15 Topic A: Creative fixes for the
student debt problem . . . Millennials
approach to financial planning . . .
Knight Kiplinger on money and ethics.
PLUS: November money calendar.
25 SUCCESS STORY Recharging a
career with solar power, by PATRICIA
MERTZ ESSWEIN.
26 OPENING SHOT Small stocks, big
potential, by JAMES K. GLASSMAN.
INVESTING // COVER

30 BUILD MORE WEALTH The
motto Measure twice, cut once is
good advice for constructing your
financial future, too. We show you
how to set goals, anticipate how
much youll need to achieve them,
choose the right investments, control
costs and do regular portfolio main-
tenance. PLUS: When to call in a pro.
38 DIVIDEND CHAMPS OFF THE
BEATEN TRACK These eight compa-
nies may have little name recognition,
but they boast outstanding records for
steady dividend hikes.
48 FOUR EUROPEAN STOCKS TO
BUY NOW Even though the outlook
for the eurozone is dismal, these
multinationals are bright spots for
investors looking for value.
42 PROMISED LAND A promising
biotech bargain, by ANDREW FEINBERG.
44 PRACTICAL INVESTING How
overpaid CEOs hurt us, by KATHY
KRISTOF.
46 MORE ABOUT INVESTING
ETF Spotlight (46). The risks and
rewards of junk bonds (50). News
of the Kiplinger 25 (52). Mutual fund
rankings (53).
KIPLINGERS PERSONAL FINANCE // FOUNDED 1947 VOL. 68 NO. 11
CONTENTS
54
MONEY

54 THE RIGHT WAY TO BORROW
FOR COLLEGE We tell you how to keep
student debt manageable with loan
programs that offer good terms and
flexibility. PLUS: How much to borrow.
61 HOW TO BUY LONG-TERM-CARE
INSURANCE Strategies for when to get
it and how to keep premiums afford-
able. PLUS: Who qualifies for Medicaid.
60 RETHINKING RETIREMENT Free
meal with a spiel, by JANE BENNETT CLARK.
66 GAME PLAN How do I convert my
home into a rental property?
70 ASK KIM How much life insurance?
64 MORE ABOUT YOUR MONEY
Fix your online rep (64). Ins and outs
of inherited IRAs (68). Fill the gaps in
your homeowners policy (69). Yields
and rates (71).
ON THE COVER: Photo-illustration by Aaron
Goodman
K11-CONTENTS.indd 3 9/11/14 5:00 PM
Before investing in any mutual fund, consider the investment objectives, risks, charges, and expenses.
Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information.
Read it carefully.
Past performance is no guarantee of future results.
In general, the bond market is volatile, and xed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect
is usually more pronounced for longer-term securities.) Fixed income securities also carry ination risk, liquidity risk, call risk, and credit and default risks for both
issuers and counterparties. Lower-quality xed income securities involve greater risk of default or price changes due to potential changes in the credit quality of
the issuer. Foreign investments involve greater risks than U.S. investments, and can decline signicantly in response to adverse issuer, political, regulatory, market,
and economic risks. Any xed income security sold or redeemed prior to maturity may be subject to loss.
The municipal market can be affected by adverse tax, legislative, or political changes and the nancial condition of the issuers of municipal securities. Interest
income generated by municipal bonds is generally expected to be exempt from federal income taxes and, if the bonds are held by an investor resident in the
state of issuance, state and local income taxes. Such interest income may be subject to federal and/or state alternative minimum taxes. Investing in municipal
bonds for the purpose of generating tax-exempt income may not be appropriate for investors in all tax brackets. Generally, tax-exempt municipal securities are
not appropriate holdings for tax-advantaged accounts such as IRAs and 401(k)s.
Hypothetical yield curve: A chart that plots the yields of similar bonds across different maturities. The yield, as of 4/30/2014, for commonly referenced indices
representing bonds with 15 year maturities, is as follows: U.S. Treasury securities (0.74%), Barclays 15 Year Municipal Bond Index (0.82%), Barclays 15 Year
U.S. Credit Bond Index (1.45%), and Bank of America Merrill Lynch 15 Year BB/B Cash Pay Index (3.53%). Sources: Barclays Live, Bank of America Merrill Lynch.
1
Interest rate sensitivity, also known as volatility, is based on the annualized standard deviation of monthly total returns for the 10-year period ending February
2014, with the overall bond market represented by the Barclays U.S. Credit Bond Index (all maturities), and short-term bonds represented by the subset of
bonds within the index with maturities of 15 years (Barclays 15 Year U.S. Credit Bond Index). Source: FMR.
2
Frequency of reinvestment based on the percentage of bonds maturing within 3 years as of February 201420% for the overall bond market (represented by
Barclays U.S. Credit Bond Index), and 52% for short-term bonds (represented by Barclays 15 Year U.S. Credit Bond Index). Source: FMR.
3
Yield as of 4/30/2014, with cash represented by the 3-month U.S. Treasury bill (0.03%), and short-term bonds represented by the Barclays 15 Year U.S. Credit
Bond Index (1.45%). Short-term bonds have the potential for more interest rate and credit risk than 3-month Treasury bills. Source: FMR.
Fidelity Brokerage Services LLC, Member NYSE, SIPC. 2014 FMR LLC. All rights reserved. 686815.1.0

1mo 3mo 6mo 1yr 2yr 3yr 5yr 7yr 10yr 20yr 30yr
Time to Maturity
Y
i
e
l
d

%
Short-term
bonds
Why short-term bond funds are
generating long-term interest
45
%
less sensitivity to interest rate
changes than the overall U.S.
credit bond market
1
2.5x
more frequent reinvestment
as rates rise
2
20x or more the yield of cash
3
Consider these short-term bond funds for your portfolio
FIDELITY

LIMITED TERM BOND FUND

FJRLX
FIDELITY

SHORT DURATION HIGH INCOME FUND

FSAHX
FIDELITY

CONSERVATIVE INCOME MUNICIPAL BOND FUND

FCRDX
At Fidelity, we use our industry-leading bond research and analysis to help you generate
additional income and reduce interest rate risk. Get our full perspective and fund details now.
Fidelity.com/shortbondfunds
800.FIDELITY
11804_08_AD_FixedInc_Kips_SP.indd 1 8/28/14 3:59 PM
Before investing in any mutual fund, consider the investment objectives, risks, charges, and expenses.
Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information.
Read it carefully.
Past performance is no guarantee of future results.
In general, the bond market is volatile, and xed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect
is usually more pronounced for longer-term securities.) Fixed income securities also carry ination risk, liquidity risk, call risk, and credit and default risks for both
issuers and counterparties. Lower-quality xed income securities involve greater risk of default or price changes due to potential changes in the credit quality of
the issuer. Foreign investments involve greater risks than U.S. investments, and can decline signicantly in response to adverse issuer, political, regulatory, market,
and economic risks. Any xed income security sold or redeemed prior to maturity may be subject to loss.
The municipal market can be affected by adverse tax, legislative, or political changes and the nancial condition of the issuers of municipal securities. Interest
income generated by municipal bonds is generally expected to be exempt from federal income taxes and, if the bonds are held by an investor resident in the
state of issuance, state and local income taxes. Such interest income may be subject to federal and/or state alternative minimum taxes. Investing in municipal
bonds for the purpose of generating tax-exempt income may not be appropriate for investors in all tax brackets. Generally, tax-exempt municipal securities are
not appropriate holdings for tax-advantaged accounts such as IRAs and 401(k)s.
Hypothetical yield curve: A chart that plots the yields of similar bonds across different maturities. The yield, as of 4/30/2014, for commonly referenced indices
representing bonds with 15 year maturities, is as follows: U.S. Treasury securities (0.74%), Barclays 15 Year Municipal Bond Index (0.82%), Barclays 15 Year
U.S. Credit Bond Index (1.45%), and Bank of America Merrill Lynch 15 Year BB/B Cash Pay Index (3.53%). Sources: Barclays Live, Bank of America Merrill Lynch.
1
Interest rate sensitivity, also known as volatility, is based on the annualized standard deviation of monthly total returns for the 10-year period ending February
2014, with the overall bond market represented by the Barclays U.S. Credit Bond Index (all maturities), and short-term bonds represented by the subset of
bonds within the index with maturities of 15 years (Barclays 15 Year U.S. Credit Bond Index). Source: FMR.
2
Frequency of reinvestment based on the percentage of bonds maturing within 3 years as of February 201420% for the overall bond market (represented by
Barclays U.S. Credit Bond Index), and 52% for short-term bonds (represented by Barclays 15 Year U.S. Credit Bond Index). Source: FMR.
3
Yield as of 4/30/2014, with cash represented by the 3-month U.S. Treasury bill (0.03%), and short-term bonds represented by the Barclays 15 Year U.S. Credit
Bond Index (1.45%). Short-term bonds have the potential for more interest rate and credit risk than 3-month Treasury bills. Source: FMR.
Fidelity Brokerage Services LLC, Member NYSE, SIPC. 2014 FMR LLC. All rights reserved. 686815.1.0

1mo 3mo 6mo 1yr 2yr 3yr 5yr 7yr 10yr 20yr 30yr
Time to Maturity
Y
i
e
l
d

%
Short-term
bonds
Why short-term bond funds are
generating long-term interest
45
%
less sensitivity to interest rate
changes than the overall U.S.
credit bond market
1
2.5x
more frequent reinvestment
as rates rise
2
20x or more the yield of cash
3
Consider these short-term bond funds for your portfolio
FIDELITY

LIMITED TERM BOND FUND

FJRLX
FIDELITY

SHORT DURATION HIGH INCOME FUND

FSAHX
FIDELITY

CONSERVATIVE INCOME MUNICIPAL BOND FUND

FCRDX
At Fidelity, we use our industry-leading bond research and analysis to help you generate
additional income and reduce interest rate risk. Get our full perspective and fund details now.
Fidelity.com/shortbondfunds
800.FIDELITY
11804_08_AD_FixedInc_Kips_SP.indd 1 8/28/14 3:59 PM
6
KIPLINGERS PERSONAL FINANCE 11/2014
KIPLINGER.COM
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5
INVESTING FEATURES
1. 24 Stocks for 2014
2. 12 Stocks to Get Dividends Every Month
3. 9 Stocks to Make You Rich
4. 10 Great Dividend Stocks for Retirement
5. The Worlds 10 Best Stocks
kiplinger.com/links/stocks2014
kiplinger.com/links/dividends
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Discover which states tax you the
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INTERACT
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SUSAN GARLAND
@susanbgarland
kiplinger.com/
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STEVE GOLDBERG
@Kiplinger
Susan Garland reminds
couples that retirement
planning is about more
than just the size of
your nest egg.
RETIRE HAPPILY
EVER AFTER
kiplinger.com/
links/dealsites
CAMERON HUDDLESTON
@CHLebedinsky
Save big every time you
shop online with Cameron
Huddlestons guide to
free-shipping offers,
coupon codes and more.
BEST SITES FOR
ONLINE DEALS
Columnist Steve Goldberg
tells investors how to
prosper from global
turmoil with foreign stocks
trading at bargain prices.
FOREIGN FUNDS
TO BUY NOW
K11-CONTENTS.indd 6 9/11/14 5:00 PM
100 6TH AVE / NYC 10013 / 212 824 2000 / STUDI [email protected]
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PUBLI CATI ON: Kiplingers
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BLEED: 8.125 X 10.75
TRI M: 7. 875 X 10.5
LI VE: 7.125 X 9.75
CREATI VE DI R
ART DI RECTOR
COPYWRI TER
ACCT MGMT
PRODUCTI ON
TRAFFI C
STUDI O MGR
STUDI O
PROOFREADER
COMP
MECHANI CAL
PDF/ X1A DI SK PDF/ X1A
DI SK I NDESI GN
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SI GNATURE SI GNATURE DATE DATE
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JPG; FDI C WHI TE. AI; C1_CORE_NG_
REV_R. EPS; HEART. AI; 360_BALL_
CHECKI NG_NG_REV. AI
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ANY CHECKING
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YOUR MONEY.
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capitalone360.com 800-289-1992
Offered by Capital One

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WELL ACTUALLY SHOW
IT SOME INTEREST.
Offered by Capital One

, N.A., Member FDIC. 2014 Capital One. Capital One is a federally registered service mark. All rights reserved.
B
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UPFRONT
8
KIPLINGERS PERSONAL FINANCE 11/2014
L
I
S
E

M
E
T
Z
G
E
R
A Reset on Student Debt
O
ver the past year, Ive been
helping to counsel an acquain-
tanceIll call her Debbie
who has been trying to escape
from student-loan hell. Back in the late
1980s, Debbie borrowed money to go
to a four-year college. After struggling
with her grades and being put on aca-
demic probation, she switched to a
community college. After a year, she
was readmitted to her four-year
school, borrowed even more money
and ended up with $17,000 in federal
student loans.
After graduation, Debbie held a se-
ries of low-paying jobs and never made
regular payments on her loans. The
Department of Education eventually
turned over the unpaid debt to a col-
lection agency, and Debbies wages
were garnished. With her personal
finances in disarray, she declared
bankruptcy. But her loans continued
to accrue interest and fees. When she
disregarded a further payment notice
from the Education Department, her
tax refund was seized. By last August,
she owed more than $24,000 in princi-
pal, interest and fees on her loans,
which were in default.
Debbies story has a satisfying
ending. With help from a generous
family member, she made the nine
monthly on-time payments required
to get her loans out of default. She
recently received a letter from the feds
declaring her to be back in good stand-
ing. The collection agency is off her
back, her wages are no longer being
garnished, and shell get her tax re-
fund. She can renegotiate the remain-
ing loan balance to get better terms
with a lower payment.
Debbies experience illustrates how
easy it is to borrow without consider-
ing the consequences. Debbie didnt re-
alize what she was getting into, didnt
take responsibility for repaying her
loans or seeking help to handle them,
and was eventually overwhelmed by
the system, which has been criticized
for overly aggressive collection tactics.
I cant help thinking that if someone
had suggested to Debbie that she
would be better off academically and
financially by staying in community
college to get a degree, she wouldnt
have found herself in such a fix.
Thats why its so important for
students and parents to know what
theyre getting into before they bor-
row. In her story on page 54, senior
associate editor Sandra Block shows
families how to borrow smart and set
up a manageable repayment plan. On
page 59, reporter Kaitlin Pitsker gives
families benchmarks to calculate how
much debt they can afford.

Beyond borrowing. With $1.1 trillion in
student loans outstanding, policymak-
ers are scrambling to come up with
ways to ease the burden. But it seems
to me that we need out-of-the-box
thinking that makes students less
dependent on loans to start with.
On page 15, senior editor Anne Kates
Smith outlines several innovative
proposalssuch as letting private
investors foot the bill in exchange for
a slice of a graduates future earnings.
Meanwhile, students and families are
taking matters into their own hands.
An annual survey by education lender
Sallie Mae found that in the 201314
academic year, enrollment in two-year
public colleges was at its highest level
since the survey began seven years
ago. Overall, the typical family cov-
ered 22% of college costs with loans
the lowest level in five yearsand paid
42% of costs out of savings and income
from both parents and students, up
from 38% the year before.
I encountered one of those industri-
ous students last summer at a farmers
market at the beach, where a young
woman was selling homemade pound
cakes. Her sign announced that she
was paying for her college education
one pound at a time.
Janet Bodnar
FROM THE EDITOR
janet bodnar, editor
follow janets updates at www.twitter
.com/janetbodnar.
We need out-of-the-
box thinking that
makes students less
dependent on loans.
K11-NOTES.indd 8 9/11/14 2:23 PM
10
KIPLINGERS PERSONAL FINANCE 11/2014

LETTERS TO
THE EDITOR
Letters to the editor may be
edited for clarity and space,
and initials will be used on
request only if you include
your name. Mail to Letters
Editor, Kiplingers Personal
Finance, 1100 13th St., N.W.,
Washington, DC 20005, fax
to 202-778-8976 or e-mail
to [email protected].
Please include your name,
address and daytime tele-
phone number.
LETTERS
Like Dan Wiener, I cant
say enough good things
about having an overweight
exposure to health care
(Insider Interview, Sept.).
My dad advised me 30 years
ago to open an IRA in Van-
guard Health Care (symbol
VGHCX). I took his advice,
and my IRA (and later my
Roth IRA) has been devoted
entirely to that fund.
Warren Tunwall
Iowa City, Iowa
The upside of Obamacare. Your
September reader poll con-
cerning the Affordable Care
Act listed four possible
outcomes, none of which
reflect our familys experi-
ence (Letters, Sept.). Our
coverage is better than ever.
Mark Manuel
Black Mountain, N.C.
Mortgage prepayment. One
more way to accelerate
paying off a mortgage is to
temporarily redirect your
retirement plan contribu-
tions (Game Plan, Sept.).
With five years to retire-
ment, my wife and I decided
to redirect $1,200 a month
to mortgage payments. We
will now have our $100,000
balance paid off in just two
years. Then we will resume
and increase deposits to our
retirement accounts.
David Viland
Minneapolis, Minn.
Unpleasant surprise. Before
committing to a continuing
care retirement community,
make certain it accepts
Medicare (Retire in Style,
Sept.). My mother moved
into a facility three years
ago and paid a $90,000
buy-in. But after a weeklong
hospital stay last year, we
learned she would have to
rehab elsewhere because the
health care center did not
accept Medicare payments.
Louise Haynes
University Place, Wash.
CORRECTIONS
Hotchkis & Wiley Capital
Income Fund (symbol
HWIAX) had an annualized
three-year return through
June 30 of 15.8% and should
have been listed among the
three-year winners in the
hybrid category (The Bull
Keeps Charging, Sept.).
The 2013 population esti-
mate for Gainesville, Fla., is
127,488 (Retire to a College
Town, Aug.).
Many Healthy Returns
c
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m
p
t
r
t
W
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t
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w
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y
a
r
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c
c
m
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a
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P
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3
9
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I
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S
.
INVESTORS IN INDEX FUNDS
and those who favor actively
managed funds squared off
online (Insider Interview,
Sept.).
Id say 90% of mutual fund
managers cannot beat the
market consistently. So follow
the other 10%.
The problem is figuring out
the 10% in advance. I have
12 actively managed funds in
addition to Vanguard Total
Stock. My cumulative return
is less every single year com-
pared with Total Stock, even
when some of my other funds
have banner years.
Name one manager who has
consistently outperformed
the market for 20 years.
Peter Lynch, John Neff,
T. Rowe Price Jr., John Temple-
ton, Benjamin Graham. Do you
need more? By the way, the
maximum life span of an
account manager is approxi-
mately 20 years, so you have
to find several who have done
well over three to five years
and rebalance.
ONLINE
CHATTER
Aetna policys monthly
premiums came down 60%
overnight, and our plan
Do you
have long-
term-care
insurance?
READER
POLL
Q
To learn more about the cost of
long-term-care insurance, turn
to page 61.
I have a policy now
31%
If I need long-term care,
I will pay the cost myself
53%
I plan to buy a policy
16%
K11-LETTERS.2.indd 10 9/12/14 12:19 PM
Create a retirement
plan that inspires
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Keep in mind that investing involves risk. The value of your investment will uctuate over time and you may
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PERSONAL
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EDITORIAL
EDITOR IN CHIEF Knight A. Kiplinger
EDITOR Janet Bodnar
EXECUTIVE EDITOR Manuel Schifres SENIOR EDITOR, MONEY/LIVING Mark K. Solheim
MANAGING EDITOR Barbara Hoch Marcus
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K11-MASTHEAD.indd 12 9/11/14 4:57 PM
I love Vanguard, but I hate their
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And with more than 170 funds to
choose, most every Vanguard investor
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Im Dan Wiener, head of the worlds
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My wealthiest subscribers are some of
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If you want a fund that will achieve
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If your goal is SAVING FOR
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initial investors, not experienced or
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VANGUARDs
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Note: Dan Wiener and Fund Family Shareholders Association are independent and in no way afliated with the Vanguard Group of Investment Companies. LD7454
Decades of documentation show that a small group of Vanguard funds,
when combined properly, outperform Vanguards most popular funds
by a whopping 162%.
Which few? Mixed how? Its all in a new report and best of all ITS YOURS FREE!
Dan is Americas
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has helped tens of
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their funds wisely.
Dubbed the Vanguard Gumshoe
by Forbes magazine, hes won the
industrys Financial Advisory award.
Independent study at Duke University
declared, The probability that
[Dan Wieners] Growth portfolio
could have outperformed by such
a wide margin because of luck
rather than skill is only 13.4%.
Dan Wiener
FREE
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PO Box 3279 Lancaster, PA 17604
1-866-873-3791
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11/2014 KIPLINGERS PERSONAL FINANCE
J
O
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W
.

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O
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.
THE NUMBERS ARE EYE-
popping. Student loan debt
in the U.S. now stands at
$1.1 trillion, with a current
rate of default approaching
15% for loans within three
years of beginning repay-
ment. Still, fears of a crisis
on the order of the recent
mortgage meltdown seem
overblown, with two in five
borrowers on the hook for
less than $10,000. Whats
scary is that you dont need
an exorbitant loan balance
to face financial hardship.
The highest rate of late pay-
ments is among borrowers
with outstanding loans of
less than $5,000, says Beth
Akers, a fellow at the Brook-
ings Institution. Clearly, the
current college-financing
system is in need of repair,
if not outright overhaul. To
learn how to borrow wisely,
see The Right Way to Bor-
row for College, on page
54. For three out-of-the-box
proposals to fix the student
loan market over the long
term, read on.
Streamline repayment. Replace
the bewildering array of
existing options for repaying
federal loans with a single,
income-based plan, says
economics professor Daniel
Kreisman, of Georgia State
University. After leaving
college, borrowers would
be automatically enrolled in
the program. Your employer
would deduct a fraction of
your paycheck to apply to-
ward the debt (youd check
a box on your W-4 form if
you have a loan to repay),
starting at 3% on the first
$10,000 of income and ris-
ing as earnings increase, to
a cap of 10%. Interest rates
would fluctuate with market
rates, and your contribu-
tions would stop when the
loan was repaid or after
25 years. You could indicate
on your W-4 that you want
to pay back the loan faster.
Drawback: The plan could
stretch out the typical
10-year payback period,
increasing the amount of
interest paid.

Give colleges skin in the game.
Schools already lose access
to federal aid if their stu-
dents default rates soar.
NAVIGATING THE
STUDENT LOAN MESS
Education gurus push novel solutions to
the debt problem. BY ANNE KATES SMITH
TOPIC A
AHEAD

K11-AHEAD.indd 15 9/11/14 5:34 PM

16
KIPLINGERS PERSONAL FINANCE 11/2014
arehelping them get out
of debt, giving budgeting
advice, keeping track of
hotel points and frequent-
flier miles, and helping
them plan trips. It used
to be that planners sold,
managed or gave advice
about investments. Now,
an adviser helps you navi-
gate the entire financial
jungle, whatever that might
be. Theres a lot of contact,
but its not what somebody
in his sixties would think
of as a traditional profes-
sional relationship. Clients
and advisers arent meeting
as much, but they text back
and forth. The client is free
to leave the arrangement
at any time, putting more
pressure on the adviser
to continue to add value.
Can you give an example? One
valuable service is putting
all of the assets and fi-
nances on a dashboard,
so clients can see
everything in one
place and track their
progress, whether
its making more
money, saving more
or getting out of debt.
What happens when these
clients are older? When this
cohort accumulates suffi-
cient assets, their finances
will be more complicated
and it will be appropriate to
charge more. Planners may
still charge a flat retainer
fee, just bigger. The profes-
sion is evolving to reduce
conflicts of interestmoving
from selling financial prod-
ucts to charging for assets
under management to
charging a retainer fee.
The retainer will be where
it ends up. ANNE KATES SMITH D
A
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INTERVIEW
FINANCIAL PLANNERS
FOR YOUNG CLIENTS
Millennials prefer to pay by the month
and stay in touch via text message.
But some experts want
colleges to pay as much as
20% of the losses incurred
on bad loans at their school.
The lender takes all the risk.
The student has the obliga-
tion to pay. But colleges
just get the money, says fi-
nance scholar Alex Pollock,
of the American Enterprise
Institute. Sharing the risk
puts more of the onus on
schools to keep academic
standards high and ensure
students success.
Drawback: Schools that serve
high-risk populations might
be unfairly penalized.
Let investors foot the bill.
Income-sharing agree-
ments, or ISAs, give inves-
tors the right to a slice of a
students future earnings
for a fixed period. Agree-
ments are tailor-made; terms
might be more favorable for
an engineering major in a top
program than for a humani-
ties student at a lower-tier
school. Lest you think that
all the money would go to
Harvard financiers, con-
sider that youd expect
abundant funding at, say,
a community college with
ties to area employers and a
strong vocational bent. The
beauty of this human-capital
market is that it alerts pro-
spective students to high-
quality, low-cost programs,
says Vanderbilt finance
professor Miguel Palacios,
cofounder of Lumni, one
of a few firms making such
deals. Regulatory uncer-
tainty about ISAs are for
now their biggest hurdle.
Drawback: Fields of study
deemed valuable by society
but not necessarily lucrative
might find it hard to tap the
ISA market.
Bob Veres is editor and pub-
lisher of Inside Information
Service, a publication for
financial planners.
You say the financial-planning
industry is reinventing itself
when it comes to younger cli-
ents. What are you seeing? The
younger clientele is focused
on lifestyle more than re-
tirement. They want to take
a sabbatical in five years, or
a trip to Europe. So rather
than retirement, the con-
versation has to be about
good saving and invest-
ing habits, budgeting,
and cash-flow plan-
ning. Younger advis-
ers tell me their Gen
X and Y clients dont
want to pay a big,
up-front fee for a
financial plan, or pay
a percentage for some-
one to manage their
assetsthey dont have a
lot of assets. But theyll pay
a monthly bill to keep a
planner on retainer, the same
way they pay for cable ser-
vice or a gym membership.
How does that work? The ball-
park fee for a comprehen-
sive financial plan is $3,500
to $5,000. Planners who bill
on an hourly basis charge
$125 to $350 an hour, which
comes out to about the same
as for a traditional plan. The
retainer model is for people
who cant afford as much.
It runs $100 per month or
a little more.
What do you get for that? In-
stead of focusing on a road
map to the future, planners
are assessing where clients
AHEAD
S
U
S
A
N
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T
11/2014
it ends up. ANNE KATES SMITH retainer model is for people
K11-AHEAD.indd 16 9/11/14 5:34 PM
17 17
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N
HIGHER RATES
ON STORE CARDS
Retailers dangle discounts, but youll
pay more to carry a balance.
WHATS THE DEAL
KATHLEEN OMALLEY FIRST
used Airbnb in the summer
of 2013, when she traveled
through Washington State
and British Columbia with
her fianc. After that, we
were hooked, says OMalley
of Portland, Ore. The couple
used Airbnb to book a cot-
tage in Sonoma for their
honeymoon in September.
Airbnb connects budget-
minded travelers with
homeowners who have a
room, apartment or house
to rent. Soon, guests could
pay more to sleep on some-
ones fold-out couch. In July,
Airbnb began collecting
11.5% in city and county
lodging taxes for bookings
in Portland. Airbnb plans
to expand the program
to San Francisco, which
charges a 14% hotel tax.
From there, well take the
lessons weve learned and
A NEW TAX ON THE
SHARING ECONOMY
Airbnb guests will now have to pay more.
TRAVEL
move forward, says Airbnb
spokesman Nick Papas.
The move is an attempt
to forestall regulation
that threatens to slow the
companys growth. Other
enterprises in the sharing
economy are similarly
pursuing agreements with
state and local governments
amid concerns about un-
fair advantages over more-
traditional businesses. For
instance, Colorado recently
enacted legislation that
authorizes ride-sharing
services, such as Lyft and
Uber, to operate in the state,
provided drivers undergo
background checks and
obtain insurance.
OMalley, founder of
FrugalPortland.com, says
occupancy taxes wont deter
her from using Airbnb. Its
still cheaper than a hotel,
she says. SANDRA BLOCK
receives three annual mail-
ings of discount coupons;
someone who spends $1,000
or more per year at Macys
gets 12 mailings, plus other
bonuses.
Credit limits on store
cards tend to be lower than
for general-purpose cards,
says John Ganotis, founder
of CreditCardInsider.com.
Try to keep your spending
on a card at no more than
20% to 30% of its limit to
maintain your credit score.
And avoid applying for sev-
eral cards while youre on
a shopping spree. A cluster
of inquiries on your credit
report as a result will send
a negative signal to lenders
and could damage your
score. LISA GERSTNER
AS YOU SHOP FOR HOLIDAY
gifts, you may be tempted
to open a store credit card
and charge a big purchase
especially if the cashier
dangles a discount of, say,
20% for signing up. But
dont be dazzled by the
discount if youre likely to
carry a balance. The aver-
age annual percentage rate
on credit cards from the
countrys largest retailers
is 23.23%, according to a
Cre ditCards.com survey.
Thats about two percentage
points higher than in 2010
and more than eight per-
centage points higher than
the average APR for standard
credit cards. If you charge
$500 on a card with a 23.23%
rate and make a $20 payment
every month, it will take
you nearly three years to
pay it off. Youll spend $190
in interest, outweighing
any savings youd capture
by opening the card.
Still, a store card could
make sense if you pay off
the balance each billing
cycle (or before an introduc-
tory 0% APR offer ends, if
you are lucky enough to snag
one). The same survey found
that retailers are juicing
up rewards, with some pro-
viding tiered bonuses that
become better as you spend
more. For example, a Macys
cardholder who spends up
to $499 a year at the store
177
States are stepping up Inter-
net privacy laws and policies.
Most states require that con-
sumers be notified of stolen
credit card data, mailing
addresses or phone numbers.
In California, stolen pass-
words also trigger notifica-
tion. Arizona and California
prevent online booksellers
and libraries from disclosing
the books you order. Other
laws make it easy to remove
embarrassing details from
online sites. (www.kiplinger
biz.com/ahead/privacy)
PRIVACY TAKES
CENTER STAGE
EXCERPT FROM
The Kiplinger Letter
S
U
S
A
N

S
E
U
B
E
R
T
KATHLEEN
OMALLEY STILL
EXPECTS TO
SAVE MONEY.
K11-AHEAD.indd 17 9/11/14 5:34 PM
18
KIPLINGERS PERSONAL FINANCE 11/2014
L
I
S
E

M
E
T
Z
G
E
R
GADGET LOVERS NO LONGER
need to distinguish between
business and pleasure. Many
offices are adopting a bring
your own device (BYOD)
policy, encouraging workers
to use the mobile electron-
BRING YOUR OWN
DEVICE TO WORK
But safeguard your data if you use your
cell phone or computer for the boss.
WORKPLACE
ics they already own (cell
phones, tablets and laptops)
for business tasks, whether
users are on the go or in
their cubicles. Technology
research firm Gartner pre-
dicts that by 2017, half of
employers worldwide will
require employees to supply
their own mobile devices.
It may sound like an im-
position on employees, and
reimbursement policies dif-
fer. But many workers prefer
using tools they personally
selected rather than corpo-
rate-issued ones. Bosses
like BYOD because it can
save money and boost pro-
ductivity by skipping the
learning curve required
to master a new device.
Before you plug into the
trend, ask about restrictions
(such as tampering with the
operating system or using
cloud software) and rules
for securing company
data. Be aware that you risk
losing personal photos and
files if you leave the job.
The National Workrights
Institute says the most
common complaint they
receive is from employees
whose phones have been
wiped remotely. Mitigate
risks by clarifying how
much control youre giving
up and by backing up data
frequently. MIRIAM CROSS
It smells fishy to me, too. As you describe it, this relation-
ship wouldnt meet the IRSs multipart test for legitimate
independent-contractor status. Your sons employer is
running the risk that his job (and perhaps others at the firm) will be
reclassified by the IRS as conventional employment, with penalties
assessed for back employment taxes and perhaps overtime.
The federal government and class-action labor lawyers are
getting aggressive on this issue. In a case that will probably end
up before the Supreme Court, a federal appellate court in San Fran-
cisco recently ruled that FedEx drivers in California and Oregon,
whom the company considers independent contractors, are
really employees in virtually every way. And some drivers for
the car-sharing services Uber and Lyft are also challenging their
independent-contractor status.
The issue isnt going away, as many businesses, especially tech
MONEY & ETHICS // KNIGHT KIPLINGER
e
HAVE A MONEY-AND-ETHICS QUESTION YOUD LIKE ANSWERED IN THIS COLUMN?
WRITE TO EDITOR IN CHIEF KNIGHT KIPLINGER AT [email protected].
Q
A
start-ups, fudge on legal distinctions to keep their labor costs
low and cap their official employee count under thresholds that
trigger coverage requirements for various federal programs, such
as family leave and health care.
There is much to recommend genuine independent contracting,
both to employers and to the contractors themselves. Many
workers value the freedom to set their own hours and place of
work, serve several different clients, and deduct their own busi-
ness expenses from their income.
But in my experience, companies that honor their workforce
with attractive pay and benefitsplus the security and legal
rights of genuine employmentare rewarded with good perform-
ance and low turnover.
My son works for a big tech company as a so-called independent con-
tractor, but it seems to me that hes really an employee in everything
but title. He works only for that company, puts in very long hours
and is closely supervised by company managers (albeit off-site). He
doesnt get employer-paid benefits, the firm expects him to pay self-
employment taxes, and he wont qualify for state unemployment relief if his
contract isnt renewed. This doesnt seem right to me. What do you think?
AHEAD
When Is an Independent
Contractor Really an Employee?
K11-AHEAD.indd 18 9/11/14 5:34 PM
2014 PRUDENTIAL FINANCIAL, INC., NEWARK, NJ, USA. ALL RIGHTS RESERVED.
0266042-00001-00
RETIREMENT | INVESTMENTS | INSURANCE
What if you got paid for all the work you do when
youre not at work? See how much it could be at
bringyourchallenges.com/life-insurance-that-keeps-up
Maybe you never thought about it. Its easy to overlook all the
things you do that someone else might be paid to do if anything
happened to you. Its why a lot of people have less life insurance
than they might really need. Our new online tool can help you
estimate the value of those things. And Prudential has life insurance
solutions that can cover you, not just for the job you go to every day,
but for all the other jobs you take care of.
YOU KNOW WHAT YOU EARN FROM 9 TO 5.
NOW CALCULATE THE VALUE OF WHAT YOU DO 24/7.
Solutions_KPF_
2
Studio
Job #
Date
Live
Trim
Bleed
Gutter
Pub
P. Date
Gross, Alan
A4567
9-2-2014 11:39 AM
7 x 9.571
7.875 x 10.5
8.125 x 10.75
None
Kiplingers Personal
Finance
__________ GCD
__________ CD
__________ AD
__________ CW
__________ AE
__________ Traffic
__________ Proof
Approvals:
None Scaled
Prudential Advertising
973-802-7361
S:7
S
:
9
.
5
7
1

T:7.875
T
:
1
0
.
5

B:8.125
B
:
1
0
.
7
5

Solutions_KPF_ 7.875x10.5.indd 1 9/2/14 11:39 AM

SATURDAY, NOVEMBER 1
Fellas: Grow a mustache and collect
donations from friends and family
in honor of Movember. The charity
drive, which supports prostate and
testicular cancer initiatives, devoted
84% of U.S. funds to mens health
programs last year, more than the
80% considered a best practice.
TUESDAY, NOVEMBER 11
Hit the great outdoors on Veterans
Day. The 133 national parks that
usually charge admission, from Flor-
idas Everglades National Park to
Denali National Park and Preserve
in Alaska, will be free to visitors.
FRIDAY, NOVEMBER 14
May grads: November marks the
end of the six-month grace period
for repaying subsidized and unsub-
sidized federal Direct student loans.
CALENDAR
11/2014
I
S
T
O
C
K
P
H
O
T
O
.
C
O
M

(
4
)
AHEAD
SATURDAY, NOVEMBER 22
National Adoption Day. If
youre adopting, keep me-
ticulous records. Theres a
$13,190 tax credit for
adoption expenses,
which starts to phase
out at higher incomes.
SUNDAY, NOVEMBER 23
Are you cooking for Thanksgiving?
Sign up at www.readyseteat.com
for recipe ideas. The site will also
show you where ingredients are on
sale in your area. RYAN ERMEY
*
DEAL OF THE MONTH
Holiday chefs will find
more cookware deals
in November than in
any other month. Look
for discounts of 30%
to 80%.
allybank.com | 1-877-247-ALLY
2009-2014 Ally Financial Inc.
YOUR MONEY
NEEDS AN ALLY
EVERY DAY OF THE YEAR.
No hidden fees, no asterisks
and no surprises
No expensive branches allows us to
ofer competitive rates
No monthly maintenance fees
Award-winning,
24/7 customer service
K11-AHEAD.indd 21 9/11/14 5:34 PM
What is BELVIQ?
BELVIQ is an FDA-approved prescription
weight-loss medication that, when used with
diet and exercise, can help some overweight
(BMI 27 kg/m
2
) adults with a weight-related
medical problem, or obese (BMI 30 kg/m
2
)
adults, lose weight and keep it of.
It is not known if BELVIQ when taken with other
prescription, over-the-counter, or herbal weight-
loss products is safe and efective. It is not known if
BELVIQ changes your risk of heart problems, stroke,
or death due to heart problems or stroke.
Important Safety Information
Pregnancy: Do not take BELVIQ if you are pregnant
or planning to become pregnant, as weight loss
oers no potential benet during pregnancy and
BELVIQ may harm your unborn baby.
Serotonin Syndrome or Neuroleptic Malignant
Syndrome (NMS)-like reactions: Before using
BELVIQ, tell your doctor about all the medicines you
take, especially medicines that treat depression,
migraines, mental problems, or the common
cold. These medicines may cause serious or life-
threatening side eects if taken with BELVIQ. Call
your doctor right away if you experience agitation,
hallucinations, confusion, or other changes in
mental status; coordination problems; uncontrolled
muscle spasms; muscle twitching; restlessness;
racing or fast heartbeat; high or low blood pressure;
sweating; fever; nausea; vomiting; diarrhea; or sti
muscles.
Valvular heart disease: Some people taking
medicines like BELVIQ have had heart valve
problems. Call your doctor right away if you
experience trouble breathing; swelling of the arms,
legs, ankles, or feet; dizziness, fatigue, or weakness
that will not go away; or fast or irregular heartbeat.
Before taking BELVIQ, tell your doctor if you have or
have had heart problems.
Changes in attention or memory: BELVIQ may slow
your thinking. You should not drive a car or operate
heavy equipment until you know how BELVIQ
aects you.
Mental problems: Taking too much BELVIQ may
cause hallucinations, a feeling of being high or in
a very good mood, or feelings of standing outside
your body.
Depression or thoughts of suicide: Call your
doctor right away if you notice any mental changes,
especially sudden changes in your mood, behaviors,
thoughts, or feelings, or if you have depression or
thoughts of suicide.
Low blood sugar: Weight loss can cause low
blood sugar in people taking medicines for type
2 diabetes, such as insulin or sulfonylureas. Blood
sugar levels should be checked before and while
taking BELVIQ. Changes to diabetes medication may
be needed if low blood sugar develops.
Painful erections: If you have an erection lasting
more than 4 hours while on BELVIQ, stop taking
BELVIQ and call your doctor or go to the nearest
emergency room right away.
Slow heartbeat: BELVIQ may cause your heart to
beat slower.
Decreases in blood cell count: BELVIQ may cause
your red and white blood cell counts to decrease.
Increase in prolactin: BELVIQ may increase the
amount of a hormone called prolactin. Tell your
doctor if your breasts begin to make milk or a milky
uid, or if you are a male and your breasts increase
in size.
Most common side eects in patients without
diabetes: Headache, dizziness, fatigue, nausea, dry
mouth, and constipation.
Most common side eects in patients with
diabetes: Low blood sugar, headache, back pain,
cough, and fatigue.
Nursing: BELVIQ should not be taken while
breastfeeding.
Drug interactions: Before taking BELVIQ, tell
your doctor if you take medicines for depression,
migraines, or other medical conditions, such as:
triptans; medicines used to treat mood, anxiety,
psychotic or thought disorders, including tricyclics,
lithium, selective serotonin reuptake inhibitors,
selective serotonin-norepinephrine reuptake
inhibitors, monoamine oxidase inhibitors, or
antipsychotics; cabergoline; linezolid (an antibiotic);
tramadol; dextromethorphan (an over-the-counter
(OTC) common cold/cough medicine); OTC
supplements such as tryptophan or St. Johns Wort;
or erectile dysfunction medicines.
BELVIQ is a federally controlled substance
(CIV) because it may be abused or lead to drug
dependence.
For more information about BELVIQ, talk to your
doctor and see the Patient Information on the
reverse side.
You are encouraged to report negative side eects
of prescription drugs to the FDA. Visit www.fda.gov/
medwatch or call 1-800-FDA-1088.
TAKE STEPS WI TH BELVI Q

BELVIQ is a registered trademark and Power Over Portion is a trademark of Arena Pharmaceuticals GmbH. BELV1497
FDA- APPROVED FOR WEI GHT LOSS
You could be carrying more than
just extra weight.
In FDA clinical trials, people who added BELVIQ to diet and exercise were able to lose
weight as well as improve certain health risk factors,* such as high blood pressure, high
blood sugar, and high cholesterol levels.
Power Over Portion
VISIT GetBELVIQsavings.com
OR CALL 1855BELVIQ1 18552358471 TO GET A
15DAY FREE

TRIAL
* BELVIQ was evaluated in three clinical studies involving overweight adults (with at least one weight-related medical condition) and
obese adults. All three studies compared people taking BELVIQ plus diet and exercise to people using diet and exercise alone
(placebo). The results of the rst two studies (involving 7,190 people without diabetes) showed that 47.1% of people taking BELVIQ
lost 5% or more of their body weight, compared with 22.6% of the placebo group. People taking BELVIQ also had signicant
improvements in their blood pressure and cholesterol levels. A third clinical study (involving 604 overweight people with type 2
diabetes) showed that 37.5% of people taking BELVIQ lost 5% or more of their body weight, compared with 16.1% of the placebo
group. People taking BELVIQ also had signicant improvements in their blood sugar levels. Nearly half of all participants completed
the rst two studies; nearly two-thirds of the participants completed the third study.

Restrictions apply.
PROMO CODE: KP
FINAL SIZE: 15.5 X 10.5 KIPLINGER
S:15
S
:
1
0

T:15.5
T
:
1
0
.
5

B:17.5
B
:
1
1
.
7
5

F:7.75
FS:7.25
F:7.75
FS:7.25
What is BELVIQ?
BELVIQ is an FDA-approved prescription
weight-loss medication that, when used with
diet and exercise, can help some overweight
(BMI 27 kg/m
2
) adults with a weight-related
medical problem, or obese (BMI 30 kg/m
2
)
adults, lose weight and keep it of.
It is not known if BELVIQ when taken with other
prescription, over-the-counter, or herbal weight-
loss products is safe and efective. It is not known if
BELVIQ changes your risk of heart problems, stroke,
or death due to heart problems or stroke.
Important Safety Information
Pregnancy: Do not take BELVIQ if you are pregnant
or planning to become pregnant, as weight loss
oers no potential benet during pregnancy and
BELVIQ may harm your unborn baby.
Serotonin Syndrome or Neuroleptic Malignant
Syndrome (NMS)-like reactions: Before using
BELVIQ, tell your doctor about all the medicines you
take, especially medicines that treat depression,
migraines, mental problems, or the common
cold. These medicines may cause serious or life-
threatening side eects if taken with BELVIQ. Call
your doctor right away if you experience agitation,
hallucinations, confusion, or other changes in
mental status; coordination problems; uncontrolled
muscle spasms; muscle twitching; restlessness;
racing or fast heartbeat; high or low blood pressure;
sweating; fever; nausea; vomiting; diarrhea; or sti
muscles.
Valvular heart disease: Some people taking
medicines like BELVIQ have had heart valve
problems. Call your doctor right away if you
experience trouble breathing; swelling of the arms,
legs, ankles, or feet; dizziness, fatigue, or weakness
that will not go away; or fast or irregular heartbeat.
Before taking BELVIQ, tell your doctor if you have or
have had heart problems.
Changes in attention or memory: BELVIQ may slow
your thinking. You should not drive a car or operate
heavy equipment until you know how BELVIQ
aects you.
Mental problems: Taking too much BELVIQ may
cause hallucinations, a feeling of being high or in
a very good mood, or feelings of standing outside
your body.
Depression or thoughts of suicide: Call your
doctor right away if you notice any mental changes,
especially sudden changes in your mood, behaviors,
thoughts, or feelings, or if you have depression or
thoughts of suicide.
Low blood sugar: Weight loss can cause low
blood sugar in people taking medicines for type
2 diabetes, such as insulin or sulfonylureas. Blood
sugar levels should be checked before and while
taking BELVIQ. Changes to diabetes medication may
be needed if low blood sugar develops.
Painful erections: If you have an erection lasting
more than 4 hours while on BELVIQ, stop taking
BELVIQ and call your doctor or go to the nearest
emergency room right away.
Slow heartbeat: BELVIQ may cause your heart to
beat slower.
Decreases in blood cell count: BELVIQ may cause
your red and white blood cell counts to decrease.
Increase in prolactin: BELVIQ may increase the
amount of a hormone called prolactin. Tell your
doctor if your breasts begin to make milk or a milky
uid, or if you are a male and your breasts increase
in size.
Most common side eects in patients without
diabetes: Headache, dizziness, fatigue, nausea, dry
mouth, and constipation.
Most common side eects in patients with
diabetes: Low blood sugar, headache, back pain,
cough, and fatigue.
Nursing: BELVIQ should not be taken while
breastfeeding.
Drug interactions: Before taking BELVIQ, tell
your doctor if you take medicines for depression,
migraines, or other medical conditions, such as:
triptans; medicines used to treat mood, anxiety,
psychotic or thought disorders, including tricyclics,
lithium, selective serotonin reuptake inhibitors,
selective serotonin-norepinephrine reuptake
inhibitors, monoamine oxidase inhibitors, or
antipsychotics; cabergoline; linezolid (an antibiotic);
tramadol; dextromethorphan (an over-the-counter
(OTC) common cold/cough medicine); OTC
supplements such as tryptophan or St. Johns Wort;
or erectile dysfunction medicines.
BELVIQ is a federally controlled substance
(CIV) because it may be abused or lead to drug
dependence.
For more information about BELVIQ, talk to your
doctor and see the Patient Information on the
reverse side.
You are encouraged to report negative side eects
of prescription drugs to the FDA. Visit www.fda.gov/
medwatch or call 1-800-FDA-1088.
TAKE STEPS WI TH BELVI Q

BELVIQ is a registered trademark and Power Over Portion is a trademark of Arena Pharmaceuticals GmbH. BELV1497
FDA- APPROVED FOR WEI GHT LOSS
You could be carrying more than
just extra weight.
In FDA clinical trials, people who added BELVIQ to diet and exercise were able to lose
weight as well as improve certain health risk factors,* such as high blood pressure, high
blood sugar, and high cholesterol levels.
Power Over Portion
VISIT GetBELVIQsavings.com
OR CALL 1855BELVIQ1 18552358471 TO GET A
15DAY FREE

TRIAL
* BELVIQ was evaluated in three clinical studies involving overweight adults (with at least one weight-related medical condition) and
obese adults. All three studies compared people taking BELVIQ plus diet and exercise to people using diet and exercise alone
(placebo). The results of the rst two studies (involving 7,190 people without diabetes) showed that 47.1% of people taking BELVIQ
lost 5% or more of their body weight, compared with 22.6% of the placebo group. People taking BELVIQ also had signicant
improvements in their blood pressure and cholesterol levels. A third clinical study (involving 604 overweight people with type 2
diabetes) showed that 37.5% of people taking BELVIQ lost 5% or more of their body weight, compared with 16.1% of the placebo
group. People taking BELVIQ also had signicant improvements in their blood sugar levels. Nearly half of all participants completed
the rst two studies; nearly two-thirds of the participants completed the third study.

Restrictions apply.
PROMO CODE: KP
FINAL SIZE: 15.5 X 10.5 KIPLINGER
S:15
S
:
1
0

T:15.5
T
:
1
0
.
5

B:17.5
B
:
1
1
.
7
5

F:7.75
FS:7.25
F:7.75
FS:7.25
IMPORTANT PATIENT INFORMATION
Read the Patient Information that comes with BELVIQ

(BEL-VEEK) (lorcaserin hydrochloride) tablets before you start
taking it and each time you get a rell. There may be new
information. This page does not take the place of talking
with your doctor about your medical condition or treatment.
If you have any questions about BELVIQ, talk to your doctor
or pharmacist.

What is BELVIQ?
BELVIQ is a prescription medicine that may help some obese
adults or overweight adults who also have weight related
medical problems lose weight and keep the weight off.
BELVIQ should be used with a reduced calorie diet and
increased physical activity.
It is not known if BELVIQ is safe and effective when taken
with other prescription, over-the-counter, or herbal weight
loss products.
It is not known if BELVIQ changes your risk of heart problems
or stroke or of death due to heart problems or stroke.
It is not known if BELVIQ is safe when taken with some
other medicines that treat depression, migraines,
mental problems, or the common cold (serotonergic or
antidopaminergic agents).
It is not known if BELVIQ is safe and effective in children
under 18 years old.
BELVIQ is a federally controlled substance (CIV) because
it contains lorcaserin hydrochloride and may be abused
or lead to drug dependence. Keep your BELVIQ in a safe
place, to protect it from theft. Never give your BELVIQ to
anyone else, because it may cause harm to them. Selling
or giving away this medicine is against the law.
Who should not take BELVIQ?
Do not take BELVIQ if you:
are pregnant or planning to become pregnant. BELVIQ may
harm your unborn baby.
What should I tell my healthcare provider before
taking BELVIQ?
Before you take BELVIQ, tell your doctor if you:
have or have had heart problems including:
congestive heart failure
heart valve problems
slow heartbeat or heart block
have diabetes
have a condition such as sickle cell anemia, multiple
myeloma, or leukemia
have a deformed penis, Peyronies disease, or ever had an
erection that lasted more than 4 hours
have kidney problems
have liver problems
are pregnant or plan to become pregnant
are breastfeeding or plan to breastfeed. It is not known if
BELVIQ passes into your breastmilk. You and your doctor
should decide if you will take BELVIQ or breastfeed. You
should not do both.
Tell your doctor about all the medicines you take, including
prescription and non-prescription medicines, vitamins, and
herbal supplements.
BELVIQ may affect the way other medicines work, and other
medicines may affect how BELVIQ works.
Especially tell your doctor if you take medicines for
depression, migraines or other medical conditions such as:
triptans, used to treat migraine headache
medicines used to treat mood, anxiety, psychotic or
thought disorders, including tricyclics, lithium, selective
serotonin reuptake inhibitors (SSRIs), selective serotonin-
norepinephrine reuptake inhibitors (SNRIs), monoamine
oxidase inhibitors (MAOIs), or antipsychotics
cabergoline
linezolid, an antibiotic
tramadol
dextromethorphan, an over-the-counter medicine used to
treat the common cold or cough
over-the-counter supplements such as tryptophan or
St. Johns Wort
medicines to treat erectile dysfunction
Ask your doctor or pharmacist for a list of these medicines, if
you are not sure.
Know all the medicines you take. Keep a list of them to show
your doctor and pharmacist when you get a new medicine.
How should I take BELVIQ?
Take BELVIQ exactly as your doctor tells you to take it.
Your doctor will tell you how much BELVIQ to take and
when to take it.
Take 1 tablet 2 times each day.
Do not increase your dose of BELVIQ.
BELVIQ can be taken with or without food.
Your doctor should start you on a diet and exercise
program when you start taking BELVIQ. Stay on this
program while you are taking BELVIQ.
Your doctor should tell you to stop taking BELVIQ if you
do not lose a certain amount of weight within the rst 12
weeks of treatment.
If you take too much BELVIQ or overdose, call your doctor
or go to the nearest emergency room right away.
What should I avoid while taking BELVIQ?
Do not drive a car or operate heavy machinery until you
know how BELVIQ affects you. BELVIQ can slow your
thinking.
What are the possible side effects of BELVIQ?
BELVIQ may cause serious side effects, including:
Serotonin Syndrome or Neuroleptic Malignant
Syndrome (NMS)-like reactions. BELVIQ and certain
medicines for depression, migraine, the common cold, or
other medical problems may affect each other causing
serious or life-threatening side effects. Call your doctor
right away if you start to have any of the following
symptoms while taking BELVIQ:
mental changes such as agitation, hallucinations,
confusion, or other changes in mental status
coordination problems, uncontrolled muscle
spasms, or muscle twitching (overactive refexes)
restlessness
racing or fast heartbeat, high or low blood pressure
sweating or fever
nausea, vomiting, or diarrhea
muscle rigidity (stiff muscles)
Valvular heart disease. Some people taking medicines
like BELVIQ have had problems with the valves in their
heart. Call your doctor right away if you have any of the
following symptoms while taking BELVIQ:
trouble breathing
swelling of the arms, legs, ankles, or feet
dizziness, fatigue, or weakness that will not go away
fast or irregular heartbeat
Changes in your attention or memory.
Mental problems. Taking BELVIQ in high doses may
cause psychiatric problems such as:
hallucinations
feeling high or in a very good mood (euphoria)
feelings of standing next to yourself or out of your
body (disassociation)
Depression or thoughts of suicide. You should pay
attention to any mental changes, especially sudden
changes, in your mood, behaviors, thoughts, or feelings.
Call your healthcare provider right away if you have any
mental changes that are new, worse, or worry you.
Low blood sugar (hypoglycemia) in people with
type 2 diabetes mellitus who also take medicines
used to treat type 2 diabetes mellitus. Weight loss
can cause low blood sugar in people with type 2 diabetes
mellitus who also take medicines used to treat type 2
diabetes mellitus (such as insulin or sulfonylureas). You
should check your blood sugar before you start taking
BELVIQ and while you take BELVIQ.
Painful erections (priapism). The medicine in BELVIQ
can cause painful erections that last more than 6 hours. If
you have an erection lasting more than 4 hours whether it
is painful or not, stop using BELVIQ and call your doctor or
go to the nearest emergency room right away.
Slow heartbeat. BELVIQ may cause your heart to beat
slower. Tell your doctor if you have a history of your heart
beating slow or heart block.
Decreases in your blood cell count. BELVIQ may cause
your red and white blood cell count to decrease. Your
doctor may do tests to check your blood cell count while
you are taking BELVIQ.
Increase in prolactin. The medicine in BELVIQ may
increase the amount of a certain hormone your body
makes called prolactin. Tell your doctor if your breasts
begin to make milk or a milky discharge or if you are a
male and your breasts begin to increase in size.
The most common side effects of BELVIQ include:
headache
dizziness
fatigue
nausea
dry mouth
constipation
cough
low blood sugar (hypoglycemia) in patients with diabetes
back pain
Tell your doctor if you have any side effect that bothers
you or that does not go away.
These are not all the possible side effects of BELVIQ. For
more information, ask your doctor or pharmacist.
Call your doctor for medical advice about side effects. You
may report side effects to FDA at 1-800-FDA-1088.
How do I store BELVIQ?
Store BELVIQ at room temperature between 59F to 86F
(15C to 30C).
Safely throw away medicine that is out of date or no longer
needed.
Keep BELVIQ and all medicines out of the reach of
children.

General information about the safe and effective use
of BELVIQ.
Medicines are sometimes prescribed for purposes other
than those listed in a Patient Information leaet. Do not use
BELVIQ for a condition for which it was not prescribed. Do
not give BELVIQ to other people, even if they have the same
symptoms you have. It may harm them.
This Patient Information summarizes the most important
information about BELVIQ. If you would like more information,
talk with your doctor. You can ask your doctor or pharmacist
for information about BELVIQ that is written for health
professionals.
For more information, go to www.BELVIQ.com Website or call
1-888-274-2378.
What are the ingredients in BELVIQ?
Active Ingredient: lorcaserin hydrochloride
Inactive Ingredients: silicied microcrystalline cellulose;
hydroxypropyl cellulose NF; croscarmellose sodium
NF; colloidal silicon dioxide NF; polyvinyl alcohol USP;
polyethylene glycol NF; titanium dioxide USP; talc USP; FD&C
Blue #2 aluminum lake; and magnesium stearate NF.
This Patient Information has been approved by the U.S. Food
and Drug Administration.
Rx Only
BELVIQ

is a registered trademark of Arena

Pharmaceuticals GmbH, Zofngen, Switzerland
Manufactured by Arena Pharmaceuticals GmbH, Untere
Brhlstrasse 4, CH-4800, Zofngen, Switzerland
Distributed by Eisai Inc., Woodcliff Lake, NJ 07677
2013 Eisai Inc. BELV1061 10/13
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11/2014 KIPLINGERS PERSONAL FINANCE 11/2014 KIPLINGERS PERS
You worked in high tech? Yes,
for 23 years, 15 of them as
a software engineer for
Hewlett-Packard. In 2008,
HP shut down my whole
division, and I was out of a
job. I didnt see myself going
back to software, so I re-
turned to school to finish a
second degree, in electrical
engineering.
Why Suntactics? Solar power
has interested me since I
was a kid. When I returned
to school, I teamed up with
a partner to power a full-
size glider with solar energy.
We worked on other proj-
ects, and in 2009 we formed
a general partnership to
focus on making a portable
yet powerful solar panel to
charge a phone. In 2010, my
partner said, I dont think
this is going to work, and
left amicably. Since then,
Ive developed three prod-
ucts that can charge devices
with a USB connection. I
have provisional patents on
my designs, and Ive sold
almost 10,000 units, mostly
via our Web site (www.sun
tactics.com) and Amazon
.com. Our chargers range
in price from $140 to $240.
Theyll charge an iPhone in
two hours or less in direct
sunlight, as fast as a wall
outlet. Theyre popular
with outdoors enthusiasts,
among others.
You made the panels yourself
at first? The cheapest solar-
panel laminator I could find
cost $50,000 and was full-
size. I needed a pint-size
one. So I built my first one
out of parts from a pizza
oven that I bought at Good-
will. I cranked out 2,000
panels in my garage.
Did you get any outside help?
To perfect my process, I
picked the brains of a scien-
tist and a couple of engi-
neering PhDs. But in my
previous career, I never saw
the sales and marketing
end, and now I was trying
to run a business. So I
appealed to Score
[www.score.org,
a nonprofit
group that
mentors small businesses].
When I told them I couldnt
keep up with orders, thats
all they needed to hear. I
have two counselorsone is
an expert in manufacturing
and the other in marketing.
They helped me find a small
manufacturer to produce
more units under contract.
How did you finance your start-
up? I took out a home-equity
line of credit on my house
and borrowed about
$42,000. More recently,
I got a line of credit thats
backed by the Small Busi-
ness Administration.
Do you make a living? In 2013,
we did more than $500,000
in sales, and I paid myself
about $65,000. Thats a lot
less than the $100,000 I
made at the peak of my ca-
reer as a software engineer,
but because Im a sole pro-
prietor I can write off a lot
of stuff on my tax return.
Whats ahead? Our next
product will charge laptops.
Im gradually bringing pro-
duction into my own facil-
ity because contracting it
out is expensive. We need
to get into retail outlets.
Our products are sold in
Batteries Plus stores, but
its a struggle to get into
sporting-goods and
big-box stores.
Is your work reward-
ing? Id rather
do this than
anything else.
My custom-
ers are my
bosses, and
I like to
make them
happy. Plus,
I bought a com-
pany car: a Chevy
Camaro that replaces
the 68 model I sold to
go to college and the 98
pickup I had been driving.
Its my dream car. PATRICIA
MERTZ ESSWEIN
Recharging a Career With Solar Power
A former software engineer harnesses the sun to charge devices on the go.
WHO: Dean Sala, 52
WHERE: San Jose, Calif.
WHAT: Founder and CEO of
Suntactics
PROFILE
SUCCESS STORY
$
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KIPLINGERS PERSONAL FINANCE 11/2014
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JAMES K. GLASSMAN > Opening Shot
Small Stocks, Big Potential
S
mall-company stocks are having
a lousy 2014. So far this year, the
group, as measured by the Russell
2000 index, is roughly flat, and it
trails Standard & Poors 500-stock index,
which measures large-cap stocks, by a
whopping nine percentage points.
As longtime readers of my column know,
I like lousy. Investing styles and categories
fall in and out of favor, and the time to
pounce is when they are out. Small-capital-
ization stocks are especially attractive now
because they are unloved and because his-
tory shows that over the long term, little
companies beat big ones. Since 1926, small
caps have returned on average two per-
centage points per year more than large
caps. In fact, if youre a believer in buy-
and-hold investing, you can make a good
case for owning only small-cap stocks.
Bigger risks. Yes, theres a trade-off. Over the
past 10 years, the Russell 2000 has been 34%
more volatile than the S&P 500. That should
come as no surprise: In investing, you get
paid to assume risk. But if you have the faith
and courage to hang on for the long haul,
the ups and downs shouldnt bother you.
A major advantage of small caps is that
relatively few professionals pay attention to
them. Why is that an advantage? The effi-
cient market hypothesis holds that a stocks
price reflects all publicly available informa-
tion and that precise future price movements
are unknowable. So it stands to reason that
stocks that undergo less scrutiny are priced
less efficiently than those that are widely
followed. Because small companies are less
widely followed than big ones, you are
more likely to find bargains among them.
Consider a small cap you have probably
never heard of: Seacor Holdings, a com-
pany that services the offshore oil-and-gas
industry. Seacor is one of the top holdings
of T. Rowe Price Small-Cap Stock (symbol
OTCFX), a superb small-cap fund that is
closed to new investors. According to
Thomson Reuters, precisely two analysts
follow Seacor, a firm with a market cap of
$1.6 billion. By contrast, 33 analysts track
Halliburton, an energy-services company
with a market cap of $57.4 billion.
Prices of companies such as Halliburton,
Apple and Google reflect vast amounts of
information gleaned by dozens of analysts
and deeply involved institutional investors.
By contrast, many small caps fly under the
radar screen.
Of course, this lack of visibility also
means that unexpected news about a small-
cap stock can cause a spike (up or down)
in its share price. In addition, when mutual
funds and other large investors buy or sell
many shares at once, it can cause volatility
in a stock with a small market cap. But
these apparent drawbacks have little effect
on returns for long-term holders.
Small caps tend to go in and out of fashion.
They beat large caps in the 1960s, the late
70s and the first half of the 90s, and they
have had a great run since 2000. Has the
latest run ended? Theres no way to know
for sure, but some analysts are attributing
this years sluggishness to profit-taking
the rationale they typically ascribe to price
movements they cant otherwise explain.
Another concern is a gnawing fear that
interest rates will rise once the economy
gets back to a robust rate of growth. Higher
rates tend to hurt smaller companies, which
lack the creditworthiness of larger ones.
But trying to guess the advent and de-
mise of cycles is a fools errand. The wise
investor understands that small caps are
strictly long-term investments with a high
likelihood of beating large caps and the
U.S. market as a whole.
The next question is, which small caps?
Although theres no standard definition,
small caps are generally characterized
as companies with market values of less
than $5 billion. Thats a bit big for my taste.
The roughly 2,000 stocks that make up
the portfolio of ISHARES RUSSELL 2000 (IWM),

Small caps
are especially
attractive
now because
they are out
of favor, and
over the long
term little
companies
beat big
ones.
K11-GLASSMAN.a.indd 26 9/11/14 2:25 PM
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Submitted On Date: Time:
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KIPLINGERS P(4CB) (8.25 x 10.75) 10/1/14 11/1/14
bhq
8/6/14
8.25x10.75-(4CB)RDFB82523KIPS
955
8/6
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Past performance cannot guarantee future results.
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Request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses, and
other information that you should read and consider carefully before investing.
The principal value of the Retirement Funds is not guaranteed at any time, including at or after the target date, which is the approximate
year an investor plans to retire (assumed to be age 65) and likely stop making new investments in the fund. If an investor plans to retire
signifcantly earlier or later than age 65, the funds may not be an appropriate investment even if the investor is retiring on or near the target
date. The funds allocations among a broad range of underlying T. Rowe Price stock and bond funds will change over time. The funds
emphasize potential capital appreciation during the early phases of retirement asset accumulation, balance the need for appreciation with
the need for income as retirement approaches, and focus on supporting an income stream over a long-term postretirement withdrawal
horizon. The funds are not designed for a lump-sum redemption at the target date and do not guarantee a particular level of income. The
funds maintain a substantial allocation to equities both prior to and after the target date, which can result in greater volatility over shorter
time horizons. *Based on cumulative total return, 12 of 12, 12 of 12, 12 of 12, 9 of 9, and 2 of 3 (67%) of the Retirement Funds for individual investors outperformed their Lipper average for
the 1-, 3-, 5-, and 10-year and since-inception periods ended 6/30/14, respectively. The Retirement 2010, 2020, 2030, 2040, and Income Funds began operations on 9/30/02; the 2005, 2015,
2025, and 2035 Funds began operations on 2/29/04; the 2045 Fund began operations on 5/31/05; and the 2050 and 2055 Funds began operations on 12/31/06. (Source for data: Lipper Inc.)
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8.25x10.75-(4CB)RDFB82523KIPS.indd 1 8/27/14 11:28 AM
AHEAD
28
KIPLINGERS PERSONAL FINANCE 11/2014
an exchange-traded fund that tracks its
namesake index, have an average cap of
$1.5 billion. The average market value of
the 336 stocks that make up the T. Rowe
Price fund is $2.0 billion.
The smaller the market cap, the higher
the potential returnand the greater a
stocks volatility. Im fond of mutual funds
that specialize in the smallest of the small-
cap universe: micro-cap stocks, with the
sweet spot being an average market cap
of about $500 million. Such funds are hard
to find. When they get popular, they tend to
attract a flood of assets and often respond
by closing to new investors.
An excellent fund thats still open is
AMG MANAGERS ESSEX SMALL/MICRO CAP GROWTH
(MBRSX). The average market cap of its
holdings is $566 million. Over the past 10
years, the fund outpaced the S&P 500 by
an average of 1.1 percentage points per year
(all returns are through September 5). A big
drawback, though, is the funds annual ex-
pense ratio of 1.50%.
Another fine choice: BRIDGEWAY ULTRA-
SMALL COMPANY MARKET (BRSIX), with stocks
that boast an average market cap of just
$228 million. The fund returned 50.9% in
2013. It has gained 0.8% so far in 2014, and
its running slightly behind the S&P 500
over the past 10 years. Still, it has an ex-
pense ratio of just 0.75%, and I like it for
the next two or three decades.
Among the best funds that tilt toward
larger (though not large) companies is
HODGES SMALL CAP (HDPSX). Including 2014,
it has been in the top 10% of its category
(funds that invest in small companies with
a blend of growth and value attributes)
for six straight years. The average market
cap of its holdings is $2.0 billion.
Then theres BARON SMALL CAP (BSCFX),
which has an average market cap of $3.4
billion and an admirably low turnover ratio
of just 20% (meaning that the fund holds a
stock for about five years, on average). Over
the past 10 years, Baron Small Cap, a mem-
ber of the Kiplinger 25, beat the S&P 500 by
an average of 1.7 percentage points per year.
Finally, consider the most popular of all
small-cap mutual funds, VANGUARD SMALL CAP
INDEX (NAESX). The fund tracks the CRSP U.S.
Small Cap index, which excludes the very
smallest small caps. It charges a mere 0.24%
in expenses.
Its fashionable these days to criticize
funds whose stocks are chosen by living
human beings rather than index algorithms.
But because small caps are inefficient,
smart research and analysis can pay off.
Should you do your own stock picking?
Certainly, if you have the time and some
expertise. But for most of us, when the
going gets tough, its easier to muster the
discipline to hold on to stocks when we
own them through a mutual fund. Good
choices abound.
JAMES K. GLASSMAN IS A VISITING FELLOW AT THE AMERICAN
ENTERPRISE INSTITUTE. HE OWNS NONE OF THE STOCKS
MENTIONED.
Im fond
of mutual
funds that
specialize
in the
smallest of
the small-cap
universe:
micro-cap
stocks.
FIVE GREAT SMALL-CAP FUNDS FOR LONG-TERM INVESTORS
By the Numbers
Five- and ten-year returns are annualized. *As of September 5. As of July 31, unless otherwise noted. #As of June 30. Not available; fund not in existence for the entire period. SOURCES: Fund companies, Morningstar Inc.
Fund Symbol 1 yr. 5 yrs. 10yrs.
Expense
ratio Three largest holdings

AMG Managers Essex Small/Micro Cap Growth MBRSX 17.4% 17.8% 9.4% 1.50% AtriCure CNO Financial Matador Resources
Baron Small Cap Retail BSCFX 15.4 17.6 10.0 1.31 SBA Communications TransDigm Gartner
Bridgeway Ultra-Small Company Market BRSIX 16.8 17.4 7.9 0.75 Famous Daves Rex American Res. Warren Res.
#
Hodges Small Cap HDPSX 27.1 25.5 1.35 Trinity Ind. Texas Pacific Land Bonanza Creek Energy
Vanguard Small-Cap Index NAESX 20.0 18.9 10.6 0.24 Salix Pharmaceuticals Cooper Cos. Hillshire Brands
S&P 500-STOCK INDEX 23.8% 17.0% 8.3% Apple ExxonMobil Microsoft*
RUSSELL 2000 INDEX 15.2% 17.0% 9.2% Intermune Puma Biotechnology Isis Pharmaceuticals*
Over the past year, the big-company Standard & Poors 500-stock index has beaten the small-cap-oriented Russell 2000. But over long periods,
small-cap stocks have won. Note the contrast between the familiar names in the S&P 500 and the lesser-known stocks in the funds.
Total return*
K11-GLASSMAN.1.indd 28 9/12/14 12:20 PM
1 National savings rate courtesy of Bankrate.coms 2014 Passbook & Statement Savings Study, as of 4/16/14; survey is compiled semi-annually April 15 and October 15
of current year.
2 Barclays Online Savings Annual Percentage Yield (APY) is valid as of 01/06/2014. No minimum opening balance or deposit required to open. Fees could reduce the
earnings on the account. Rates may change at any time without prior notice, before or after the account is opened. No minimum balance to open, but for interest to
post to your account you must maintain a minimum balance that would earn you at least $0.01.
2014 Barclays Bank Delaware, member FDIC.
Reach your goals faster with an account
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Take a simple path to
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INVESTING

Build More
Wealth
We give you all the tools you need to reach
your financial goals. BY KATHY KRISTOF
PHOTO-ILLUSTRATIONS BY AARON GOODMAN
30
KIPLINGERS PERSONAL FINANCE 11/2014
A DECADE INTO RETIREMENT, EILEEN KEMP IS
proof that even people with modest means
can build sufficient wealth to sustain a sat-
isfying lifestyle. A former elementary school
librarian, Kemp started educating herself
about investing when she was in her thirties
and just beginning to contribute to work-
place retirement accounts. Now, at age 70,
K11I-BUILD WEALTH.1.indd 30 9/11/14 5:19 PM
11/2014
31
K11I-BUILD WEALTH.1.indd 31 9/11/14 5:19 PM
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KIPLINGERS PERSONAL FINANCE 11/2014
INVESTING // COVER STORY
shes living comfortably in a
home she has paid off, taking
annual vacations to Europe
and making regular gifts to
charity. Ive made some mis-
takes, but Ive learned things
along the way, says Kemp.
Im a relatively frugal per-
son, and I have more money
coming in than I need.
At a time when Americans
are shouldering increased
responsibility for their long-
term economic security,
Kemps story offers encour-
agement. To be sure, its easy
to be overwhelmed by the
cacophony of competing fi-
nancial demands, particularly
when youre starting out. And
the amount of money that
professionals say youll need to finance
everything from college to retirement
can appear daunting. But building
wealth over a lifetime is both possible
and rewarding. Like constructing your
dream house, it takes time, a well-
crafted plan and, sometimes, a little
help from the pros.
Draw Up a Blueprint
THE FIRST STEP IN ANY MAJOR
construction job is to create a wish
list. When designing your house, an
architect is likely to ask for photo-
graphs of things you want and like
from crown molding to refrigerators
so he or she can produce a drawing of
how the finished project should look
and allow you to get an estimate of the
cost. Its wise to be equally specific
with your financial wish list.
If youre like most people, your list
will include multiple itemssuch as
buying a house and a car, paying your
kids college costs, and footing the bill
for your retirement. But theres a vast
difference between financing a Toyota
instead of a Tesla, or paying for college
at a state school instead of an Ivy
League university. And a comfortable
retirement can cost anything from
$1,000 to $100,000 a month, depend-
ing on whether your typical vacation
involves playing Skee-Ball at the
arcade or taking ski trips to the Alps.
The more specific you make your list,
the more accurate your plans will
be. So write down your wants, their
estimated costs and when you hope
to achieve each piece of your plan.
When youre done, the wish list
might look something like this:
Accumulate $20,000 (six months
worth of living expenses) within one
year for an emergency fund.
Save $50,000 within five years for a
down payment on a $250,000 home.
Build a kitty of $100,000 (in todays
dollars) to help pay for college in 16
to 20 years for two kids, now toddlers.
Save enough in 30 years to generate
a monthly stream of income of
$5,500 (again, in todays dollars) for
the remainder of your life.
Create a Budget
NOW ITS TIME TO PULL OUT A
calculator to see if you can afford the
project. This involves figuring out
just how much you need to set aside
every month for each goal.
Determining the monthly amount
required to address a short-term goal
is easy. Just divide the total by the
number of months you have left to
save. So, for example, if you need
$5,000 in one year, you would set
aside $417 per month.
To estimate the monthly cost of
financing goals that are several years
away, youll want to factor in the
impact of investment returns. So
youre best served by a Web-based
tool, such as Bankrate.coms savings
goal calculator. Kiplingers Retirement
Savings Calculator (kiplinger.com/
tools/retirement) can help answer the
more complex question of how much
you need to set aside each month for
retirement when youre likely to have
part of the bill financed by Social
Security and possibly by an employer-
sponsored pension plan.
When done, you should have a list
with a column that shows how much
you need to save monthly for each goal.
Adding up the numbers will give you
the total amount you should be setting
aside each month to attain all of your
goals in the time youve allotted. If the
total is more than you can afford, you
have two choices: You can address one
or two goals now and the rest later, or
you can modify your aspirations.
s
K11I-BUILD WEALTH.indd 32 9/10/14 4:23 PM
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11/2014 KIPLINGERS PERSONAL FINANCE
For instance, although cash invest-
ments, such as Treasury bills, money
market funds and short-term certifi-
cates of deposit, pay practically nothing
nowadays, they keep your principal
safe. And that is precisely what you
want for an emergency fund or a goal
thats coming up in just a year or two.
Income-oriented investments, such
as government and corporate bonds,
generally pay fixed rates of interest and
promise to return your principal on
specified maturity dates. That makes
them ideal for midrange goals that
need a predictable source of funding.
Returns from stocks, by contrast,
vary greatly over short stretches (see
the table on page 34). But over many
years, stocks handily beat the rate
of inflation and the return from other
investments. That makes stocks great
for long-term goals.
Commodities and real estate tend to
perform well when other investments
are struggling and especially when
inflation heats up. Although consumer
prices have been tame for most of the
past three decades, you never know
when inflation will reappear. So it
makes sense to put 10% of your long-
term assets into commodity funds and
real estate investment trusts, says
Tony Davidow, an asset allocation
strategist at Charles Schwab & Co.
Our hypothetical couple could put
their emergency savings in cash, their
down-payment savings into a mixture
of corporate and government bonds,
and their retirement and college ac-
counts in a mixture of stocks, REITs
COMPETING ECONOMIC DEMANDS AND LIMITED INCOME MAKE IT PARTICULARLY
difficult for young people to save. After all, you have to pay for a roof over your head,
you may need (or want) a car, and youll have to pay what may seem like shockingly high
amounts for necessities such as food, taxes and health insurance. But starting early is the
key to building lasting wealth. And if you have access to a 401(k) plan, building a nest egg
may be cheaper than you think.
Thats because many employers match worker contributions at a generous rateusually
between 50 cents and 100 cents on the dollar up to a set limit (commonly 6% of your pay).
In addition, contributions are taken out of your check before taxes. Uncle Sam (and states
with income taxes) act as if you didnt earn the money, which lowers your tax bills.
Lets say you earn $30,000 annually and contribute 6% of your pay to your retirement
plan. That works out to $150 per month. Your employer matches your contributions at the
rate of 50 cents on the dollar, adding an additional $75 to your account each month. Be-
cause your contributions cut your taxable income, you pay $22 less in federal withholding
each month and, say, $5 less to your state. In the end, your 401(k) contributions reduce your
take-home pay by $123 but your account grows by $225 per month.
If you keep just this modest contribution rate going until you retire 40 years from now,
youll have just over $1 million socked away. (This assumes 3% annual salary growth and
that you earn 8% a year on your money, or one percentage point per year less than the av-
erage annual return of a portfolio made up of 70% stocks and 30% bonds, according to
Morningstar.)
So how can you find that extra $123 a month to save? Pack a lunch. Buy a used car rather
than a new one (which will also save on auto insurance). Live with Mom and Dador add an
extra roommate. Pare back your phone, cable, entertainment and clothing expenses. Re-
pay your student loans more slowly by signing up for the governments Pay As You Earn or
income-based repayment plan if youre eligible. You have numerous ways to squeeze $31 a
week out of your budget, and the end result will be well worth the trouble.
How to Get Started
*
Road to Riches
For instance, a 32-year-old couple
who have nothing saved but want to
fund all four of the goals described
above would likely feel they face an
insurmountable task. Funding all four
accounts at the desired pace would
cost them roughly $3,700 a month
$1,667 for the emergency fund, $700
for the home, $300 for the college ac-
count and about $1,000 for their retire-
ment accounts. (All the calculations
assume an 8% annualized return and
average inflation of 3% per year. The
retirement calculation assumes the
couple have no current savings, get
matching retirement-plan contribu-
tions from their employers and will get
$1,850 a month from Social Security.)
A more viable plan might be to cut
the size of the emergency fund to, say,
$10,000, or to stretch the amount of
time for amassing the savings. The
couple could also postpone saving for
a house until they have built up the
emergency fund. But they would be
foolish to delay saving for their longer-
term goals, especially if it means for-
going thousands of dollars in matching
funds from their employers. As an al-
ternative, they could opt to set aside
less today, with the understanding
that theyll boost their contributions
for long-term goals once they have
achieved their nearer-term goals.
Select the
Right Materials
THE BENEFIT OF DISTRIBUTING
your savings among a number of goal-
related pieces is that it helps with
what many find to be investings most
vexing challenge: how to divvy up
your assets among various types of
investments, such as stocks, bonds,
cash and real estate. Experts disagree
on the perfect allocations. But differ-
ent types of assets each have unique
qualities that make them appropriate
for specific goals. In the absence of an
agreed-upon ideal, simply dividing
your assets according to your goals
and time frames can work nicely.
K11I-BUILD WEALTH.indd 33 9/10/14 4:24 PM
34
KIPLINGERS PERSONAL FINANCE 11/2014
INVESTING // COVER STORY
IN A PERFECT WORLD, EVERYONE WOULD MAKE HIS OR HER OWN
investing decisions. After all, no one knows you better than you do.
Plus, being a do-it-yourself investor means you dont have to pay
someone else to invest on your behalf. But sometimes even savvy
investors need help. You have to know the limitations of your own
abilities, says Jeff Reeves, editor of the investing-advice Web site
InvestorPlace.
To invest solo, you need to be calm, disciplined and well educated
about investment options, says financial planner Cicily Maton, of
Aequus Wealth Management, in Chicago. You must also be able to set
specific goals and track your progress. But most of all, you must have
the emotional fortitude to suffer through market downturns without
selling in a panic or suffering undue anxiety. Ups and downs are as
old as the market, Maton says. Even if youre intellectually capable
of investing on your own, you should get help if you find yourself
worrying so much that youre losing sleep.
You can get assistance from many sources, but the costs and serv-
ices vary widely. Here are some of the more attractive options:
Free. If youre able to map out your plan but need help dividing up
your assets and choosing specific investments, you may be able to get
free advice from your discount
broker or mutual fund company.
Vanguard, for example, offers an
array of tools at www.vanguard
.com that help investors choose
specific Vanguard funds based on
their goals, risk tolerance and
time horizon. Investors with more
than $500,000 in assets can also
get ongoing access to Vanguards
financial advisers via computer-
based video chats.
Inexpensive. Some online advi-
sory firms, such as Jemstep and
Betterment, also provide free
portfolio evaluations and sug-
gest ways to invest at a low cost
from a few dollars to about $250 per year if you have a balance of at
least $50,000 (see Best of the Online Investment Advisers, July).
These so-called robo-advisers are best for people who are just start-
ing out. If you already have built up a portfolio of stocks and bonds, be
careful. These sites may encourage you to sell your existing holdings
because they dont fit into their programs, which favor low-cost index
funds. Selling what youve gotparticularly when your investments
are well consideredcould be a mistake because you might trigger a
tax bill and fail to improve your portfolios performance. The Ameri-
can Association of Individual Investors also offers model portfolios
for the $29 cost of an annual membership.
Comprehensive. If youve amassed considerable wealth and need
investment advice, you can pay for it in one of three ways: by the hour,
via commissions or by letting an adviser manage your money and
charge you a percentage of the assets. Each method has advantages
and disadvantages.
Financial planners who charge by the hour can help with almost
any question and can map out a great blueprint for you. Theyll gener-
ally charge $100 to $400 an hour for their services. But they wont
execute the plan. If you dont have the discipline to take the next
steps, you may need more hands-on help.
Some advisers dont charge you directly, but make money by steer-
ing you into products that generate commissions. They may make
excellent recommendations. But because they only make money if
you buy something, their advice can be tainted by their own economic
interest. You should always ask these types of advisers how much
theyre paid for the products they pitch you.
Fee-only planners usually charge a percentage of the assets you
give them to manage. These
fees often amount to 1% or
more of your assets each year
and come on top of the ex-
penses you pay for the invest-
ments they buy on your behalf.
Of course, these costs may
be well worth paying if your
adviser can keep you on track,
rebalance your portfolio as
needed, and stop you from
making rash and potentially
costly moves. But be sure to
check your planners creden-
tials. Securities regulators have
an online tool that can help at
http://adviserinfo.sec.gov.
Type in the name of your ad-
viser or the name of his or her firm, and you can learn if either has had
any regulatory scuffles. The Web site will also lead you to Form ADV,
which tells you how an adviser is paid.
Its also wise to consider occasionally whether youre getting good
value for your money. Is your adviser easy to reach? Does he or she
give you good advice and keep you from acting rashly? If not, look
around for someone better. For more on finding a financial planner,
go to kiplinger.com/links/financialplanner.
When to Call In a Pro
*
Expert Advice
gi
fe
m
an
pe
m
be
ad
re
ne
m
co
ch
tia
an
ht
Ty
STOCKS FOR THE LONG RUN
How They Stack Up
1 year 88 24 54.0% (1933) 43.3% (1931)
5 years 84 12 28.6% (1995-99) 12.5% (1928-32)
10 years 79 4 20.0% (1949-58) 1.4% (1999-08)
20 years 69 0 17.9% (1980-99) 3.1% (1929-48)
Data from 1926 to 2013. *Annualized for 5-, 10- and 20-year periods. SOURCES: Ibbotson SBBI,
a Morningstar company.
Holding
period
Number
of
periods
Number of
periods with
negative returns Best period* Worst period*
Since 1926, U.S. stocks have returned 10% annualized. But they
have lost money in 27% of calendar years. The longer the
holding period, the lower the chance of losing money in stocks.
K11I-BUILD WEALTH.indd 34 9/10/14 4:24 PM
35
11/2014 KIPLINGERS PERSONAL FINANCE
and commodities. How-
ever, as long-term goals
draw near, they will want
to shift some of those as-
sets into bonds and cash.
Thus, although the col-
lege accounts will start
out primarily invested in
stocks, the family should
start shifting some of the
money into fixed-income
investments when the
kids enroll in junior high.
When the oldest child is
ready to enroll in college,
about one-fourth of his
or her college savings
should be in short-term
CDs and bank deposits.
Most of the rest should
be in income-oriented
investments, such as
medium-term bonds that mature as
tuition bills come due.
This bucket approach not only pro-
vides a simple formula for divvying up
assets, it also offers psychological ben-
efits. When you see that your near-
term needs are being taken care of
with investments that are not going to
swing in value, you can take more risk
in the accounts designed to address
long-term goals, says Charles Rotblut,
a vice-president at the American Asso-
ciation of Individual Investors, a non-
profit dedicated to investor education.
Sweat the Details
SPREADING YOUR ASSETS AMONG
stocks, bonds and cash is just the first
step to building a solid investment
portfolio. You also need to diversify
within those asset classes.
The stock portion of your portfolio
should include shares of big companies,
small companies, domestic outfits and
foreign firms. Some of the companies
you invest in should be rapid growers,
and others should be value playsnot
necessarily fast growers but companies
with stocks that are cheap in relation
to earnings, sales and other key busi-
ness measures. Dividend-paying stocks
should also play a role in your portfolio.
Meanwhile, the bond portion of
your holdings should be divided
among bonds with varying maturity
dates and issuers, such as corporations
and government agencies. You can
boost your yield by buying low-rated,
high-yield corporate debt, known as
junk bonds. But realize that if you
reach too far for yield, your bond port-
folio will probably be more volatile,
Davidow says. Thats because junk-
bond prices often react to economic
news, much as stock prices do. You can
also boost yield by buying long-term,
high-quality bonds. But bond prices
typically move in the opposite direc-
tion of interest rates, and long-term
bonds lose more than short-term
bonds when rates rise. For steadier
results in your bond portfolio, its best
to stick with investment-grade bonds
that mature in less than 10 years.
The broader your investment mix,
the less likely that one economic
upset will topple the plan. One way
to diversify is to own both low-cost
index fundswhich are designed
simply to track a market barometer,
such as Standard & Poors 500-stock
indexand actively managed funds.
Why? Index funds provide an inex-
pensive way to produce returns nearly
equal to those of the market they track.
You can choose from index funds that
track large-company stocks, small-
company stocks, foreign stocks, all
sorts of bonds and a wide variety of
other asset categories. And index funds
are available as both mutual funds and
exchange-traded funds.
But sprinkling in a few carefully
selected actively managed funds gives
you an even better mix, Davidow says.
A good fund manager can find stocks
that arent included in indexes and can
concentrate assets where the opportu-
nities are best.
Ideally, a well-managed actively run
fund will improve your portfolios re-
turns and lower risk. Thats an exact-
ing standard that not many managers
can meet. A good place to start your
search is the Kiplinger 25, the list of
our favorite no-load mutual funds (see
page 52). Considering a specific fund
and want to see how it measures up?
Go to www.morningstar.com and look
at the funds performance over both
long and short periods. (Also, see
3 Simple Steps, on page 80.)
Retired librarian Kemp doesnt
expect her actively managed funds
t inv t e v t s nveee vestor ed t ve ve nv v
K11I-BUILD WEALTH.indd 35 9/10/14 4:24 PM
36
KIPLINGERS PERSONAL FINANCE 11/2014
INVESTING // COVER STORY
to beat their benchmarks every year.
But she checks their holdings and per-
formance every six months to make
sure both the funds and her portfolio
are on track. If the holdings within a
fund have changed dramatically or
a fund is drastically lagging its index
for a long stretch, shell make adjust-
ments. But mostly, she says, shes a
patient buy-and-hold investor.
Control Your Costs
INVESTING INVOLVES A WHOLE
range of costs, among them trading
commissions, fund expenses and in-
come taxes. If youre not keeping a
tight rein on expenses, thousands of
dollars may slip through your fingers.
If you buy individual stocks, you
can save a fortune by using a good
discount broker. The typical discount
broker charges just $7 per trade, while
a full-service firm may charge hun-
dreds of dollars. If you trade often, the
difference could add up to thousands
of dollars per year.
Fund investors also need to be wary
of fees. Diversified U.S. stock funds
charge an average of 1.2% per year for
management, printing and other costs.
But index funds, which dont hire high-
priced managers to pick securities,
charge as little as 0.05% per year
thats a mere $5 per year for every
$10,000 invested. Assuming equal
performance before the impact of fees,
youll end up with far more money
over the long haul if you invest in a
super-low-cost index fund (see the
table below). If you prefer actively
managed funds, choose ones that
charge well-below-average fees, such
as Kiplinger 25 members Dodge & Cox
Stock and Vanguard Selected Value.
Or, as Davidow suggests, mix some
index mutual funds or exchange-
traded funds with a few carefully
selected actively managed funds.
If you have taxable accounts, the
government can also take a big bite out
of each trade. If you hold investments
for more than a year, you pay preferen-
tial capital gains rates to the IRS, usu-
ally amounting to no more than 15%.
But your state is likely to assess taxes
on the gain, too. Add those levies
together and youre likely to lose one-
fifth or more of your profit. Savvy in-
vestors trade sparingly and attempt to
offset capital losses with gains. And
if youre in a high tax bracket, consider
investing in tax-free municipal bonds
or bond funds for income. Although
muni bonds typically pay less than
taxable bonds of similar maturity and
quality, you may be better off after
taxes with lower-yielding munis.

Do Regular
Maintenance
BOTH YOUR PORTFOLIO AND YOUR
life contain a lot of moving parts that
need to act in concert to ensure that
your money is available to fund the
goals you hold dear. So your portfolio
needs regular upkeep.
Major life events, such as a job
change or the birth of a child, should
prompt a portfolio review and possible
revisions. As you close in on long-term
goals, such as retirement or that first
college-tuition bill, shift money into
less-volatile investments so you dont
have to worry about a market crash
wrecking your plans.
Even in the absence of life-changing
events, you should review your portfo-
KIPLINGERS Retirement Savings Calcula-
tor at kiplinger.com/tools/retirement can
help you estimate how much you need to
save today to afford your future lifestyle.
THE AMERICAN ASSOCIATION OF
INDIVIDUAL INVESTORS (www.aaii
.com) offers investment education and
model portfolios. Membership is $29
per year.
BANKRATE.COM features a variety
of savings calculators, including those
that help you figure out how much to
save monthly to pay for college and other
long-term goals.
THE FINANCIAL PLANNING ASSOCI-
ATION (www.plannersearch.org) and the
National Association of Personal Financial
Advisors (www.napfa.org) provide refer-
rals to local financial advisers.
MORNINGSTAR (www.morningstar
.com) offers detailed information on mu-
tual fund performance, can help you design
a portfolio and can tell you whether your
investments are well diversified. Premium
membership ($199 annually) gives you
access to additional tools and analysis.
THE SECURITIES AND EXCHANGE
COMMISSION (http://adviserinfo.sec
.gov) provides a tool that lets you check
the background and credentials of individ-
ual advisers, brokers and advisory firms,
including how the firm is compensated.
Where to Get Help
*
Online Tools
B
l
n
y
g
n
c
p
r
g
c
l
h
w
e
WATCH THOSE FEES
Big Impact
1 year $2,232 $2,222 $2,212
10 years 20,696 19,956 19,247
20 years 65,630 60,706 56,211
30 years 167,624 147,851 130,683
SOURCE: 2014 Morningstar Inc.
Time frame 0.2% 0.8% 1.4%
The table shows how fees affect the bot-
tom line. It assumes an initial investment
of $1,000, monthly additions of $100 and
an annual return of 8% before fees.
Annual fee
wer r y r yie yiel yi
lio at least once a year. Thats because
your investments will move up and
down at different times and at differ-
ent rates. If your stocks soar while your
bonds slump, for example, you could
find your portfolio too heavily concen-
trated in stocks. At that pointthe end
of the calendar year is a good time
lighten up a bit on the asset class that
has performed well and invest the pro-
ceeds in the lagging category. This
technique, known as rebalancing, is
a simple way to follow age-old market
wisdom: Buy low, sell high.
K11I-BUILD WEALTH.indd 36 9/10/14 4:24 PM
154637C 03/20/14
1
2014 Medicare & You, National Medicare Handbook, Centers for Medicare and Medicaid Services, September 2013
Even if your life is in shape, you could be vulnerable
to the risk of needing long term care.
At least 70% of people over 65 will need long term care
services and support at some point.
1
The cost of these
services can impact even well-built portfolios. And the
longer you live, the likelier you are to need them.
Good news: Options are available that could help you
pay for long term care.
Get your feet wet at genworth.com
Financially savvy.
Physically t.
A sitting duck?
38
KIPLINGERS PERSONAL FINANCE 11/2014
increasing the likelihood that the
companies will boost their dividends
for years to come. Prices and related
data are through September 5. Price-
earnings ratios are based on estimated
year-ahead profits.
AQUA AMERICA (SYMBOL WTR)
Headquarters: Bryn Mawr, Pa.
Share price: $25
Market capitalization: $4.4 billion
Price-earnings ratio: 20
Dividend yield: 2.7%
Dividend streak: 23 years
Its not surprising to find a utility on
a list of dividend payers. But Aqua
America, a holding company for water
and wastewater utilities, stands out for
its potential to keep raising its payout.
Aqua America serves nearly 3 mil-
lion people in eight states. But with
close to 53,000 water systems in the
U.S., expansion opportunities abound.
In 2013, Aqua America bought 15 oper-
ations, and so far this year it has com-
pleted another eight acquisitions.
The purchases are helping pump up
earnings, which increased at an annu-
recognize. A lot of them probably get
overlooked because theyre just sort of
boring, says Sam Stovall, chief equity
strategist for S&P Capital IQs stock re-
search group. Plenty of firms outside
the S&P 500 have also regularly in-
creased dividends for a decade or more.
The following eight stocks boast
yields that are close to or more than
the S&P 500s 2.0% yield. Each of the
companies has raised its dividend every
year for the past 23 years or more. The
outlook for their businesses is bright,
WHEN YOU THINK OF MIGHTY DIVIDEND
payers, some big names instantly come
to mind: Coca-Cola, Johnson & John-
son and McDonalds, to name a few.
These firms are so-called Dividend
Aristocrats, members of Standard &
Poors 500-stock index that have
boosted their payouts every year for
at least the past quarter-century.
But the list of dividend-raisers goes
well beyond household names. In fact,
even among the Aristocrats, there are
companies whose names you might not
38
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Dividend Champs
Off the Beaten Track
These eight little-known firms have raised dividends
annually for at least the past 20 years. BY CAROLYN BIGDA
STOCKS

VF CORP. IS
CASHING IN ON
RISING INTEREST
IN ACTIVEWEAR.
INVESTING
K11I-DIVIDEND.indd 38 9/11/14 2:26 PM
stores, and during tough economic
times consumers often choose to re-
pair an old car rather than buy a new
one. So although Genuine Parts earn-
ings fell in both 2008 and 2009, they
did not collapse. The stock lost only
16.3% in 2008, much better than the
S&P 500s plunge of 37%.
Since then, Genuine Parts results
have steadily improved. Sales in the
first half of 2014 for the entire com-
pany, which includes Genuine Parts
three other business lineswholesale
distribution of electrical materials,
industrial replacement parts and
office suppliesrose 10% from the
same period the year before. The com-
panys S.P. Richards subsidiary was
named as the primary wholesaler for
the newly merged Office Depot and
OfficeMax stores. And Genuine Parts
is expanding overseas as well. Last
year, it bought Exego Group (now GPC
Asia Pacific), an auto-parts distributor
in Australia.
All of that has made it possible for
the company to continue to increase
its dividend, this year by 7%. The stock
trades at 19 times estimated year-ahead
earnings, compared with an average of
18 for its sector (companies that make
nonessential consumer goods).
HELMERICH & PAYNE (HP)
Headquarters: Tulsa
Share price: $104
Market capitalization: $11.2 billion
Price-earnings ratio: 15
Dividend yield: 2.6%
Dividend streak: 42 years
Much of the boom in U.S. energy
depends on horizontal drilling. And
Helmerich & Payne, the largest land-
drilling contractor in the U.S., is one
of the best at doing it. In 2013, it won
55% of all new rig contracts. Orders
have continued to pour in this year,
and analysts estimate that earnings
will surge 18% in 2015, after an ex-
pected gain of 12% in 2014.
Rig deals often carry long-term con-
tracts with steady revenues, perfect
for financing dividends. Since Decem-
ber 2012, H&Ps payout has soared
as oil-and-gas drilling equipment
and plastic tube connectors. But this
diversified manufacturer is worth
getting to know.
Case in point: Despite the global
economys uneven growth so far in
2014, Dovers sales are improving.
Orders for the firms four main seg-
mentsenergy, engineered systems,
fluids, and refrigeration and food
equipmenthave been strong, climb-
ing by an average of 8% in the first six
months of 2014 from the same period
the year before. Dovers results stand
out, writes Nicholas Heymann, an
analyst at William Blair, a Chicago-
based investment bank.
Meanwhile, the company continues
to raise its dividend at a healthy clip.
Over the past five years, the payout
has moved up at an annualized rate
of 9%. Dovers stock trades at 17 times
estimated year-ahead earnings, a
slight premium to the average indus-
trial-stock P/E of 16. But analysts
expect Dovers earnings to rise 12%
next year, compared with 9% for its
average competitor.
GENUINE PARTS (GPC)
Headquarters: Atlanta
Share price: $88
Market capitalization: $13.5 billion
Price-earnings ratio: 19
Dividend yield: 2.6%
Dividend streak: 58 years
During the recession, Genuine Parts
fared better than most. Thats because
the companys main business segment
is the wholesale distribution of car re-
placement parts through NAPA auto
alized rate of 15% from 2009 through
2013. In addition, Aqua America plans
to spend roughly $1 billion on upgrades
from now through 2016, much of which
will be paid for by state-approved
surcharges and rate increases. That
should bolster earnings and help fuel
dividend growth. Aqua America lifted
its payout by 9% this year; over the past
decade, it has boosted its dividend by
an average of 8% per year.
BD (BECTON, DICKINSON) (BDX)
Headquarters: Franklin Lakes, N.J.
Share price: $116
Market capitalization: $22.3 billion
Price-earnings ratio: 17
Dividend yield: 1.9%
Dividend streak: 42 years
BD makes syringes, IV catheters and
other garden-variety medical supplies
that most of us barely notice. The big-
gest driver of the companys growth is
overseas sales. BD now has operations
in more than 50 countries, with about
60% of sales coming from abroad. And
in the companys latest quarterly state-
ment, overseas revenues increased 6%
(adjusted for currency fluctuations)
from the same period a year earlier.
U.S. revenues rose only 2.8%.
Analysts believe BDs earnings will
rise 9% in both 2015 and 2016. That
should provide ample space to in-
crease the dividend, which currently
accounts for only 35% of estimated
2014 earnings. Indeed, over the past
five years, BD has ratcheted up its div-
idend at an average rate of 11% annu-
ally. That growth rate may justify a
premium P/E. The stock trades at 17
times estimated year-ahead earnings,
on par with the average health care
company in the S&P 500.
DOVER CORP. (DOV)
Headquarters: Downers Grove, Ill.
Share price: $88
Market capitalization: $14.7 billion
Price-earnings ratio: 17
Dividend yield: 1.8%
Dividend streak: 59 years
Dover produces industrial components
that consumers rarely encounter, such C
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T. ROWE PRICE
IS ONE OF THE
TOP PROVIDERS
OF TARGET-DATE
RETIREMENT
FUNDS.
11/2014 KIPLINGERS PERSONAL FINANCE
K11I-DIVIDEND.indd 39 9/11/14 2:26 PM
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KIPLINGERS PERSONAL FINANCE 11/2014
INVESTING
company will earn $1.96 per share.
Although the companys goal is to
raise the dividend by 4% annually, it
outdid itself in late July when it an-
nounced a boost of 10%. UGIs stock
is having a terrific year, with a return
of 31%. It trades at 18 times estimated
earnings for the fiscal year that ends
in September 2015. That compares
with 16 for the average utility stock.
VF CORP. (VFC)
Headquarters: Greensboro, N.C.
Share price: $65
Market capitalization: $28.2 billion
Price-earnings ratio: 20
Dividend yield: 1.6%
Dividend streak: 41 years
You may have never heard of VF Corp.,
but you probably wear some of its
products. The apparel manufacturer
owns more than 30 brands, including
The North Face, Timberland and
Wrangler. Lately, the company has
benefited from rising consumer de-
mand for activewear. In fact, sales
of activewear were up 9% across the
industry last year, compared with 2%
for the total apparel market, according
to the NPD Group. (Raise your hand
if youve worn yoga pants or a running
jacket to the grocery store.)
VF is doing a good job of riding the
trend with its top activewear brands.
Revenues in the second quarter were
up 8% from the same quarter the year
before, and earnings per share were
up 16%. VFs global reach is also an ad-
vantage. A little more than one-third
of its sales come from overseas. In the
latest quarter, foreign sales rose by 14%.
The momentum is likely to continue.
Analysts see VFs earnings expanding
14% this year and 13% next year. That
should enable VF to continue to de-
liver impressive dividend boosts (it
lifted the payout by 21% last year).
After soaring 68% in 2013, VFs stock
trails the S&P 500 in 2014. But the
breather allows earnings to catch up
with the share price. VF trades at 20
times estimated earnings, compared
with 18 for the average company that
makes nonessential consumer goods.
UGI CORP. (UGI)
Headquarters: King of Prussia, Pa.
Share price: $36
Market capitalization: $6.2 billion
Price-earnings ratio: 18
Dividend yield: 2.4%
Dividend streak: 27 years
Low natural gas prices have hampered
some utilities, but not UGI. Thats
partly because the holding company is
diversified: It owns U.S. and European
propane gas distributors, natural gas
utilities, gas pipelines, and storage
facilities. The company has also been
growing through acquisitions. In 2012,
AmeriGas, a partial subsidiary of UGI,
bought Heritage Propane, which in-
creased the number of customers
AmeriGas serves from 1.3 million
to more than 2 million. And in July,
UGI announced that it would purchase
the liquefied-petroleum-gas business
of Frances Total. If the deal goes
through, UGIs share of the LPG busi-
ness in France will essentially double.
Carl Kirst, an analyst at BMO Capi-
tal Markets, a Toronto-based bank, be-
lieves the deal with Total could boost
profits by 17 cents per share in the first
full fiscal year after the purchase is
completed. Over the long term, that
amount could rise to as much as 33
cents per share, thanks to cost savings.
For the fiscal year that ends in Sep-
tember 2015, analysts predict that the
882%. A repeat over the next few years
is unlikely. But according to a report
by FBR & Co., an Arlington, Va.based
investment bank, management has a
clear preference for returning excess
capital via a dividend. H&P shares
trade at 15 times estimated year-ahead
profits. Thats below the overall mar-
kets P/E, but higher than the P/E of
the typical drilling stock.

T. ROWE PRICE (TROW)
Headquarters: Baltimore
Share price: $81
Market capitalization: $21.4 billion
Price-earnings ratio: 17
Dividend yield: 2.2%
Dividend streak: 28 years
Okay, if youre a regular Kiplingers
reader, youve probably heard of mu-
tual fund giant T. Rowe Price, which
has more than $730 billion in assets
under management. But you may not
think of Price as the steady dividend-
raiser that it is.
Although the company increased its
dividend by 16% in 2014, the stock has
performed poorly this year, losing 2.1%.
One reason: Overseas institutional cli-
ents and some domestic advisers have
been pulling money out of Price funds.
In 2013, for example, investors with-
drew $12 billion more from Price funds
than they added. The pattern contin-
ued in the first half of 2014.
But Price has a large and growing
retirement-account business. As of
2013, T. Rowe was the third-largest
provider in the U.S. of target-date
funds, which own a mix of invest-
ments appropriate for a set retirement
year. Target-date dollars are more
likely to stay put than money invested
in other kinds of investment accounts,
says Keefe, Bruyette & Woods, a New
York Citybased investment bank.
That should help drive steady earnings
growth, which analysts see climbing
18% this year and 10% in 2015. Price
also has zero debt and ample cash it
can use to raise its dividend. At 17
times projected year-ahead profits,
Price shares sell well below their aver-
age P/E of 19 for the past five years.
DOVER CORP. MAKES
REFRIGERATION EQUIPMENT,
AMONG OTHER THINGS.
K11I-DIVIDEND.indd 40 9/11/14 2:26 PM

I Hate Annuitiesand So Should You!
If you own an annuity or if
someone is trying to sell you
one, I urge you to call for your
free report. Annuities can lock
you into low returns, complicate
your tax situation, tie up your
wealth and hit you with high
fees. If you have an annuity,
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isnt, we might be able to help
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Tis free report could save
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Forbes Portfolio Strategy
columnist for 29 years
Author of 10 fnancial
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Please hurry! Tis ofer contains time-sensitive information.
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1-800-695-5929 Ext. A900
2014 Fisher Investments. 5525 NW Fisher Creek Drive, Camas, WA 98607.
Investments in securities involve the risk of loss.
* Rebates are for investors who liquidate an annuity with surrender penalties
and fund a Private Client Group account. Average rebates from August 2011
to September 2013 were $13,227. Terms and conditions apply.
See www.AnnuityAssist.com/Terms-and-Conditions for further information.
**As of 6/30/2014.
2014 Fisher Investment

Te Soothing Sound Of Guaranteed Income
Many Kiplingers investors currently own or are considering annuities. Afer all, they are
sold as safe investments, ofering dependable and predictable returns, no matter what
the market does. And that sounds very appealing, especially afer sufering through the
worst bear market since the Great Depression. So whats the problem with annuities?
What You Might Not Know About Annuities
Could Come Back To Haunt You
Before you put your hard-earned money into an annuity, or if you already own one,
please call 1-800-695-5929 for a special report, Annuity Insights: Nine Questions Every
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Te vast majority of annuities are really complicated insurance policies that make it very
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decision to reverse. Tats why it is vital you look before you leap and ensure that you
have your eyes wide open before you purchase an annuity. And if you already own an
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and the ugly aspects of annuities.
What Youll Learn From Tis Free Report
Te diferent types of annuities and the advantages and disadvantages of each
Why annuities can be complex to understand
What you need to ask an annuity salesman when evaluating his product
Te infation risk, tax implications, estate planning considerations and
typical annuity fees
Stuck In An Annuity?
Because people ofen regret their annuity decision, Fisher Investments has helped many
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Fisher Investments is a money management frm serving successful individuals as well
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42
KIPLINGERS PERSONAL FINANCE 11/2014
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A Promising Biotech Bargain
ANDREW FEINBERG > Promised Land
B
ack in the old days, stocks of small
biotech companies virtually defined
investment risk. News about the re-
sults of a drug in trials could cause a
stock to soar or crater. There was no middle
ground. So value investors ignored biotech.
But with a seemingly endless flow of new
drugs emerging from biotech labs, that
has changed. The Baupost Groups Seth
Klarman, one of the sharpest value inves-
tors around, regularly invests in biotech
stocks. He recently made a killing in Idenix,
when Merck said that it would buy the de-
veloper of hepatitis C drugs at a 240% pre-
mium to the pre announcement share price.
I, too, have warmed to biotech over the
past year. One of my largest holdings is
GILEAD SCIENCES (SYMBOL GILD), whose hepatitis
C drug Sovaldi generated more revenue
($2.3 billion) in its first quarter on the market
than any other drug ever. At $105, Gilead,
which also has the worlds top HIV drugs,
trades at just 12 times estimated year-ahead
earnings (prices are as of September 5).
I think BIODELIVERY SCIENCES INTERNATIONAL
(BDSI) is also a terrific value, and I have made
it one of my biggest holdings. The firm al-
ready has approval from the Food and Drug
Administration for a drug with big poten-
tial. It has another drug that just produced
excellent results in late-stage trials, and
it has a third in early trials that could be
a huge winner. The stock trades for just
under $16 and boasts a market capitaliza-
tion of $805 million.
BioDelivery Sciences has a lot going for
it. In June, the FDA approved Bunavail,
a treatment for dependence on opiates.
The annual market for these kinds of drugs
is $1.4 billion. We expect peak sales of
Bunavail will be 20% to 25% of the market,
says Al Medwar, a vice-president at Bio-
Delivery. Based on the way investors value
biotech stocks, if Bunavail generates annual
sales of $300 million, that should be worth
$900 million in stock market value, or 12%
more than BioDeliverys current market cap.
In August, the company announced out-
standing late-stage trial results for BEMA
buprenorphine, its treatment for chronic
pain. BioDelivery and its partner, Endo
International (ENDP), plan to seek FDA
approval for the drug late this year or early
in 2015. When the application is filed, Endo
will give BioDelivery $10 million, and it
will hand over $50 million if the drug wins
approval. Those would be significant chunks
of change for such a small company. There
is a 90% chance of approval, says analyst
Jim Molloy, of Summer Street Research,
an institutional research firm. BEMA
buprenorphine could be the next Vicodin.
Big potential. The drug in early trials is
Clonidine, a topical gel for treating diabetic
neuropathy pain. In August, BioDelivery
doubled the number of participants in its
Clonidine trial and said the analysis thus
far was very encouraging. About 20% of
the millions of diabetics in the U.S. suffer
nerve-related pain. If Clonidine works, it
could produce $300 million in annual sales.
But millions of non-diabetics also suffer
neuropathic pain, and current treatments
are fairly ineffective. So annual Clonidine
sales could conceivably hit $600 million.
As a value investor, what I really like
about BioDelivery Sciences is not so much
that there are many ways to win as that
there are almost no ways to lose. If initial
sales of Bunavail prove disappointing, the
stock could fall to $10. But it often takes
time for a new drug to get traction, so that
shouldnt scare people out of the stock,
especially given the high likelihood that
BEMA buprenorphine will be approved
and the reasonable chance that Clonidine
will be as well. With BDSI, you get tremen-
dous downside protection, says Molloy,
whose one-year price target for the stock
is $20. My estimates are conservative. The
stock could hit $40.
COLUMNIST ANDREW FEINBERG MANAGES A NEW YORK CITY
BASED HEDGE FUND CALLED CJA PARTNERS.

What I
like about
BioDelivery
Sciences is
not so much
that there are
many ways to
win as that
there are
almost no
ways to lose.
K11I-FEINBERG.indd 42 9/9/14 12:07 PM
Service. Safety. Savings.
Great rates and safety.
In harmony.
The Studio
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44
KIPLINGERS PERSONAL FINANCE 11/2014
Unfortunately,
too many
companies
distribute their
wealth in
economically
inefficient
ways.

KATHY KRISTOF > Practical Investing
How Overpaid CEOs Hurt Us
KATHY KRISTOF IS A CONTRIBUTING EDITOR TO KIPLINGERS PERSONAL
FINANCE AND AUTHOR OF THE BOOK INVESTING 101.
Y
ears ago, when I started writing
articles critical of exorbitant exec-
utive pay, some readers accused me
of being a communist. In truth, Im
a die-hard capitalist. But I believe soaring
executive pay is helping to fuel income in-
equality and is a threat to shareholders and
the economy. A growing body of research
supports this theory, so I thought it time
to explain my views.
You expect some income inequality in a
capitalist economic system. But inequality
becomes a negative when it reaches ex-
treme levels, and the situation in the U.S.
is approaching that threshold, Standard
& Poors says in a recent report.
The distribution of income isnt just
about fairness. John Maynard Keynes, one
of the fathers of modern economics, posited
that extreme income inequality could lead
to long stretches of high unemployment.
Extreme inequality is characterized by
stagnant or falling income among the poor
and middle class, which causes vast num-
bers of people to spend less and leads to
diminishing demand. If demand is inade-
quate to snap up the available supply of any
given good or service, the price of the item
will fall. If the price falls far enough, it will
drop below the cost of production. Produc-
tion then ceases, workers are furloughed,
and demand falls further.
Keynes encouraged governments to use
fiscal and monetary policy to spur demand
to avoid this downward spiral. His theories
formed the basis for the policies that the
U.S. government employed to prevent the
Great Recession from morphing into a de-
pression. Most prominently, the Federal
Reserve has used its monetary tools to
drive interest rates to rock-bottom levels.
But monetary policy can only take you
so far, as Japan has painfully demonstrated
over the past quarter-century. Whats
needed to goose the economy is a surge
in consumer spending, which accounts
for more than two-thirds of U.S. economic
activity. But too many Americans are keep-
ing a tight grip on their wallets.
Why arent Americans shopping more?
They cant afford to. A recent analysis by
the Congressional Budget Office found that
income for 90% of the population is grow-
ing at an anemic annual rate of 1%. The
Census Bureau estimates that overall infla-
tion-adjusted income increased a tepid
0.2% in 2011 and 2012, but it declined for
everyone but the top 20% of earners.
Keynes figured that people would borrow
to buy. But because Americans are still dig-
ging out of the debt hole that nearly wrecked
the economy in 2008, many simply cant.
To spend more, they must earn more.
Exorbitant pay. It may be difficult for small
businesses to boost wages, but the same
cant be said about large, cash-flush pub-
licly traded companies. Unfortunately, too
many companies distribute their wealth
in economically inefficient ways. Consider
software giant Oracle. For the fiscal year
that ended in May 2013, CEO Larry Ellison
declined cash pay. But Oracle lavished him
with 7 million stock options with an esti-
mated value of $77 million at the time of
the grant. Given that Ellison, 70, has a net
worth of some $50 billion, its hard to argue
that hell work harder because of an addi-
tional $77 million in pay. Hed make more
by earning a piddling 0.2% on his billions.
But if Oracle divided the value of those
7 million options among its 122,000 em-
ployees, each would get 57 shares, which
would be worth $663 today. That could
give two or three football stadiums full of
people the incentive to head to the mall. By
giving that money to super-rich executives
like Ellison rather than spreading it more
equitably among the rank and file, busi-
nesses make it difficult for their employees
to spend on anything but bare necessities.
The entire U.S. economy pays the price.
INVESTING
K11I-KRISTOF.1.indd 44 9/11/14 5:18 PM
The Main Advantages of Municipal Bonds
Investors are attracted to municipal bonds for three
reasons, safety of principal, regular predictable
income and the tax-free benets. Together, these three
elements can make a compelling case for including
tax-free municipal bonds in your portfolio.
Potential Safety of Principal
Many investors, particularly those nearing retirement
or in retirement, are concerned about protecting
their principal. In March of 2012, Moodys published
research that showed that rated investment grade
municipal bonds had an average cumulative default
rate of just 0.08% between 1970 and 2011.* Tat
means while there is some risk of principal loss,
investing in rated investment-grade municipal bonds
can be a cornerstone for safety of your principal.
Potential Regular Predictable Income
Municipal bonds typically pay interest every six
months unless they get called or default. Tat means
that you can count on a regular, predictable income
stream. Because most bonds have call options,
which means you get your principal back before
the maturity date, subsequent municipal bonds you
purchase can earn more or less interest than the called
bond. According to Moodys 2012 research,* default
rates are historically low for the rated investment-
grade bonds favored by Hennion & Walsh.
Potential Triple Tax-Free Income
Income from municipal bonds is not subject to federal
income tax and, depending on where you live, may also
be exempt from state and local taxes. Triple tax-free can
be a big attraction for many investors in this time of
looming tax increases.
About Hennion & Walsh
Since 1990 Hennion & Walsh has specialized in
investment grade tax-free municipal bonds. Te
company supervises over $2 billion in assets in over
15,000 accounts, providing individual investors with
institutional quality service and personal attention.
What To Do Now
Call 1-800-318-4850 and request our Bond Guide,
written by the experts at Hennion & Walsh. It will
give you a clear and easy overview of the risks and
benets of tax-free municipal bonds.
Are Tax Free Municipal
Bonds Right for You?
2013 Hennion and Walsh. Securities oered through Hennion & Walsh Inc. Member of FINRA, SIPC. Investing in bonds involves risk
including possible loss of principal. Income may be subject to state, local or federal alternative minimum tax. When interest rates rise, bond prices
fall, and when interest rates fall, prices rise. *Source: Moodys Investor Service, March 7, 2012 U.S. Municipal Bond Defaults and Recoveries,
1970-2011. Past performance is no guarantee of future results.
Dear Investor,
We urge you to call and get your free Bond Guide. Having tax-
free municipal bonds as part of your portfolio can help get your
investments back on track and put you on a path to achieving
your investment goals. Getting your no-obligation guide could
be the smartest investment decision youll make.
Sincerely,
FREE Bond Guide
Without Cost or Obligation
CALL 1-800-318-4850
(for fastest service, call between 8 a.m. and 6 p.m.)
Hennion & Walsh, Bond Guide Oer
2001 Route 46, Waterview Plaza
Parsippany, NJ 07054
Please call 1-800-318-4850
for your free Bond Guide.
46
KIPLINGERS PERSONAL FINANCE 11/2014
Equal Rights
for Tech
In this technology fund,
the smallest companies get
the same weighting as Apple.
TECHNOLOGY STOCKS HAVE BEEN ON
a roll. Over the past 12 months, the
sector returned 25.1%, besting Stan-
dard & Poors 500-stock index by two
percentage points. FIRST TRUST NASDAQ-
100-TECHNOLOGY SECTOR INDEX FUND has
done even better, with a 34.3% gain
over the past year.
Although the exchange-traded fund
holds just 41 stocks, it manages to cap-
ture a broad swath of the sector, from
Apple to Chinese search engine Baidu
to Cerner, a health care information-
technology firm. Much of the funds
recent success stems from its hefty ex-
posure to semiconductor stocks, which
account for nearly 40% of its assets.
One of the funds chip stocks, Avago
Technologies, soared 124% over the
past year, and another, Micron Tech-
nology, more than doubled.
The ETF tracks the tech companies
in the Nasdaq-100 index, which
consists of the largest nonfinancial
com panies that trade on Nasdaq. Tra-
ditional index funds weight companies
by market capitalization, which means
the greater a companys value, the big-
ger its position in a fund. The First
Trust ETF, by contrast, weights each
holding equally, rebalancing four times
a year to maintain each stocks equal
standing. By devoting roughly 2.4% of
assets to each holding, the ETF ramps
up its exposure to smaller firms, some
with market values of less than $10 bil-
lion. At the same time, the fund gets a
small income boost from some larger
dividend-paying holdings, including
Apple, Intel and Microsoft. The ETF
yields 0.8%. KAITLIN PITSKER
ETF SPOTLIGHT
Technology Sector ETFs Ranked by one-year return
Rank/Fund Symbol
Exp.
ratio
2011
market
correction

1 yr. 3 yrs. 5 yrs.

Total return*
1. PowerShares Dynamic Semiconductors PSI 40.8% 23.4% 14.3% 36.6% 0.63%
2. SPDR S&P Semiconductor XSD 38.5 21.7 14.5 34.8 0.35
3. iShares PHLX Semiconductor SOXX 38.2 25.2 16.1 27.3 0.48
4. Market Vectors Semiconductor SMH 37.9 0.35
5. First Trust Nasdaq-100-Tech Sector QTEC 34.3 24.4 18.6 24.1 0.60
S&P TECHNOLOGY SECTOR SELECT INDEX 23.4% 22.0% 16.9% 18.6%
Through September 4. *Assumes reinvestment of all dividends and capital gains; three- and five-year returns are annualized. Market
correction is from April 29 through October 3, 2011. Not available; fund not in existence for the entire period. Expense ratio is the
percentage of assets claimed annually for operating a fund. SOURCE: 2014 Morningstar Inc.
Sector figures do not add up to 100% because of rounding.
SOURCES: First Trust Portfolios, Morningstar Inc.
First Trust Nasdaq-100-Technology Sector Index
Weekly
closes
$45
40
35
30
25
20
15
Performance Key Facts
SYMBOL: QTEC
CLOSING PRICE: $42
ASSETS: $261 million
START DATE: April 19, 2006
STOCK HOLDINGS: 41
AVG. PRICE-EARNINGS RATIO: 23*
AVG. MARKET VALUE: $18.6 billion
*Based on estimated earnings.
Sector Breakdown: Semiconductors Take Charge
LARGEST DIVERSIFIED US STOCK ETFs Ranked by assets
Rank/Fund Symbol 1 yr. 3 yrs. 5 yrs.
Assets
(billions)
2011
market
correction

Expense
ratio
Total return*
1. SPDR S&P 500 SPY $173.1 23.2% 21.8% 16.8% 18.6% 0.09%
2. iShares Core S&P 500 IVV 60.0 23.3 21.9 16.8 18.7 0.07
3. PowerShares QQQ QQQ 47.0 31.6 24.7 21.0 13.1 0.20
4. Vanguard Total Stock Market VTI 46.5 22.8 22.2 17.3 20.3 0.05
5. iShares Russell 2000 IWM 25.3 15.3 21.2 17.0 28.9 0.20
S&P 500-STOCK INDEX 23.4% 22.0% 16.9% 18.6%
Through September 4. *Assumes reinvestment of all dividends and capital gains; three- and five-year returns are annualized. Market correction is from
April 29 through October 3, 2011. Expense ratio is the percentage of assets claimed annually for operating a fund. SOURCE: 2014 Morningstar Inc.
2011 2010 2012 2013 2014
5%
COMPUTER SERVICES
7%
TELECOM EQUIPMENT
16%
INTERNET SERVICES
10%
COMPUTER HARDWARE
38%
SEMICONDUCTORS
25%
SOFTWARE
K11I-ETF SPOTLIGHT.indd 46 9/9/14 12:07 PM
INVESTING
48
KIPLINGERS PERSONAL FINANCE 11/2014
from the conflict between Russia and
Ukraine. In the second quarter, the
18 nations that share the euro currency
showed no growth, on average, from
the first quarter. The European econ-
omy has been so anemic that it runs
the risk of a Japanese-style deflation,
meaning a debilitating spiral of falling
prices and wages.
More help. The economys troubles have
put renewed pressure on the European
Central Bank to provide ad-
ditional mon-
etarystimulus.
The ECB launched new pro-
grams in September to try to funnel
more money into the euro zone econo-
mies, and ECB president Mario Draghi
has hinted that the bank could go fur-
ther. The expectation out there is that
the ECB can do something more, says
Don Rissmiller, chief economist at
Strategas Research Partners, an in-
vestment firm in New York City. But
this time, it has to work.
More financial stimulus from the
ECB could, however, further devalue
the euro, which would hurt U.S. inves-
tors. The euro has lost 5.8% against
the dollar this year, to a recent $1.30.
The drop makes sense given the weak-
ness of Europes economies. A sliding
euro could help European-based mul-
tinational firms better compete with
U.S. rivals, because prices of European
goods and services get cheaper in dol-
lars as the euro falls.
But the declining euro also hurts
U.S. investors holding European stocks,
because the value of the securities
drops when theyre translated from
euros to dollars. So far this year,
for example, Germanys
main stock index, the
DAX, gained 2%
in euros but was
down 4% in dol-
lars (all prices
and returns
are through
September 5).
So with
all that, why
bother look-
ing across the
Atlantic? We
see big discrepan-
cies in share prices
versus companies intrin-
sic value, says Rob Taylor, comanager
of Oakmark Global fund. The fund,
which can invest worldwide, hunts
for stocks that Oakmark believes
should rise at least 30% to reflect the
underlying companys true value.
Taylor and his analysts have found
enough candidates in Europe that the
fund at midyear had more than one-
third of its $3.7 billion in assets in
shares of companies in developed
4 European Stocks to Buy Now
News from the Continent is dreary. But some multinationals look compelling. BY TOM PETRUNO
STOCKS
CHOOSING EUROPEAN STOCKS OVER U.S.
stocks the past few years has meant
living in constant hopeand suffering
constant disappointment. Americans
were much better off staying home.
Since the end of2010, Standard &
Poors 500-stock index has returned
73%, far exceeding the 38% gain of the
MSCI Europe index. Making things
worse for U.S. investors, the euro has
declined against the dollar, further
sapping the MSCI Europes return.
But the disparity in performance
just boosts Europes
allure for some value-
hunting investors,
who say the regions
stocks arerelative bargains
in a world of pricey assets.Europe
is filled with great companies, says
Dean Tenerelli, the London-based
manager of T. Rowe Price European
Stock, a $1.8 billion fund that holds
stakes in big companies such as food
titan Nestl (symbol NSRGY) and drug
maker Novartis (NVS). He concedes,
though, that its tough for many inves-
tors to get past the gloomy headlines.
Start with the economy. After reviv-
ing modestly in 2013, Europe is again
struggling amid government austerity
measures, a still-hobbled banking sys-
tem and the threat of economic fallout
NESTL IS BENEFITING
FROM GROWING SALES
IN EMERGING NATIONS.
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K11I-EURO STOCKS.indd 48 9/10/14 4:25 PM

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11/2014 KIPLINGERS PERSONAL FINANCE
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taxes paid, but thats no help if you

own foreign stocks in tax-deferred
accounts, such as an IRA. Check with
your tax adviser before buying any
foreign security for income.)
Royal Dutch is a favorite big-energy-
company pick of brokerage Barclays
Capital. With rising production from its
wells in the Gulf of Mexico and a new
focus on controlling costs, the oil-and-
gas company can currently cover both
capital-spending requirements and divi-
dend payments solely from the cash that
the business generates, Barclays says.
That leaves significant room to fur-
ther reward shareholders via dividend
hikes and share buybacks, Barclays says.
The potential for steady dividend
European countries (including the
United Kingdom). That was a bit more
than the average global funds 31%
stake in European stocks, according
to Morningstar.
Oakmark Globals second-largest
holding is CREDIT SUISSE GROUP (CS).
Although many investors still shun
banks in the aftermath of the 2008
crash, Taylor thinks Credit Suisses
rebuilt capital base and focus on private
and investment banking will translate
into healthy long-term profit growth.
And with CSs American depositary
shares trading at $28, youre paying less
than 10 times estimated 2015 earnings
for the business. (Many foreign stocks
trade in the U.S. as ADSs or as the simi-
lar American depositary receipts.)
For investors who prefer a name they
know, NESTL is a classic growth story
thats worth a look. The Swiss company
is the worlds largest food processor,
with brands including Lean Cuisine,
Gerber and Alpo. Its expected to earn
$3.90 per ADR this year, rising 12%,
to $4.35, in 2015, says Andrew Wood,
an analyst at AllianceBernstein in Lon-
don. He recommends the stock in part
based on Nestls huge presence in the
developing world, which already ac-
counts for 45% of sales. Growth in
emerging nations has helped Nestls
stock, now $77, more than quadruple
over the past 10 years.
For income-seeking investors, many
European stocks offer rich dividend
yieldsin many cases north of 3%,
compared with an average of 2% for
S&P 500 stocks. Dividend generosity
says that management has discipline
about the companys capital and an
awareness of shareholders, says
T. Rowe Prices Tenerelli. His second-
biggest holding is the BritishDutch
energy giant ROYAL DUTCH SHELL (RDS.B),
whose Class B shares, at $84, yield
4.5%. Shares of two big U.S. rivals,
ExxonMobil and Chevron, yield 2.8%
and 3.4%, respectively.
(One caution on foreign dividends:
Some countries withhold taxes on div-
idends paid to foreigners. The IRS al-
lows you to claim a credit on foreign
*
KipTip
5 Funds That Bet on Europe
INVESTORS WHO WANT TO INVEST IN EUROPEAN STOCKS HAVE PLENTY OF OPTIONS
among mutual funds and exchange-traded funds. But check first whether you al-
ready have a large chunk of money in Europe. Many diversified global and interna-
tional stock funds have a large percentage of their portfolio in European stocks.
For example, DODGE & COX INTERNATIONAL STOCK (SYMBOL DODFX), a member of the
Kiplinger 25, recently had 60% of its assets in companies based in Europe (includ-
ing the United Kingdom).
If you want a no-load fund that owns nothing but European shares, consider
T. ROWE PRICE EUROPEAN STOCK (PRESX). Over the past 10 years, the fund gained 9.2%
annualized, compared with 8.5% for the average European mutual fund. Manager
Dean Tenerelli focuses on how proficient companies are at generating a return on
shareholders capital. In the past year, that has led him to some Spanish and Italian
banks that survived the global financial crisis.
If active management isnt your thing, youll appreciate VANGUARD EUROPEAN
STOCK INDEX (VEUSX). The fund, which tracks the FTSE Developed Europe index, holds
about 500 stocks. But note: The index is dominated by British, French and Swiss
companies, which account for 61% of the portfolio. The exchange-traded VANGUARD
FTSE EUROPE ETF (VGK) tracks the same index. Annual expenses for both the fund and
the ETF are just 0.12%.
Another ETF, ISHARES MSCI EMU (EZU), takes the opposite tack. It excludes British
and Swiss stocks and owns only shares of companies in 11 developed-country mem-
bers of the euro currency zone. Its fees, at 0.50% annually, are much higher than
those of the Vanguard funds.
One question to ask about any overseas fund: Does it try to hedge against cur-
rency fluctuations? Some do and some dont. That can make a big difference de-
pending on what happens with the dollars value against the euro, British pound,
Swiss franc and other currencies. In our list, the Dodge & Cox fund does hedge in
some cases, while the T. Rowe Price fund doesnt. Most index funds, including ETFs,
dont hedge unless theyre specifically designed to do so.
increases figures prominently in the
appeal of London-based RIO TINTO (RIO),
one of the worlds biggest mining
firms, particularly for iron ore. The
company has slashed costs as demand
for many commodities weakened over
the past year. The result was a surpris-
ing 21% jump in profits from its core
businesses in the first half of this year.
At $53, Rio Tintos ADRs yield 3.8%,
and analysts at brokerage Canaccord
Genuity in London say the company
has the wherewithal to hike its pay-
outs substantially. Rio is now moving
toward the happy position of having
surplus cash, Canaccord says. And if
commodity prices pick up, that would be
gravy for Rioand its shareholders.
K11I-EURO STOCKS.indd 49 9/10/14 4:25 PM
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KIPLINGERS PERSONAL FINANCE 11/2014
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Kiplinger 25, can own any type of
bond, it currently has 90% of its assets
in junk. Comanager Carl Kaufman
says rising rates pose a greater risk to
bond investors than a rash of firms de-
faulting on their debt. But hes selective
about what he buys. We own a lot
of companies that arent investment-
grade but that arent bad companies,
he says. Hertz Global Holdings is one
example. This year, the rental car giant
announced that it will have to restate
as many as three years of results be-
cause of an accounting error, and that
2014 profits will be lower than ex-
pected. But Kaufman believes the
challenges Hertz faces are temporary.
Strategic Income is also positioned
to combat rising rates. Its average
duration, a measure of interest-rate
sensitivity, is about 2 years, compared
with a little more than 4 years for
the U.S. High Yield Master II index.
Year to date, the fund has
returned 3.4%. It yields
3.4%, and annual expenses
are 0.85%.
For another option, check
out VANGUARD HIGH-YIELD CORPO-
RATE (VWEHX). The fund doesnt
gamble on the highest-yield-
ing (and therefore highest-
risk) bonds; more than half of
the portfolio is in debt rated
BB, the best rating for junk.
This approach can help mini-
mize losses. In 2008, for ex-
ample, High-Yield Corporate
fell 21.3%, compared with 26.4%
for its average competitor.
So far this year, the fund has
returned 5.0%, and it yields
4.3%. Its annual expense ratio
is a low 0.23%.
BECAUSE INTEREST RATES ARE SO LOW
today, the extra income you get from
high-yield, or junk, bonds looks
tempting. But before you buy in to
junk, you should know what youre
getting yourself into.
Companies with poor credit ratings
issue junk bonds, so yields tend to be
larger than those of Treasuries and
other low-risk debt. In recent years,
though, investor demand for junk has
pushed up prices and slashed yields
(bond prices move opposite to yield).
In fact, the average junk bond recently
paid out only 5.8%, well below the
long-term average of 9.5%. And at 3.9
percentage points, the gap between the
yield of the average junk bond and that
of comparable Treasuries is nearly two
percentage points short of the average
(figures are as of September 5).
Given such low yields, the chance
of a junk-bond pullback is rising. This
summer offered a glimpse of
what could happen. For about
two weeks in July and August,
U.S. stocks retreated due to
a host of worries, from con-
flicts in the Middle East and
Ukraine to the winding down
of the Federal Reserves bond-
buying program. Standard &
Poors 500-stock index fell
3.9%. Junk bonds, which tend
to move in the same direction
as stocks, also pulled back.
The Bank of America Merrill
Lynch U.S. High Yield Master
II index, a broad benchmark
of junk bonds, declined 1.0%.
The damage turned out to
be minimal. Stocks recovered,
and the U.S. High Yield Mas-
ter II index has returned 5.3%
Handle Junk Bonds With Care
They still pay more than most debt, but bargains are scarce. BY CAROLYN BIGDA
BONDS
year-to-date. But that also means junk
bonds remain expensive. There hasnt
been a dramatic repricing, says Mark
Freeman, comanager of the Westwood
Income Opportunity fund.
As a result, financial advisers are
singing a cautious tune. Holding some
junk bonds makes sense because of their
fatter interest payments and because
they should hold up better than lower-
paying, high-quality bonds once yields
start rising in earnest. But signs of a
faltering economy or a stock market
correction (a drop in share prices of 10%
to 20%) could cause junk debt to reel.
Funds to consider. Lou Stanasolovich,
of Legend Financial Advisors, in Pitts-
burgh, recommends that his clients
keep 3% to 8% of their portfolios in
junk bonds. One good choice: OSTER-
WEIS STRATEGIC INCOME FUND (SYMBOL OSTIX).
Although Osterweis, a member of the
INVESTING
K11I-JUNK BONDS.indd 50 9/9/14 12:06 PM
Loves growing things
in her garden.
Has grown her garden shop into a
thriving landscape design company.
OR
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2014 Regions Bank. Investments in securities and insurance products are not FDIC-insured, are not a deposit, may go down in value,
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how your Regions Wealth Advisor can help you move forward, call 1.800.826.6933 or visit us online at regions.com/wealth.
INVESTING
52
KIPLINGERS PERSONAL FINANCE 11/2014
have come roaring back in
recent months, too. Since
the start of 2014, shares in
Goldcorp have climbed 21%,
and Annaly Capital Man-
agement has returned 25%.
Says Sertl: Weve had
broad success in four or five
sectors.
One stock did so well,
in fact, that the managers
unloaded all of their shares
this year: Baker Hughes.
They bought shares in
the oil-services company
for about $40 in 2012. In
early 2014, a turnaround
in the sector drove the
stock price up past $60,
and the managers started
to sell. By the time the stock
peaked at $75, they were
out of the position. It was
a nice success, says Sertl.
NELLIE S. HUANG
REACH YOUR GOALS: TO SEE PORTFOLIOS
USING THESE FUNDS, GO TO KIPLINGER
.COM/LINKS/PORTFOLIOS.
Microsoft lagged the mar-
ket by nearly 10 percentage
points in 2012. Over the past
year through September 5,
those stocks returned 42%
and 25%, respectively.
Apple, Values top hold-
ing, constitutes 6% of the
funds assets. Sertl says the
managers have trimmed the
funds holdings in Apple as
the stock climbed this year.
If we hadnt, it would be
9% to 10% of the portfolio,
he says. He emphasizes that
the sales did not represent
a call on Apples valuation.
I dont think its expen-
sive, Sertl says.
Other winners include
energy firms Apache and
National Oilwell Varco, up
17% and 21%, respectively,
over the past year. A gold
miner and a mortgage real
estate investment trust
stocks in sectors that were
hurting in much of 2013
with attractive business
models and solid balance
sheets. They buy with a
three- to five-year view and
sell a stock once it moves
into the top range of what
they consider fair value.
Were buying things that
arent working and selling
things that are working,
says Sertl. The fund holds
36 stocks.
The stocks that held the
fund back a couple of years
ago are helping it now. For
example, shares of Apple
sank 43% between Septem-
ber 2012 and June 2013, and
ARTISAN VALUES THREE-YEAR
results look impressive on
the surface. Dig deeper,
however, and youll see
that the fund lags the broad
market and ranks behind
79% of all funds that focus
on large, undervalued com-
panies. But Artisan Values
outlook is looking brighter.
Part of the problem has
been the use of an anti-
momentum process in a
momentum market, says
George Sertl, who runs the
fund with three other man-
agers. The quartet tilt to-
ward out-of-favor stocks
Things Are Looking
Up at Artisan Value
THE KIPLINGER 25 UPDATE
Through Sept 5. *Three-, five- and ten-year returns are annualized. Date of issue. Not available; fund not in existence for the entire period. Small-company U.S. stocks. #Foreign stocks. Tracks high-grade U.S. bonds. SOURCE: 2014 Morningstar Inc.
Specialized/
Go-Anywhere Funds Symbol
Total return*
Added to
Kip 25

1 yr. 3 yrs. 5 yrs. 10 yrs.

FPA Crescent FPACX 14.2% 14.3% 12.2% 9.0% Oct. 2008
Merger MERFX 5.3 4.3 3.6 3.9 June 2007
Bond Funds Symbol
Total return*
Added to
Kip 25

1 yr. 3 yrs. 5 yrs. 10 yrs.

DoubleLine Total Return N DLTNX 6.9% 4.8% May 2011
Fidelity Intermed Muni Inc FLTMX 7.7 3.6 4.1% 4.1% May 2004
Fidelity New Markets Income FNMIX 14.1 7.8 9.6 9.6 May 2012
Fidelity Total Bond FTBFX 7.6 3.8 6.0 5.3 May 2014
Met West Unconstrained Bd M MWCRX 5.6 May 2013
Osterweis Strategic Income OSTIX 6.0 7.0 7.8 7.0 May 2013
Vanguard Sh-Tm Inv-Grade VFSTX 3.4 2.4 3.3 3.7 May 2010
Indexes
Total return*
1 yr. 3 yrs. 5 yrs. 10 yrs.
S&P 500-STOCK INDEX 23.8% 22.2% 17.0% 8.3%
RUSSELL 2000 INDEX

15.2 21.3 17.0 9.2

MSCI EAFE INDEX
#
14.6 14.3 9.1 7.5
MSCI EMERGING MARKETS INDEX 19.0 6.5 8.1 12.5
BARCLAYS AGGREGATE BOND INDEX

6.3 2.5 4.4 4.7

U.S. Stock Funds Symbol
Total return*
Added to
Kip 25

1 yr. 3 yrs. 5 yrs. 10 yrs.

Akre Focus Retail AKREX 22.2% 24.8% 18.4% Dec. 2009
Artisan Value ARTLX 18.7 19.0 15.4 May 2012
Baron Small Cap Retail BSCFX 15.4 19.3 17.6 10.0% Dec. 2007
Davenport Equity Opps DEOPX 21.9 22.9 May 2014
Dodge & Cox Stock DODGX 26.0 25.8 17.6 8.6 May 2008
Fidelity New Millennium FMILX 21.1 21.7 18.0 11.2 May 2014
Homestead Small Co Stock HSCSX 14.0 22.3 20.7 11.9 May 2012
Mairs & Power Growth MPGFX 18.7 24.0 17.4 9.0 Jan. 2013
Parnassus Mid Cap PARMX 19.3 21.1 17.7 Aug. 2014
T. Rowe Price Sm-Cap Value PRSVX 13.9 19.8 16.3 9.9 May 2009
Vanguard Dividend Growth VDIGX 19.7 19.8 16.1 9.5 May 2010
Vanguard Selected Value VASVX 22.5 24.1 18.8 10.7 May 2005
International
Stock Funds Symbol
Total return*
Added to
Kip 25

1 yr. 3 yrs. 5 yrs. 10 yrs.

Cambiar Intl Equity CAMIX 8.0% 12.5% 11.0% 7.5% May 2014
Dodge & Cox Intl Stock DODFX 24.6 17.1 11.8 9.8 May 2005
Harding Loevner Emrg Mkts HLEMX 21.1 9.3 10.0 12.8 May 2013
Matthews Asian Gro & Inc Inv MACSX 12.4 9.9 10.6 11.1 Aug. 2013
K11I-KIP 25.indd 52 9/10/14 3:05 PM
53
11/2014 KIPLINGERS PERSONAL FINANCE
EXPLANATION OF TERMS
Total return assumes reinvestment of all dividends
and capital gains; three- and five-year returns are
annualized. Returns reflect ongoing expenses but
not sales charges.
Maximum sales charge A figure without a footnote
means the commission is deducted from the money
you send to the fund. A figure with an r is the max-
imum redemption fee charged when you sell shares.
Funds that charge both sales and redemption fees
are footnoted with an s next to the front-end load.
Expense ratio is the percentage of assets claimed
annually for operating a fund.
A Short-Term
Bond Fund
Stands Out
Thompson Bond has excelled
by loading up on medium-
rated corporate debt.
IT HAS BEEN A SURPRISINGLY GOOD YEAR
for bonds. Yields have fallen when
most experts expected them to rise.
But with interest rates still exception-
ally low, the risks of owning bonds
are great (bond prices move opposite
to rates). One way to lessen the
danger is to invest in a short-term
bond fund. Few such funds have shone
as brightly as THOMPSON BOND. Over the
past year, the fund has beaten 97%
of its peers. And it has been in the top
11% of funds in the taxable short-term
bond category in each of the past six
calendar years, including 2014.
Neither the funds name nor its
charter suggests a short-term orienta-
tion. But Jason Stephens, one of three
comanagers, says the team runs
Thompson Bond as a short-term bond
fund. At last word, the funds average
duration (a measure of interest-rate
sensitivity) stood at 2.6 years.
The managers are making big bets
on the lowest tier of investment-grade
debt. They recently had 82% of the
funds $3.5 billion in assets in triple-B-
rated corporate bondsabout four and
a half times greater than the category
average. Triple-B bonds offer favor-
able yields for the risk, especially
when compared with Treasury debt,
says Stephens. A lot of companies
were downgraded during the financial
crisis, so the triple-B space is much
more populated today, he says. And
in some cases, the balance sheets of
those companies look better than they
did before the crisis. KAITLIN PITSKER
FUND SPOTLIGHT
RETURNS FOR
THOUSANDS OF
FUNDS ONLINE
Use our Mutual Fund Finder
to get the latest data and see
the top performers over one-,
three- and five-year periods.
Research a specific fund, or
compare multiple funds based
on style, performance and
cost. And view details including
volatility rank and turnover
rate. To use this tool, go to
kiplinger.com/tools/fundfinder.
Kiplinger.com
20 LARGEST STOCK MUTUAL FUNDS Ranked by size
Rank/Name Symbol 1 yr. 3 yrs. 5 yrs.
Assets

(in billions)
Max.
sales
charge
Toll-free
number
Total return
through Sept. 5*
*Annualized for three and five years.
@
Rankings exclude share classes of this fund with different fee structures or higher minimum initial investments.

For all share classes combined.

r
Maximum fee for short-term redemptions. MSCI EAFE index consists of developed foreign stock markets.
SOURCE: 2014 Morningstar Inc.
1. Vanguard Total Stock Market Idx Inv
@
VTSMX $314.5 23.1% 22.2% 17.3% none 800-635-1511
2. Vanguard 500 Index Inv
@
VFINX 163.6 23.6 22.0 16.9 none 800-635-1511
3. American Growth Fund of America A
@
AGTHX 139.8 22.8 21.6 15.6 5.75% 800-421-0180
4. Vanguard Total Intl Stock Idx Inv
@
VGTSX 130.1 16.1 10.5 8.1 none 800-635-1511
5. American EuroPacific Growth A
@
AEPGX 125.4 15.8 11.8 8.7 5.75 800-421-0180
6. Fidelity Contrafund
@
FCNTX 110.6 23.1 20.3 17.2 none 800-343-3548
7. American Capital Income Builder A
@
CAIBX 94.9 16.0 12.4 10.6 5.75 800-421-0180
8. Franklin Income A
@
FKINX 94.6 17.0 13.6 12.7 4.25 800-632-2301
9. American Income Fund of America A
@
AMECX 93.8 18.1 14.8 13.2 5.75 800-421-0180
10. American Capital World Gro & Inc A
@
CWGIX 87.7 19.2 16.7 11.7 5.75 800-421-0180
11. Vanguard Wellington
@
VWELX 87.6 16.8 15.5 12.5 none 800-635-1511
12. Fidelity Spartan 500 Index Inv
@
FUSEX 78.6 23.7 22.1 16.9 none 800-343-3548
13. American Balanced A
@
ABALX 74.6 17.7 15.9 13.4 5.75 800-421-0180
14. American Invstmt Co of America A
@
AIVSX 72.9 24.7 21.8 15.2 5.75 800-421-0180
15. American Washington Mutual A
@
AWSHX 72.8 22.4 20.8 16.8 5.75 800-421-0180
16. American Fundamental Inv A
@
ANCFX 69.0 22.5 20.4 15.7 5.75 800-421-0180
17. Dodge & Cox International Stock DODFX 65.3 24.6 17.1 11.8 none 800-621-3979
18. BlackRock Global Allocation A
@
MDLOX 59.7 12.2 8.8 8.2 5.25 800-441-7762
19. Dodge & Cox Stock DODGX 59.1 26.0 25.8 17.6 none 800-621-3979
20. American New Perspective A
@
ANWPX 56.5 17.7 16.6 12.9 5.75 800-421-0180
S&P 500-STOCK INDEX 23.8% 22.2% 17.0%
MSCI EAFE INDEX 14.6% 14.3% 9.1%
SHORT-TERM BOND FUNDS Ranked by one-year returns
Rank/Name Symbol 1 yr. 3 yrs. 5 yrs.
Max.
sales
charge
Exp.
ratio
Toll-free
number
Total return
through Sept. 5*
1. BlackRock US Mortgage Portfolio A
@
BMPAX 8.4% 4.4% 2.1% 4.00% 0.93% 800-441-7762
2. Thompson Bond THOPX 5.6 5.1 6.1% 2.9 none 0.74 800-999-0887
3. Thornburg Limited Term Income A
@
THIFX 5.6 3.5 4.9 1.6 1.50 0.88 800-847-0200
4. Leader Short-Term Bond Inv
@
LCCMX 5.5 4.9 4.2 1.9 none 1.44 800-711-9164
5. Virtus Multi-Sector S/T Bd A
@
NARAX 5.0 4.6 6.5 3.0 2.25 0.99 800-243-1574
6. Azzad Wise Capital WISEX 4.9 3.2 0.6 2.00
r
1.49 888-862-9923
7. New Covenant Income NCICX 4.6 2.2 3.8 1.5 none 0.77 877-835-4531
8. Virtus Low Duration Income A
@
HIMZX 4.2 3.1 4.2 2.2 2.25 0.95 800-243-1574
9. Lord Abbett Short Duration Income A
@
LALDX 3.9 3.9 4.5 2.6 2.25 0.58 888-522-2388
10. Vanguard Short-Term Corp Bd Idx Adm
@
VSCSX 3.9 3.0 1.4 none 0.12 800-635-1511
CATEGORY AVERAGE 2.5% 1.7% 2.7%
30-day
SEC
yield
K11I-FUNDTRENDS_RANKINGS.indd 53 9/11/14 2:22 PM
54
KIPLINGERS PERSONAL FINANCE 11/2014

MONEY
PHOTOGRAPH BY KEVIN MIYAZAKI/REDUX
You dont need to jeopardize
your students future, or your own,
by taking on too much debt.
BY SANDRA BLOCK
The Right Way to
BORROW
FOR COLLEGE
YOUVE NO DOUBT HEARD STORIES ABOUT RECENT
college graduates with minimum-wage jobs and six-
figure student loans. Or parents who cant afford to
send their children to college because theyre still pay-
ing off their own student debts.
These tales, while troubling, are the exceptions. About
40% of student loan borrowers had balances of less than
$10,000 in the first quarter of 2012, according to the
New York Federal Reserve. About 30% owed between
K11M-STUDENT LOANS.indd 54 9/10/14 4:38 PM
55
07/2014 KIPLINGERS PERSONAL FINANCE
55
11/2014 KIPLINGERS PERSONAL FINANCE
KEN AND MARTHA ODEGARD,
WITH DAUGHTERS LAUREN
(LEFT) AND STEPHANIE,
EXPECT TO BORROW TO
COVER SOME COLLEGE COSTS.
K11M-STUDENT LOANS.indd 55 9/10/14 4:38 PM
MONEY
56
and the government pays the interest
while the borrower is in school. The
interest rate for loans disbursed be-
tween July 1, 2014, and July 1, 2015, is
4.66%. That rate remains the same for
the life of the loan; the rate for new
loans, based on the 10-year Treasury
note, is recalculated every year on
July 1. The maximum you can borrow
in subsidized loans is $3,500 for the
first year, $4,500 for the second year,
and $5,500 for the third year and be-
yond, up to a maximum of $23,000 for
undergraduates.
Direct unsubsidized loans. These loans
are available to all undergraduates,
without regard to financial need. The
current rate is 4.66%, the same as for
subsidized loans, and will be reset
next July 1. Unlike subsidized loans,
the government doesnt pay the inter-
est while the borrower is in college.
Most students can borrow up to
$5,500 the first year, $6,500 the sec-
ond year, and $7,500 the third year
and beyond, up to an undergraduate
maximum of $31,000. If you receive
a subsidized loan for less than the
maximum borrowing amount for a
particular year, you can take out an
unsubsidized loan for the balance.
The financial aid offer you receive
from a school could include Direct
subsidized, Direct unsubsidized and
Perkins loansfor a total of up to
$13,000 a year, depending on your
year in college and your economic
circumstances.
Parent PLUS loans. Most federal loans
are made to students, but theres one
option on the menu for parents: a PLUS
loan. Parents who take out a PLUS loan
can borrow up to the full cost of their
childs college attendance, minus any
financial aid. (Graduate students are
also eligible for PLUS loans.)
Before heading down this road, pull
over and consider whether you can
afford your childs dream school. Fam-
ilies who need to borrow more than
they can obtain through federal Direct
loans are looking at the wrong
tion for Federal Student Aid (FAFSA),
which is used by the federal govern-
ment, states and some colleges to de-
termine how much financial aid a stu-
dent will receive. Because the FAFSA
can be the starting point for all finan-
cial aid, you should fill out this form
even if you dont expect to qualify for
need-based aid, says Susie Bauer, a col-
lege savings expert for Bairds Private
Wealth Management Group.
Perkins loans. These federal loans are
administered by colleges and based on
economic need. Not all colleges offer
them. They carry a fixed rate of 5%,
and the government pays the interest
while the borrower is in school. Eligi-
ble undergraduate borrowers can re-
ceive up to $5,500 per year, for a maxi-
mum of $27,500. Borrowers get a
nine-month grace period after gradu-
ating (or leaving school) to begin re-
paying the loans and have 10 years to
pay them off. Perkins loans can be eli-
gible for forgiveness.
The interest rate for Perkins loans
is slightly higher than the current rate
for Direct loans (formerly known as
Staffords; see below). But Perkins
loans charge no fees, compared with
a fee of about 1% for Direct loansand
Direct loan borrowers have only six
months after graduation to start mak-
ing payments.
Direct subsidized loans. Like Perkins
loans, these loans are based on need,
$10,000 and $25,000. Only 3.7% had
balances of $100,000 or more. And
given the widening chasm between
income earned by college graduates
and those without a degree, college
remains one of the best investments
youll ever make, even if you need to
borrow to earn a diploma.
The key is to do it wisely, which
means borrowing as little as possible
and finding loans with the best terms
available. Thats what Martha and Ken
Odegard of New Berlin, Wis., are try-
ing to do. Their younger daughter,
Lauren, a senior in high school, wants
to attend a small private college and
eventually go to medical school. Its
been her goal forever, Martha says.
Although the Odegards want to help,
they are also saving for retirement and,
because theyre self-employed (Ken
owns a home-remodeling business),
they spend more than $27,000 a year
on health insurance. Their older
daughter, Stephanie, attends a public
college in-state, so the Odegards have
been able to pay her tuition without
borrowing. Thats probably not going
to be the case with Lauren. Shes will-
ing to take out her share of student
loans, but were trying not to get into
too much debt, Martha says.
TAKE FEDERAL LOANS FIRST
For the Odegards and most other fam-
ilies, keeping debt manageable means
starting with federal government
loans. Not only do federal loans offer
flexible payment programs (see the
discussion starting on page 57), but
they also allow borrowers to postpone
payment for a timesay, if a borrower
is unemployed. Plus, under some cir-
cumstances, the loans qualify for loan
forgiveness. In addition, federal loans
offer more protection against catas-
trophe than some other loans do be-
cause they can be discharged if the
borrower dies or becomes disabled.
Since July 1, 2010, all federal student
loans have been issued directly
through the U.S. Department of Edu-
cation. To have access to these loans,
youll need to fill out the Free Applica-
*
KipTip
Deduct the Interest
ONCE YOU START REPAYING YOUR
student loans, dont overlook a tax break
that could save you money. If you meet
the income thresholds, you can deduct
up to $2,500 in interest on a federal stu-
dent loan, and you dont need to itemize
to claim this deduction. An adult child
who isnt a dependent can claim the
deduction even if his parents paid the
debt, as long as the loan is in his name.
KIPLINGERS PERSONAL FINANCE 11/2014
K11M-STUDENT LOANS.1.indd 56 9/11/14 5:20 PM
schools, says Paula Bishop, a financial
aid adviser in Bellevue, Wash. (To
gauge how much student debt you can
afford, see the box on page 59.)
The PLUS loan interest rate for
201415 is 7.21%. That rate is fixed
for the life of the loan, but the rate for
new PLUS loans will be reset on July 1,
2015, based on a formula tied to the
10-year Treasury note. Borrowers
dont need pristine credit to get a
PLUS loan, but they will be disquali-
fied if they have an adverse credit his-
tory, which includes having filed for
bankruptcy or gone through a home
foreclosure in the past five years. A
debt thats 90 days or more past due is
also grounds for disqualification (the
Obama administration has proposed
exempting delinquent debts of $2,085
or less).
Parents with blemished credit re-
cords may still want to apply for PLUS
loans. If a loan application is rejected,
the dependent student can borrow an
additional $4,000 a year in unsubsi-
dized student loans for the first and
second years, and an additional $5,000
for the third year and beyond.
WEIGH ALTERNATIVE LOANS
Although federal loans are the first
and best place to find financing for
higher education, other options may
make sense in certain circumstances.
State loans. Many states offer their own
student loans. Some are offered by a
state agency and backed by bonds
issued by the state; others are private
loans with terms set by the state.
Theyre generally available to resi-
dents, and in some cases they are also
open to nonresidents attending school
in the state. Some offer better rates
and terms than private loans offered
by commercial lenders (see the box at
right), but thats not always the case,
so shop around, says Mark Kantro-
witz, publisher of Edvisors.com, a fi-
nancial aid Web site. For information
about state-specific loans, talk to your
schools financial aid office or your
states department of education.
57
11/2014 KIPLINGERS PERSONAL FINANCE
Home-equity line of credit. With interest
rates for home-equity lines of credit
averaging 4.95%, a HELOC may be
less expensive for parents than a
private or PLUS loan. In addition,
interest on a loan of up to $100,000
is tax-deductible. Still, parents should
think twice before tapping their home
equity for college costs, says Gary
Carpenter, a certified college planner
in Syracuse, N.Y. A home-equity line
of credit can be an important source
of funds for emergenciesmoney
that wont be available if you borrow
against your home to pay for college,
he says. Worse yet, if you fall behind
on the HELOC payments, you could
lose your home.
PICK A REPAYMENT PLAN
Failing to repay your student loans will
haunt you long after youve forgotten
the name of your freshman roommate.
A default on federal student loans trig-
gers late fees, additional interest and
other costs that will inflate the amount
you owe. The default will appear on
your credit report, affecting your abil-
ity to borrow money for a house or a
car. The government may withhold
your tax refund and may even garnish
your wages or withhold Social Security
benefits. In most cases, you cant dis-
charge your federal student loans if
you declare bankruptcy.
Fortunately, you dont have to get
into that kind of trouble in the first
*
Other Options
What About Private Loans?
PRIVATE STUDENT LOANS, OFFERED BY BANKS AND OTHER LENDERS, HAVE FIXED
rates as low as 4% for borrowers with good credit; variable rates on some private
loans are as low as 2.25%. But private loans lack many of the protections that come
with federal loansone big reason your student should stick with federal loans. For
instance, in most cases, a student wont qualify for a private loan unless the parent
cosigns, says Kalman Chany, author of Paying for College Without Going Broke
(Princeton Review). And once youve cosigned for a loan, youre on the hook for pay-
ments if your child defaults. Plus, private loans arent necessarily discharged if the
borrower dies or is disabled. If you cosigned the note, youll be the one repaying it.
Many private loan contracts give lenders the option to put the loan in default and
demand repayment of the entire balance if the cosigner dies or files for bankruptcy,
according to the Consumer Financial Protection Bureau. In fact, even a few late pay-
ments could put the loan into default.
Private loans do have one advantage over federal loans: Some will cover costs
that dont qualify for federal student loans. Gary Carpenter, a certified college plan-
ner in Syracuse, N.Y., says he has clients who were recently approved for a PLUS loan
for their childs college costs, but the loan wouldnt cover a summer school course
their child needed to take because it was for less than six credit hours. The parents,
who have good credit, paid for the course with a $5,500 private student loan.
When it comes time to repay private loans, relief is at the discretion of the lender.
Lenders arent required to provide deferment for borrowers who are unemployed or
experiencing economic travails. However, many private lenders offer short-term
relief, such as interest-only payments. Some also offer forbearance; interest will
accrue while youre not making payments, increasing the amount you owe.
Its nearly impossible to have private student loans discharged in bankruptcy.
Read the terms of the promissory note for information about repayment options,
and talk to the lender. You can find more information about private loans at
Student Loan Borrower Assistance, a nonprofit advocacy group, at www.student
loanborrowerassistance.org.
K11M-STUDENT LOANS.1.indd 57 9/11/14 5:18 PM
MONEY
place. Federal loans offer options that
make payments more affordable or let
you stop payments altogether for a
time. (The Department of Education
offers a calculator that estimates your
monthly payments under different
payment plans, ranging from 10 to 30
years. You can find it at https://student
loans.gov/myDirectLoan/mobile/
58
KIPLINGERS PERSONAL FINANCE 11/2014
repaymentEstimator.action.)
Borrowers with federal loans who
work for the government or a nonprofit
for 10 years may qualify to have the
balance of their loans forgiven.
Theres no penalty for prepaying
your student loans, and the sooner you
pay them off, the less youll pay in
interest. Setting up an automatic pay-
ment program will help you avoid
missing a payment and could also
lower your interest rate by up to 0.25
percentage point.
Joe and Lauren Quigley of San An-
tonio have resolved to pay off their
$32,000 in student loans by 2018.
Theyre making extra payments on
their highest-rate loan: a Direct subsi-
dized loan with an interest rate of
4.5%. Theyve already paid off another
federal loan with a rate of 4.5%.
Joe, 23, a computer programmer, does
part-time computer work for family
and friends and directs the money he
earns toward the loan balance. He and
Lauren, 22, a nutritionist, live frugally.
They dont have cable (they watch
Netflix instead) and they cook at home
instead of eating out. We think twice
before we spend money, Joe says.
Paying off loans is more difficult if
you cant find work, or are stuck in a
low-paying job. But even then, you
have options, which we describe be-
low. You should reach out to your loan
servicer before things go bad, says
Lauren Asher, president of the Insti-
tute for College Access & Success. To
keep track of what you owe and find
out whos servicing the loan, go to the
National Student Loan Data System, at
https://www.nslds.ed.gov/nsldsSA.
Unless you choose otherwise, youll
be put in the standard repayment pro-
gram for undergraduate loans. In this
program, youll pay a fixed amount
of at least $50 a month, depending on
how much you owe, over a 10-year
repayment term. With graduated
repayment, your payments start low
and gradually increase over the 10-
year repayment term. This option is
available for subsidized and unsubsi-
dized Direct and PLUS loans.
The extended repayment plan also
reduces your monthly payments. You
can choose between fixed and gradu-
ated payments, and the repayment
term can be up to 25 years. The option
is available for subsidized and unsub-
sidized as well as PLUS loans. Borrow-
JOE AND
LAUREN QUIGLEY
ARE ON TRACK
TO PAY OFF THEIR
STUDENT LOANS
BY 2018.
S
C
O
G
I
N

M
A
Y
O
K11M-STUDENT LOANS.indd 58 9/10/14 4:38 PM
bearance. Your payments may be
put on hold or reduced for up to 12
months. Interest accrues during the
forbearance period, even if you have
subsidized loans. You may request
mandatory forbearance from your
servicer if the total amount you owe
each month on all of your student
loans is 20% or more of your monthly
gross income (as opposed to discre-
tionary income, with the income-
based program). You may also request
discretionary forbearance, which is
at the discretion of the lender. In both
cases, forbearance isnt automatic. You
must apply and should be prepared to
provide supporting documents.
If you have PLUS loans, you can
choose the standard, graduated or
extended payment plan. Repayment
terms range from 10 to 25 years, de-
pending on the plan. You can opt to
have payments deferred until six
months after graduation, but interest
will accrue during that time. To pre-
vent the debt from ballooning, try to
at least make interest-only payments
while your child is in school.
interest rate, but now that rates are
fixed, thats no longer the case for
most borrowers. (Payments are based
on the weighted average of the under-
lying loans.) Perkins and PLUS loans
are also eligible for loan consolidation.
You cant include any private student
loans when you consolidate under the
Direct Consolidation program.
If youre unemployed or experienc-
ing economic hardship, you can apply
for deferment and have loan payments
on federal student loans deferred for
up to three years. If you have subsi-
dized or Perkins loans, the govern-
ment will pay the interest while the
loans are deferred. For unsubsidized
loans, interest will be added to the bal-
ance. To request deferment for subsi-
dized or unsubsidized loans, contact
the servicer. For Perkins loans, contact
the school that administered the loan.
If you dont meet the criteria for
defermentor you are having trouble
making payments under income-based
programsconsider requesting for-
11/2014 KIPLINGERS PERSONAL FINANCE
ers must have $30,000 or more in
loans to qualify. Keep in mind that the
longer your loans are in repayment,
the more interest youll pay.
Income-based repayment pegs the
amount you repay to what you can af-
ford (Uncle Sam decides that, not you).
To qualify for this program, you must
have high debt relative to your income.
If you qualify, your monthly loan pay-
ments will be up to 15% of your discre-
tionary income. Payments are lower
than those required by the 10-year
repayment plan. If you havent repaid
the loan after 25 years of income-
based repayment, the outstanding
balance will be forgiven (although you
may owe taxes on the forgiven debt).
Federal subsidized and unsubsidized
Direct loans are eligible. The option
isnt available for PLUS loans taken
out by parents.
A newer program, Pay as You Earn,
is even more generous. Maximum
monthly payments are 10% of your dis-
cretionary income. The outstanding
balance will be forgiven after 20 years
of qualifying payments. As with the
income-based repayment program,
this one isnt available for parent PLUS
loans. Currently, the program is lim-
ited to borrowers who didnt take out
any federal student loans before Octo-
ber 1, 2007, and have taken out a new
loan since October 1, 2011. President
Obama has proposed easing those re-
strictions so an additional 5 million
borrowers will qualify.
You can find an application for these
programs at www.studentloans.gov.
Youll have to provide tax returns so
the Department of Education can
determine whether youre eligible.
The Direct Consolidation loan pro-
gram lets you combine several federal
student loans into one loan with one
monthly payment. You can also extend
the term of the consolidated loan un-
der the extended or graduated repay-
ment plans. In the past, consolidating
federal student loans could lower your
*
Debt Load
How Much Is Too Much?
AS YOURE CRUNCHING THE NUMBERS, CONSIDER HOW MUCH DEBT YOUR STUDENT
will be able to afford after college. Most students borrow to finance their educationto
the tune of an average $29,400 per borrower for the class of 2012. But how manageable
that debt is depends on the students career path.
To avoid overborrowing, students should aim to keep total debt to no more than their
anticipated starting salary after graduation, says Mark Kantrowitz, senior vice-president
and publisher of Edvisors.com. You can go to www.payscale.com to see salaries in spe-
cific fields; use the figures as a guide for borrowing. For example, a civil engineering stu-
dent can expect an annual starting salary of about $54,000, according to PayScale.com.
Graduates in that field should be able to manage more debt than, say, an elementary
education major, who can anticipate earning about $32,000 during the first year of
teaching. (If your child doesnt have a career path in mind, Carol Stack and Ruth Vedvik,
authors of The Financial Aid Handbook (Career Press), recommend limiting borrowing to
$32,000 total, the majority of which can come from federal loans.)
By limiting borrowing to your anticipated first-year salary, your graduate should be
able to retire the debt in 10 years or less, avoiding the need for alternative plans that
stretch the term of the loan and increase the total interest (see the accompanying
story). For an idea of what monthly payments will be, use the loan calculators at www
.finaid.org. KAITLIN PITSKER
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JANE BENNETT CLARK IS A SENIOR EDITOR AT KIPLINGERS PERSONAL FINANCE.
L
ike many people over 50, I regularly
receive invitations to seminars held
at pricey local restaurants. Typically,
these invitations offer a free lunch
or dinner along with a presentation on how
to make the most of retirement income
and assets. Ive often wondered what, if
anything, I could learn from these semi-
nars and what the catch is. Hard sell? Bad
advice? Lousy food?
Thus I found myself on a recent week-
night sitting with a group of oldersome-
things at a white-tablecloth restaurant
a few miles from my home. It was an hour
into the program, but the presenter, a regis-
tered investment adviser, was just shifting
into high gear. Isnt that right? Every little
bit counts, doesnt it? he said of the tax
strategy he had just explained. We nodded
like schoolchildren. Who thinks this is
important? Show of hands!
The call-and-response delivery (think
revival meeting) was hokey, but the infor-
mation seemed reasonable. As promised,
it included advice on Social Security (delay
claiming until age 70 to get the biggest
benefit), withdrawal strategies (following
a rigid formula can be risky) and taxes (re-
quired distributions can bump you into a
higher bracket). Ive written about those
same issues; nothing controversial there.
The presenter also brought up annuities
and mentioned that as an insurance broker,
he sells them. He urged us to make an ap-
pointment for a free one-on-one consulta-
tion, and he asked us to fill out a form with
our contact information. I hesitated, but
I also felt obligated, thanks to the dinner
I had yet to be served. I filled out the form.
Reciprocity effect. Bingo, says Gerri Walsh,
senior vice-president for investor educa-
tion at the Financial Industry Regulatory
Authority (Finra), which is funded by the
securities industry. Thats the basis of
persuasion. All those tactics are aimed at
helping you make an emotional rather than
a rational decision. Its the concept of reci-
procity. If I felt pressure to give my con-
tact information, older, more vulnerable
people might be persuaded to sign away
much more.
In fact, reports from regulatory agencies,
including Finra, warn that free-dinner
seminars can include misleading claims
and even outright fraud. Agents who
deliver the presentations often style them-
selves as senior specialists, a title that
may have little or no meaning, depending
on the designating group. And many semi-
nars are sponsored by companies that
have a stake in selling you their products
including investments that can be risky or
inappropriate, such as variable or equity-
indexed annuities. If you dont get the pitch
at the seminar itself, chances are it will
come later, during the personal consulta-
tion youll be encouraged to attend.
Not every seminar is shady or high-
pressure, says Geoffrey Brown, CEO of the
National Association of Personal Financial
Advisors (NAPFA), whose members are
fee-only. Some financial advisers, including
NAPFA members, use seminars to educate,
cultivate new clients and reward old ones,
he says. And even seminars that come with
a sales pitch can teach you something, if
you dont let yourself get carried away.
Advice from Walsh: Go and listen with
an open mind, but dont buy at the seminar
itself. Take the information, think about
it, and fully vet it. Part of that vetting in-
volves going to BrokerCheck (at www.finra
.org), which lists the credentials of advisers
and firms as well as any complaints lodged
against them. Also find out who sponsored
the event. Its a good idea to check out
everybody involved, says Walsh.
Oh, yes, the dinner. We got a piece of fish,
a piece of chicken, a side, a salad, and pie
la mode for dessert. Taken with a huge
grain of salt, it wasnt bad.
Free Meal With a Spiel
JANE BENNETT CLARK > Rethinking Retirement

The presenter
mentioned
that he sells
annuities.
He encouraged
us to make an
appointment
for a free
one-on-one
consultation.
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11/2014 KIPLINGERS PERSONAL FINANCE
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buying long-term-care
insurance in your fifties or
early sixties. The younger
you are when you buy a
policy, the lower the annual
premiumsbut the longer
youll have to pay those
premiums. By the time you
reach your mid sixties, how-
ever, youre more likely to
have a medical condition
that makes you ineligible for
a preferred-health discount
or makes it tough to get
coverage at all.
Youre also more likely to
have the cash to pay premi-
ums in your fifties or early
sixties, especially if youve
finished paying for college
for the kids, or paid off the
mortgage. And because
youre starting to form a
better picture of your re-
tirement budget, its a good
time to factor the annual
premiums into your long-
term plan.
HOW MUCH
COVERAGE TO GET
Start your calculations by
looking at the cost of care
in your area (see www
.genworth.com/costofcare).
Then figure out how much
you could cover with your
retirement income and sav-
ings. The calculation may
be very different for single
people than for married
couples, who often need
MACKEY MCNEILL, A CPA AND
personal financial specialist
in Bellevue, Ky., talks with
clients in their fifties and
early sixties about protect-
ing their retirement savings
from potential long-term-
care expenseswhich cur-
rently average more than
$85,000 a year for a private
room in a nursing home.
But when McNeill turned
58 and looked at long-term-
care policies for herself and
her husband, she balked at
the premiums: more than
$5,200 a year for two poli-
cies that would cover the
average cost of care in her
area. I understand why
clients resist it, she says.
After she calculated how
much extra money theyd
need to save to cover the
cost of care (and the risk to
their portfolio if they didnt)
she decided to make the
same compromise most
of her clients do. Were
buying policies that dont
cover everything but can
cover about $4,000 a month,
she says. She gets a couples
discount for buying with her
husband. If the McNeills
future care exceeds their
coverage, they are confident
they can make up the dif-
ference with savings and
retirement income.
Like McNeill, most finan-
cial advisers recommend
How to Buy Long-Term-Care Insurance
When to get it, how much you need and ways to cut the cost. BY KIMBERLY LANKFORD
HEALTH
K11M-LONG TERM CARE.indd 61 9/10/14 4:34 PM
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KIPLINGERS PERSONAL FINANCE 08/2014
MONEY
more than two separate
policies, says Brian Gordon,
a long-term-care insurance
specialist in Riverwoods,
Ill. For example, if a healthy
55-year-old couple were to
buy two Genworth policies,
each with a $150 daily bene-
fit for three years and 3%
compound inflation protec-
tion, they would pay $1,359
some policies add another
three years to the pool). I
prefer the shared policies
because the chances of both
spouses needing long-term
care are slim, but you dont
know which one will need
it, says Cygan. It gives you
a huge amount of flexibility.
Shared-benefit policies
tend to cost 12% to 20%
bought long-term-care in-
surance last year, when she
turned 60. Im healthy and
active and independent,
she says. Im interested
in setting myself up to have
care at home. Kingston has
a pension from her years
working as a public em-
ployee in Alaska that could
cover some, but not all, of the
costs. She bought a Gen-
worth policy that currently
provides $380,000 worth of
coverage. The policy has 5%
compound inflation protec-
tion, which means the bene-
fit will grow to $1.5 million
by the time shes 85. It also
has a zero-day waiting
period for home care.
A good strategy for
couples is to buy a shared-
benefit policy that provides
a pool of benefits either
spouse can usefor example,
two three-year policies
form a pool of six years (and
to plan on spending more
than singles to cover long-
term-care bills for one
spouse plus living expenses
for the spouse who remains
at home, says Donna Skeels
Cygan, a certified financial
planner in Albuquerque.
After you know the cost
of long-term care and how
much you can afford on your
own, consider buying enough
long-term-care coverage
to fill the gap. The average
length of care is about three
years, but you may want a
longer benefit period if you
have a history of Alzheim-
ers in your family. (The pool
of benefits is calculated by
multiplying your daily bene-
fit by the benefit period, but
you may be able to stretch
your payouts if you use less
than the daily maximum
benefit.)
Kathy Kingston, an auc-
tioneer in Hampton, N.H.,
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KIPLINGERS PERSONAL FINANCE 11/2014
YOU MUST HAVE LOW INCOME AND VIRTUALLY NO ASSETS TO
qualify for Medicaid. But even if you are nowhere near the thresholds
when you or your spouse first needs care, you may meet them soon after
paying for a nursing home. Thats the main reason Medicaid is the largest
payer of long-term-care services for the elderly.
Medicaid rules are complicated and vary by state. Youll need to know
how to navigate the system if you have to pay long-term-care expenses
but are running out of money. You may also need to know how Medicaid
works if youre assisting aging parents who require help paying for care.
Who qualifies. The person receiving care must generally have less than
$2,000 in countable assets, which include savings, retirement ac-
counts, investments and most cash-value life insurance balances. Your
car, primary residence and money in certain kinds of trusts generally
dont count. Most states have a home-equity limit of $543,000, but some
states increase it to $814,000. If youre married, the spouse living at
home (called the community spouse) can generally keep up to $117,240
in countable assets in 2014. See www.medicaid.gov for your states rules.
You can protect more of your assets if you have a partnership eligible
long-term-care insurance policy, which is available in 41 states. If your
policy covers, say, $200,000 for care and you exhaust your benefits, you
can protect $200,000 over your states asset limits and still qualify for
Medicaid (see www.aaltci.org/partnership).
It has become more difficult to game the system. For example, money
you give away to anyone other than your spouse within five years of ap-
plying for Medicaid can delay your eligibility. Also, after you die, Medicaid
can send your estate a bill for your care, called estate recovery. And
even though your primary residence is excluded from the asset test, your
state may expect you to use it to pay back Medicaid (unless your spouse
is living in it, as well as a few other exceptions that depend on your states
rules). Many people who arent aware of these nuances get tripped up
by this, says Karl Kim, a financial planner in La Mirada, Calif.
You generally must receive less than $2,163 per month in countable
income to qualify for Medicaid. That includes Social Security benefits
and pension, dividend and interest income. A spouse living at home
can keep all of his or her income and may be able to keep some of your
incomeup to a total of $2,931 per month, depending on the state. If
youre slightly over the income limit, you may be able to put the money
Let Medicaid Pay the Bills?
*
Backup Plan
*
KipTip
Strategies for Single Women
LONG-TERM-CARE INSURERS CHARGED MEN AND WOMEN
the same rates for years, but women tend to have more
claims. Almost all insurers now charge single women 35%
to 50% more than men, says John Ryan, of Ryan Insurance
Strategy Consultants in Greenwood Village, Colo.
Buying as a couple tends to even out the costs. Single
women should consider long-term-care insurance offered by
their employer, especially during open enrollment in the fall.
These policies usually offer a 5% to 10% discount, and
workplace policies must generally charge women and men
the same rates.
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2%, says Jesse Slome, execu-
tive director of the American
Association for Long-Term
Care Insurance, a trade
group.
Insurers have different
sweet spots based on your
age and health and their
own claims experience.
For example, Slome recently
worked with a 65-year-old
man and his 55-year-old
wife, who received quotes
for annual premiums from
two insurers that were
$1,200 apart.
Many long-term-care
agents work primarily
with Genworth, Mutual
of Omaha, MassMutual,
Transamerica and John
Hancock (Northwestern
Mutual and New York Life
sell long-term-care insur-
ance only through their
own agents). Find a long-
term-care specialist in your
area at www.aaltci.org.
Older policies tended to
boost benefits by 5% com-
pounded each year, but low
interest rates made it ex-
pensive for insurers to offer
that coverage to new buy-
ers. Now, 3% per year is
most common, and some
insurers even offer 2% or
less per year. Claude Thau,
a long-term-care specialist
in Overland Park, Kan., usu-
ally recommends 3% com-
pound inflation protection.
The carriers have rejig-
gered their pricing so that
3% looks especially good
compared with 5%, he says.
If spouses who are both
age 55 each start with a
$175,000 pool of benefits,
they would pay about
$5,850 per year (combined)
for two policies with 5% in-
flation protection, but just
$3,000 per year for policies
with 3% inflation protection
and $2,450 for policies with
living (such as bathing) or
you provide evidence of cog-
nitive impairment. A days-
of-service waiting period
only counts the days you get
care. If you have a calendar-
day policy with a 90-day
waiting period and you need
care in your home just three
days a week, the policy will
pay out after three months.
But the same waiting period
with a days-of-service policy
would mean waiting more
than seven months before
benefits kick in.
Because you may not need
care until 20 or 30 years
from now, inflation protec-
tion is essential. Nursing-
home and assisted-living
costs have increased by
about 4% per year over the
past five years, and home-
care costs have risen by
1.3%, although that may rise
faster as baby boomers com-
pete for caregivers.
a year for each policy. If they
added a shared-benefit
ridergiving them a pool of
six years to split as needed
the annual cost would in-
crease to $1,660 each. And if
they waited ten years to buy?
A healthy 65-year-old couple
would pay $2,143 each for
the same policies, or $2,664
with the shared benefits.


CALIBRATING
THE COST
The longer the waiting pe-
riod before benefits kick in,
the lower your premiums.
But initially youll need to
pay the costs out of your
own pocket.
Make sure you under-
stand how the waiting pe-
riod is calculated. Gordon
recommends a calendar-day
waiting period, in which the
clock starts ticking as soon
as you need help with two
out of six activities of daily
63
11/2014 KIPLINGERS PERSONAL FINANCE
in a qualified income trust, which uses all of your income toward care
each month with Medicaid making up the difference. (These rules also
vary by state.) After you qualify financially, Medicaid may send a social
worker or nurse to certify that youre medically eligible, which generally
means that you need help with the activities of daily living.
Where you can get care. Medicaid
has traditionally covered care in nurs-
ing homes but not in assisted-living
facilities. But many states now have
voucher plans that let you use Medic-
aid money for assisted living or home
care. New York, for example, has a
generous home-care program. But
these programs have limited funds
and long waiting lists in some states
for example, most regions of Texas
have a two-year waiting list, says
Byron Cordes, a geriatric care manager
in San Antonio. Going into a nursing
home before switching to assisted liv-
ing or home care can reduce the wait
to four to six months, he says.
Some nursing homes dont accept
Medicaid, and ones that do may have a limited number of Medicaid beds.
Some facilities that dont accept Medicaid up front let you stay after you
run out of money and have to rely on Medicaid; others do not. These rules
also vary by state and facility. Before choosing a facility that doesnt take
Medicaid, calculate how long your money will last, says Cordes. If your top
choice takes private-pay patients only, it
may be an option if you can pay the bills
there for a few years, then move to a Med-
icaid facility before the money runs out.
Seeking help. Knowing some key strate-
gies can save thousands of dollars. Work
with an elder-law attorney who knows
your states laws. You can find one in your
area at www.naela.org or www.nelf.org.
If youre helping aging parents, meet with
the attorney as soon as they need help,
even if they still have plenty of savings,
says Bernard Krooks, an elder-law attor-
ney in New York, because youll have more
options if you plan in advance. And make
sure you have power of attorney for your
parents while they can still make decisions
so you can pay their bills if they cant. J
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MONEY
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Getting help. If youre a rare
case with an online reputa-
tion problem that wont stay
six feet under, professional
help might be the only solu-
tion. Thats true in cases in
which your profile is domi-
nated by unflattering news
stories, bad client reviews,
details of a lawsuit or nega-
tive Web sites targeting you
(if your name is in the URL,
such sites will rank espe-
cially high on Google).
But remember that a
reputation-management
firm cant force your local
newspaper to delete a nega-
tive story or an angry former
client to kill a bad review.
(A recent high-profile case
in Europe that allows citi-
zens to petition search en-
gines to remove some data
does not apply to Ameri-
cans.) A pro can bury nega-
tive posts faster and deeper
than you can, however. The
reputation company might
create third-party search-
engine-optimized sites that
link to each other to push
positive content up and
negative results down.
It can help you build your
own Web site and update
professional profiles while
tracking your name online.
Shop around for a repu-
tation-management firm,
such as Reputation.com
or Removeyourname.com.
Look for a company that
has handled cases that
are similar to yours. Ask
for referrals from cus-
tomers to make sure the
companys strategies
work. Prices range from
several hundred to several
thousand dollars, depend-
ing on the severity of the
problem and the kind of
services you buy.
page, and spend a few min-
utes every week keeping
them active. If you want to
differentiate yourself from
someone with the same
name, add a middle initial to
your online presence. Put a
Google Alert on your name
at www.google.com/alerts
to track online mentions.
mail asking them to remove
your personal data. If you
cant get a malicious Web
site to remove information
that would make you vul-
nerable to ID thieves, such
as your Social Security or
bank account number, ask
Google to delete the site
from its search results at
GOOGLING YOURSELF ISNT
narcissistic. Its necessary.
If you track your digital
trail with a quick online
search, you may be sur-
prised by the depth and
breadth of information
available about you.
In addition to Google,
enter your name into
Spokeo.com and Pipl.com,
where you might find
that your age, relatives
names and previous
addresses are on display,
as well as links to old news
stories and, say, a forgotten
MySpace account. And head
to Topsy.com to examine
what people are saying
about you on social media.
Find something unflat-
tering? You can fix most
online reputation problems
without help.
Do it yourself. The average
Joe should be able to fix his
problem on his own, says
Brian Patterson, of Go Fish
Digital, an online marketing
firm. Start by beefing up
the privacy settings on your
social media feeds and
deleting that old Flickr
account and outdated per-
sonal Web site. You can
delete search results about
you from some information-
sharing sites, such as Spokeo
(www.spokeo.com/optout)
and BeenVerified (www
.beenverified.com/optout).
For other sites, send an e- O
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FIX YOUR ONLINE REP
You can probably polish your profile yourself. BY SUSANNAH SNIDER
PRIVACY
http://support
.google.com/
websearch/trouble
shooter/3111061.
The joke in the online-
reputation biz goes like this:
Where do you bury a dead
body? On the third page of
Google. Few surfers ever get
that far, so if theres an un-
professional post that you
cant delete, grab a
shovel and start dig-
ging. Build a Web
site using a free
template, from
a site such as
Weebly.com or
WordPress.com,
with your first
and last name as
the domain name
(about $12.99 on
GoDaddy). Open
LinkedIn and
professional
Twitter accounts
and a Facebook
K11M-ONLINE REP.1.indd 64 9/11/14 5:23 PM
Attend to his dreams.
Read the Program Description for more information and consider all investment objectives, risks, charges, and expenses before investing. Call 800.418.2551
for a copy of the Program Description or visit uesp.org. Investments are not guaranteed by UESP, the Utah State Board of Regents, Utah Higher Education
Assistance Authority, or any other state or federal agency. However, Federal Deposit Insurance Corporation (FDIC) insurance is provided for the FDIC-insured
accounts. Please read the Program Description to learn about the FDIC-insured accounts. Your investment could lose value. Non-Utah taxpayers and
residents: You should determine whether the state in which you or your benefciary pays taxes or lives ofers a 529 plan that provides state tax or other
benefts not otherwise available to you by investing in UESP. You should consider such state tax treatment and benefts, if any, before investing in UESP.
Morningstar Gold rating, 2013
Multiple investment options
529-plan tax advantages
Low fees
Learn more
800.418.2551
|
uesp.org
A Nonproft 529 College Savings Program
66
KIPLINGERS PERSONAL FINANCE 11/2014
START BY HIRING A REAL
estate agent who has expe-
rience leasing properties.
The agent can screen pro-
spective tenants and help
you decide how much to
charge, says Michael Cor-
bett, a real estate expert
at Trulia, an online home-
value estimator. Ideally,
you should meet prospec-
tive renters so you can ask
questions that arent cov-
ered by boilerplate applica-
tions. Do they work at
home? Throw a lot of par-
ties? Collect and repair
antique motorcycles?
Put as much detail in the
lease as you can. The lease
should specify the expenses
the tenant will be responsible
for, such as trash collection,
utilities and landscaping.
Many states and municipali-
ties have laws and regula-
tions for multiunit buildings,
but most dont cover single-
family-home rentals.
Because youre moving to
another city, youll probably
need to hire someone to
manage the property. Ask
your real estate agent and
other landlords for refer-
rals. The National Associa-
tion of Residential Property
Managers (www.narpm
.org) offers a tool to search
for property managers in
your area. Fees vary de-
pending on the services
provided, but in general
you can expect to pay 10%
of the monthly rent, accord-
ing to ManageMyProperty
.com, which provides quotes
for property-management
companies. Some firms
charge a flat monthly fee.
When interviewing prop-
erty managers, ask them
how they handle emergen-
cies. Do they have someone
on staff to deal with routine
problems, such as a stopped-
up toilet? Will the firm
contact you before making
repairs that exceed a speci-
fied amount of money?
Insurance. Call your insur-
ance agent before you hand
over the keys to your new
tenant because youll need
to change your coverage,
says Bryan Wolfe, director
of product management for
USAA. In most cases, your
rates will drop because
rental property insurance
covers the structure but
not personal belongings,
he says. If you plan to leave
some of your belongings,
such as large appliances,
in the house, you may need
additional coverage. Make
sure you maintain your
personal liability insurance
to protect yourself against
tenant lawsuits. In fact, you
may want to increase your
liability coverage because
you wont be around to stop
potentially litigious events.
At USAA, liability coverage
for $1 million in damages
costs about $30 per year.
Encourage your tenant
to buy renters insurance.
Some landlords require
renters insurance because
tenants who have coverage
may be less likely to sue.
Taxes. Rental income is
taxable at your ordinary
income rate, so dont over-
look deductible expenses
that will lower your tax bill.
Property-management fees,
insurance, mortgage inter-
est, property taxes, clean-
ing services and repairs,
plus travel expenses to
make repairs or collect
rent, are all deductible.
As a landlord, youre also
allowed to deduct deprecia-
tion. Depreciation is based
on the lesser of the fair mar-
ket value of your home at
the time you convert it to
a rental or your tax basis,
which is basically the
amount you paid for the
home plus improvements
and additions. In either
case, you must subtract the
value of the land; only the
value of the structure can
be depreciated. Once youve
established the appropriate
value, divide it by 27.5 (the
tax code assumes residen-
tial real estate has a useful
life of 27 years) to calcu-
late a full years deduction.
Theres a catch. When you
sell your home, youll have
to pay tax on the amount you
claimed for depreciation at a
maximum rate of 25%. Con-
sider getting help from a tax
professional. SANDRA BLOCK
Im moving for a job and dont want to sell
my house. How do I turn it into a rental?
GAME PLAN
?
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K11M-GAME PLAN.indd 66 9/9/14 12:11 PM
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Kiplingers_100714.indd 1 8/21/14 3:03 PM
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allowed to hold the first-year
distribution to about $2,900, or
less than half the amount shed
have to withdraw if her father
died at age 72 and left the IRA
to the estate.
Bequeathing a Roth IRA to
your heirs? A Roth inheritance
is usually tax-free, but your
heirs cant leave the money in
the account forever. The rules
for withdrawals are the same
as they are for traditional
IRAs. If your heirs transfer
the money to accounts for
inherited Roth IRAs, they can
usually stretch withdrawals
over their life expectancies.
Avoid the pitfalls. Your beneficia-
ries should have funds trans-
ferred directly from your IRA
to their inherited IRAs. If they
receive checks made out to
them personally, theyll be pro-
hibited from depositing them in inher-
ited IRAs and will have to pay taxes on
the entire amount. There is no 60-day
window to deposit the money in the
new accounts, as there is with roll-
overs of other IRAs. Once the money
is safely in the inherited IRAs, your
heirs have until December 31 of the
year after the year of your death to
take their first distribution. If they
miss that deadline, they may have
to pay a penalty of up to 50% of the
amount they should have withdrawn.
The December 31 deadline is partic-
ularly important if you name multiple
beneficiaries for your IRA, Levine
says. As long as your heirs divide the
account among themselves by that
date, they can base distributions on
YOUR ADULT CHILDREN MAY COVET
your 1950s baseball-card collec-
tion, but unless theres a mint-
condition Willie Mays or Ted
Williams in the stack, it wont
mean much to their financial
security. An inherited IRA, on
the other hand, could let them
pay off the mortgage, plug a
major hole in their retirement
savings and more.
But unless youre careful,
your children could end up
sharing a large part of their
inheritance with the IRS. The
tax code treats IRAs inherited
by children or other heirs dif-
ferently than IRAs inherited by
husbands and wives. Surviving
spouses can roll IRAs into their
own accounts, postponing
required minimum distribu-
tionsand taxesuntil they
turn 70. Children and other
heirs dont have that option.
If the heirs want to continue to benefit
from tax-deferred growth, each must
roll his portion of the IRA into a sepa-
rate account known as an inherited
IRA, which comes with its own set
of rules.
To give your children or other
heirs this option, you must name them
as beneficiaries of the IRA. Many
spouses name each other as beneficia-
ries, and after one spouse dies the
survivor names the estate as the bene-
ficiary. That may seem like the logical
approach if your children are the
beneficiaries of your estate. But al-
though your children will still inherit
the money, theyll be required to clean
out the IRA by the end of the fifth year
after your death if you die before you
turn 70. If you die after age 70,
required payouts can be based on your
life expectancy, as set by IRS tables.
Jeffrey Levine, a certified public ac-
countant with Ed Slott and Co., which
provides IRA advice, says that will be
at most 15.3 years.
But naming your children as benefi-
ciaries of the IRA (or secondary bene-
ficiaries, if your spouse is still alive)
gives them a lot more flexibility. Once
they transfer the money to an inher-
ited IRA, they can take annual distri-
butions based on their own life
expectancies. A 50-year-old heir, for
example, could stretch distributions
(and the life of the tax shelter) over
the next 34 years. A 50-year-old bene-
ficiary of a $100,000 IRA would be
Get the Most From Inherited IRAs
Set the account up wrong and Uncle Sam will be the big winner. BY SANDRA BLOCK
ESTATE PLANNING
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individual life expectancies. If they
miss the deadline, theyll all have to
base distributions on the oldest childs
life expectancy.
If any of your heirs have credit prob-
lems, take note of a recent Supreme
Court ruling that inherited IRAs
arent protected from creditors in
bankruptcy proceedings. If your heirs
live in one of the 43 states that dont
explicitly offer protection for inher-
ited IRAs, one option is to name a
trust as the beneficiary, with your
heirs as beneficiaries of the trust.
The downside to this strategy is that
trusts are complex and expensive to
set up; theyre also subject to high tax
rates if they earn more income than is
paid out to the beneficiary in any one
year. Still, if youre concerned about
your childrens creditors, the tax hit
may be preferable to the alternative.
*
KipTip
How Much to
Withdraw
IF YOU INHERIT AN IRA, YOU CAN
cash out the account at any time with-
out paying an early-withdrawal penalty,
even if youre not yet 59. However,
unless you inherit a Roth, youll have to
pay taxes on the money (except to the
extent, if any, that the original owner
made nondeductible contributions).
A large withdrawal could push you into
a higher tax bracket.
Taking distributions from an inherited
IRA based on your life expectancy will
minimize the annual tax hit and maxi-
mize tax-deferred growth. You can find
life-expectancy tables in IRS Publication
590, Individual Retirement Arrangements
(IRAs). (Note: The life-expectancy fac-
tors are different than those used for
non-inherited IRAs.) Bankrate.com
offers a required minimum distribution
calculator for retirement plan beneficia-
ries at www.bankrate.com/calculators/
retirement/ira-beneficiary.aspx.
Beef Up Your Home Coverage
Add extra protection to fill these three common
gaps. BY JESSICA ANDERSON
INSURANCE
YOU MAY ALREADY KNOW THAT
homeowners insurance doesnt
cover flood damage or sewage
backup (see Game Plan, June). But
what about things your policy cov-
ers, but might not cover sufficiently?
Replacing your home. In the event of
a disaster that leads to a total loss,
your policy pays up to the dwelling
limit. If thats less than the cost
to rebuild your home, you have to
make up the difference. Your insurer
estimates the cost to rebuild, but to
make sure its estimate is accurate,
use an online calculator, available at
sites such as www.hmfacts.com ($7)
and www.accucoverage.com ($8).
To get full replacement coverage for
partial losses, most insurers require
you to have a policy with a dwelling
limit of 80% or more of the insurer-
estimated cost to rebuild, notes Bill
Wilson, associate vice-president of
the Independent Insurance Agents
& Brokers of America.
Your policy should include an
inflation guard clause keyed to
regional costs that adjusts your cov-
erage every year. Also, make sure
your policy has extended replace-
ment costideally, for 20% to 25%
above the dwelling limit; you can
add it as an endorsement for about
$50. If you have to rebuild your
home to bring it up to current code,
youll need ordinance and law cover-
age. You should be able to bump up
your coverage to 25% of the dwell-
ing limit for about $50 a year.
High-value belongings. All policies
cover your personal property, typi-
cally up to 50% of your dwelling
limit. But policies generally limit
reimbursement for jewelry, silver-
ware and collectibles, such as
stamps and coins, to $1,000 to
$2,500. Most policies cover you
if items are stolen but not if they
are lost or damaged. Plus, they pay
out actual cash value (depreciated
based on the age of the item) rather
than replacement cost.
If you buy a rider ($10 to $20 per
$1,000 in coverage a year for jew-
elry and silver, for example), you
can collect the replacement cost if
you file a claim. It also eliminates
the deductible and covers mysteri-
ous disappearance and breakage for
fragile items.
Home office. Most homeowners poli-
cies limit coverage for business
equipment to $2,500 and provide
no liability coverage for business
use of your home. If you have cli-
ents or delivery people coming to
your home office regularly, or you
have more than $2,500 in equip-
ment used for business, youll need
more coverage. A separate home-
office policy can provide liability
and contents coverage for a couple
hundred dollars a year. J
E
F
F
R
E
Y

C
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K11M-IRA HOMEOWNERS.1.indd 69 9/12/14 12:21 PM
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KIPLINGERS PERSONAL FINANCE 11/2014
MONEY
L
I
S
E

M
E
T
Z
G
E
R
How Much Life Insurance?
To calculate how much life insurance you
need, use this method recommended by
Tim Maurer, a certified financial planner
in Charleston, S.C. Each of you should add
up the amount youll both need for funeral
expenses, your mortgage and other debts.
Include any education expenses you antici-
pate. For college, use current costs.
Then calculate how much each of you
would need to replace 50% of your current
pretax earnings until retirement. To arrive
at a lump sum, divide half your pretax in-
come by 0.05, says Maurer. For instance, if
you earn $100,000, divide $50,000 by 0.05,
which equals $1 million. Add that to your
mortgage, education and funeral-expense
numbers for the amount of coverage youll
need for yourself.
If the number your wife comes up with
based on her part-time earnings is less than
$250,000, get that much anyway, says
Maurer. Youll need at least $250,000 to
help pay for child care and other expenses
until your child is in middle or high school.
If you plan to have more kids or anticipate
other big expenses, bump the amount up to
$500,000.
Term life coverage doesnt cost much.
A healthy 30-year-old man can buy a
20-year, $500,000 policy for $244 per year;
a woman would pay $214, says Byron Udell,
CEO of AccuQuote.com. For $1 million
in coverage, the man would pay $421 a year;
the woman, $354 per year. If you plan to
have more kids, consider a 30-year policy,
for which the man would pay $704 for
$1 million and the woman, $577.
New formula for credit scores. I heard that
FICO is making changes to its credit-score
MY WIFE AND I HAVE A BABY ON
the way. How much life insurance
should we buy? My wife plans to work
half-time while our child is young.
B.K., Washington, D.C.
calculations. What are the changes, and how
will they affect my score?
T.M., Phoenix
FICO is making two changes. Medical bills
in collection will no longer affect the calcu-
lations. And the score will ignore other
types of debt that went to collection but
have been settled or paid off (previously,
paid and unpaid collections with an origi-
nal balance of more than $100 counted the
same). Note that it may take lenders a year
or more to adopt the new scoring model.
FICO changed the formula after the
credit reporting agencies started to report
unpaid medical debt separately. Consum-
ers whose only negative is an unpaid medi-
cal debt in collection are not a credit risk,
says Anthony Sprauve, of FICO. The change
could boost scores by up to 25 points.
The other change can make a bigger
difference. If the only negatives on your
report are collection accounts that have
been reported to the credit bureaus as hav-
ing a zero balance, the new formula could
make your score fly through the roof,
says John Ulzheimer, of CreditSesame.com.
CDs for IRAs. I have some of my IRA in cash
with my brokerage firm. Can I get a higher
rate with an IRA CD at a bank without ex-
tending the maturity for more than a year?
B.P., Philadelphia
Not all online banks offer CDs for IRAs, but
the ones that do tend to offer much better
rates than cash reserves at brokerage firms
more than 1% instead of 0.01%, says Greg
McBride, of Bankrate.com.
Synchrony Bank tops the list for one-year
IRA CDs, with a 1.10% annual percentage
yield for $25,000 or more, or 1.05% for $2,000
to $25,000, says Ken Tumin, of Deposit
Accounts.com. Find rates at www.deposit
accounts.com and www.bankrate.com.
KIMBERLY LANKFORD > Ask Kim
GOT A QUESTION? ASK KIM AT KIPLINGER.COM/ASKKIM.

Youll need
at least
$250,000 to
help pay for
child care
and other
expenses until
your child is
in middle or
high school.
K11M-ASK KIM.indd 70 9/11/14 3:14 PM
71
10/2014 KIPLINGERS PERSONAL FINANCE
makers. Many still process
a single days transactions
from largest to smallest,
making it more likely youll
dip below your account bal-
ance, according to a study
from Moebs Services and
the Wall Street Journal.
A better way to go: Link
your checking account to
a savings account or line
of credit from which the
bank can transfer funds
automatically in case you
slip up. (Watch for any fees
you may incur on the linked
account.) The bank will
likely transfer money to
your account at the end of
the day and charge a single
fee of at least $10.
To help avoid spending
more than you have in your
checking account, sign up
for e-mail or text-message
alerts to notify you when
your balance hits a certain
thresholdsay, $50. And
if you (or a kid learning
the basics of money man-
agement) still have trouble
staying within the bounds
of your bank account, you
might benefit from using a
low-fee prepaid debit card,
such as Bluebird or Serve
from American Express.
LISA GERSTNER
MANY BANK CUSTOMERS
who inadvertently over-
draw their checking ac-
counts still feel the bite of
hefty fees. Under federal
law, your bank may not
enroll you automatically in
its overdraft coverage pro-
gram, but it can ask you to
opt in. If you do, the bank
pays the excess charges but
then hits you with a stiff
fee. The Consumer Finan-
cial Protection Bureau
found that the median
charge at a large bank is
$34, even though most of-
fending debit card transac-
tions are for $24 or less.
With or without overdraft
protection, the bank may
bounce a check or auto-
mated payment.
Although small banks
frequently offer low-fee
checking accounts, they are
often guilty of using over-
draft charges as money-
Dodge Annoying
Overdraft Fees
RATE
UPDATES
For the latest savings yields
and loan rates, visit kiplinger
.com/nances/yields.
Kiplinger.com
BANKING
Internet only. SOURCE: 2014 Bankrate.com, a publication of Bankrate Inc., 11760 US Highway 1, N. Palm Beach,
Fla. 33408 (800-327-7717, ext. 11410; www.bankrate.com/kip).
ableBanking (Maine)

1.10% $1,000 ablebanking.com

Colorado Federal Savings Bank (Colo.) 1.10 5,000 coloradofederalbank.com
GE Capital Bank (Ill.)

1.10 500 gecapitalbank.com

Synchrony Bank (N.J.)

1.10 25,000 myoptimizerplus.com

NATIONAL AVERAGE 0.24%
TOP-YIELDING CERTIFICATES OF DEPOSIT
Annual
yield as
of Sept. 9
Min.
amount
Web site
(www.) 1-Year
EverBank (Fla.)

2.30% $1,500 everbank.com

Synchrony Bank (N.J.)

2.30 25,000 myoptimizerplus.com

Barclays Bank (Del.)

2.25 none banking.barclaysus.com

GE Capital Bank (Ill.)

2.25 500 gecapitalbank.com

NATIONAL AVERAGE 0.79%
Annual
yield as
of Sept. 9
Min.
amount
Web site
(www.) 5-Year
Alpine Municipal MMF (AMUXX)* 0.03% 0.04%/0.05% $2,500 alpinefunds.com
PNC Tax-Ex MMF A (PXAXX)* 0.02 0.03/0.03 1,000 pncfunds.com
American Cent T-F Inv (BNTXX)*& 0.01 0.01/0.02 2,500 americancentury.com
BMO Tax-Free MMF Y (MTFXX)*& 0.01 0.01/0.02 1,000 bmo.com
NATIONAL AVERAGE 0.01% 0.01%/0.02%
30-day
yield as
of Sept. 1
Tax. eq. yield
25%/39.6%
bracket
Web site
(www.) Tax-Free Funds
Min.
invest-
ment
*Fund is waiving all or a portion of its expenses. RBB MMP/Bedford Class offers a similar yield. &Various
fund companies offer similar yields. #Deposit accounts include money market deposit accounts and high-yield
savings accounts. Internet only. Similar yields are available at GE Capital Bank and Synchrony Bank.
SOURCES: Bankrate.com; Money Fund Report, iMoneyNet Inc. (508-616-6600; www.imoneynet.com).
Annual
yield as
of Sept. 9
Min.
amount
Web site
(www.) Deposit Accounts
#
Palladian PrivateBank (Ill.)

1.26% $10,000 palladianprivatebank.com

ableBanking (Maine)

1.02 250 ablebanking.com

EverBank (Fla.)

1.01 1,500 everbank.com

CIT Bank (N.Y.)

0.95 25,000 bankoncit.com

NATIONAL AVERAGE 0.11%
TOP-YIELDING MONEY MARKET ACCOUNTS
Meeder Money Market Retail (FFMXX)* 0.06% $2,500 meederfinancial.com
HSBC Prime MMF A (REAXX)*

0.03 1,000 us.hsbc.com

HSBC U.S. Govt MMF A (FTRXX)*

0.03 1,000 us.hsbc.com

PNC Money Market Fund A (PEAXX)*

0.03 1,000 pncfunds.com

NATIONAL AVERAGE 0.01%
30-day
yield as
of Sept. 2
Min.
invest-
ment Taxable Funds
Web site
(www.)
As of September 9. *EE savings
bonds purchased after May 1,
2005, have a xed rate of interest.
Bonds purchased before
May 1, 1995, earn a minimum of 4%
or a market-based rate from date of
purchase.
Bonds bought between
May 1, 1995, and May 1, 2005,
earn a market-based rate from
date of purchase.
SOURCES FOR TREASURIES:
Bloomberg, U.S. Treasury.
YIELD BENCHMARKS Yield
Month-
ago
Year-
ago
U.S. series EE savings bonds* 0.50% 0.50% 0.20%
U.S. series I savings bonds 1.94 1.94 1.18
Six-month Treasury bills 0.04 0.05 0.04
Five-year Treasury notes 1.76 1.62 1.71
Ten-year Treasury notes 2.50 2.44 2.90
First Command Bank (P) 6.25% none $25

firstcommandbank.com
Lake Michigan Credit Union (P) 6.25 none
#
25

lmcu.org
Citizens Trust Bank Visa (G) 7.25 none 25

ctbconnect.com
LOW-RATE CREDIT CARDS
Issuer
Rate
as of
Sept. 5*
Annual
fee
Late
fee
Web site
(www.)
CASH-REBATE CARDS
Rates are adjustable. *If you do not qualify for this interest rate, the issuer will offer a higher-rate card. (P) Platinum.
(G) Gold. $35 if late more than once in six months. #Must be a credit union member. 6% groceries up to $6,000
per calendar year (1% thereafter); 3% gas/retail; 1% other purchases. ^Categories change quarterly on up to $1,500
of spending. &Earn 1% when you buy and an additional 1% when you pay your bill. SOURCE: Bankrate.com. Banks
may offer lower introductory rates.
AmEx Blue Cash Preferred 12.99% $75 6%/1%

americanexpress.com
Discover It 10.99 none 5/1
^
discover.com
Citi Double Cash 12.99 none 2
&
citi.com
Issuer
Rate
as of
Sept. 8*
Annual
fee
Rebate
earned
Category/Other
Web site
(www.)
K11M-CREDIT_YIELDS.indd 71 9/11/14 2:25 PM

LIVING
As carriers battle for your
business, we help you cut
through the hype to find the
right plan for you and your
family. BY LISA GERSTNER
ILLUSTRATIONS BY RYAN COX
PHONE PLANS
BEST
72
KIPLINGERS PERSONAL FINANCE 11/2014
K11L-CELL PHONE.indd 72 9/10/14 4:44 PM
73
11/2014 KIPLINGERS PERSONAL FINANCE
CALL IT THE WIRELESS WARS.
Cell phone carriers are falling
all over themselves in their
rush to entice you with their
latest promotions, which range
from overhauled plans and
pricing to hefty cash rebates
if youre willing to break your
contract with your current
carrier. In a span of a couple
of weeks in August, most of
73
11/2014 KIPLINGERS PERSONAL FINANCE
K11L-CELL PHONE.1.indd 73 9/11/14 5:22 PM
74
KIPLINGERS PERSONAL FINANCE 11/2014
LIVING
And sticking with a contract may
mean youll have to wait longer to get
a new phone at a discount. Earlier this
year, AT&T and Verizon began requir-
ing contract customers to wait a full
two years, rather than the previous
20 months, to purchase a subsidized
phone when they renew.
The whirl of changes can leave even
the savviest customer feeling con-
fused. So to help cut through the clut-
ter, we picked outstanding plans that
match your usage profile and priori-
ties. Keep in mind that the best plan
for you may hinge on which carriers
provide good coverage in your area
(see the box on the next page for more
on how to check coverage).
FAMILIES
Best plan: VERIZON WIRELESS MORE EVERY-
THING When several people share a
wireless plan, strong overall coverage
is crucialespecially if family mem-
bers are scattered across the country
or travel frequently. Thats where Ver-
izon excels: In a recent report from
RootMetrics, a company that evalu-
ates wireless coverage, Verizon domi-
nated in tests of network performance.
The More Everything plan isnt the
lowest-priced plan on the market, but
it has become more flexible. The plan
provides unlimited voice minutes and
texts, and it lets you choose how much
data family members share. A family
of four smartphone users on a two-
year contract would pay $260 a month
(all prices exclude taxes and fees) to
share 10 gigabytes of datawhich may
be a good allotment if Mom and Dad
go light on Web surfing but the kids
gobble data with videos and music.
Verizon says that its customers use
an average of 1 to 2 gigabytes of data
per device each month.
New customers who pay full price
for phones from Verizon or who bring
their own phones dont sign a contract,
and the monthly service charge is only
$160 for the same plan. You could give
the kids your old phones or buy phones
on eBay to save money.
the major carriers either updated
some of their current plans or intro-
duced new plans to compete more ag-
gressively for your business. I think
its a better time now than it ever has
been for customers looking for deals,
says Logan Abbott, president of Wire-
fly, a site that compares phone plans.
Intense competition has wrought a
much wider selection of no-contract
options with lower-price service
plans. T-Mobile led the charge in
spring 2013 by discontinuing two-year
contracts on all of its plans. Its cus-
tomers can bring their own compatible
devices or pay full freight for their
phones rather than select a device
at a subsidized price that carriers typi-
cally pair with a contract. Now AT&T,
Sprint and Verizon also allow custom-
ers to pay the full price for a phone or
bring their own devices in exchange
for lower pricing on a service plan and
freedom from a contract.
Youll have to do the math to see
whether one of the new arrangements
is a better deal than a traditional two-
year contract. For example, suppose
a couple want to share 4 gigabytes
of data on Verizons More Everything
plan and get new Samsung Galaxy S5
phones. If they skip the contract,
theyll fork over $600 each for the
phones but pay lower monthly service
fees than with the contract. Total cost:
$4,320 over two years, including the
phones. If they opt for a shared con-
tract, theyll pay $100 each for the
phones and slightly higher monthly
fees, for a total of $3,800 after two
yearsbut they may have to fork over
as much as $350 per line if they break
the contract within two years.
Its a plus for customers that carriers
are cutting breaks on monthly serv ice
fees. But the latest smartphones cost
a lot more than basic flip phones, and
phone and plan prices overall have
risen over the years to reflect the
higher cost of providing sophisticated
gadgets and data services. Now, the
phone industry is looking a lot more
like the car industry, says Maggie
Reardon, author of CNET.coms Ask
Maggie column. As with a car lease,
you can choose to make monthly pay-
ments on a phone and trade it in for a
new one after youve paid off a certain
portion. Plus, carriers are pushing
insurance plans to cover the devices.
K11L-CELL PHONE.1.indd 74 9/11/14 5:22 PM
75
11/2014 KIPLINGERS PERSONAL FINANCE
on the Sprint network. You get to
choose from a selection of basic
phones; a Samsung Montage, for
example, was recently $40.
DATA HOGS
Best plan: T-MOBILE SIMPLE CHOICE If you
burn through data each monthsay,
because you stream a lot of music or
videos on your mobile devicean un-
limited-data plan will give you peace
of mind that you wont exceed your
allotment and rack up big charges.
The Simple Choice plan with unlim-
ited data runs $80 a month for a single
user. It includes truly unlimited,
speedy 4G LTE data (it wont be
slowed after you hit a certain thresh-
old), as well as 5GB of data when you
use your smartphone as a mobile hot
spot. Voice minutes and text messages
are unlimited, too. If you mainly
stream music instead of videos, you
may be able to get away with a lower-
messages you use and how much data
you want. The lowest-priced plan, at
$20 a month, comes with 400 minutes.
Text messages are 15 cents each, and
Web access is $1.50 per megabyte. For
$30 per month, youll get 1,500 min-
utes and 1,500 text messages, plus
30MB of data. Virgin Mobile operates
Runner-up: T-MOBILE SIMPLE CHOICE If low
prices are your priority, consider this
plan. A family of four would pay only
$140 per month for unlimited talk and
texts and 3GB of full-speed data per
person (after you surpass that amount,
T-Mobile slows speeds but doesnt levy
an additional charge). You can bring
your own compatible devices or buy
them from T-Mobile at full price (and
spread the cost over 24 monthly pay-
ments, if you prefer). Recently, a 16GB
iPhone 5s was $600 up front or $25
per month for qualified customers,
plus a $10 fee for a T-Mobile SIM card.
LIGHT USERS
Best plan: T-MOBILE PAY AS YOU GO
T-Mobiles plan is simple and flexible.
Each month, you prepay for a mini-
mum of $3 worth of combined voice
minutes and text messages (one min-
ute is worth 10 cents, and so is each
message). If necessary, you can add
more value from your credit card, a
checking account or a T-Mobile refill
card. Plus, you can buy data packages
as you need them. A seven-day pass to
use 1GB of data is $10. Choose among
any of the phones in T-Mobiles lineup
or bring your own compatible device.
Runner-up: VIRGIN MOBILE PAYLO Virgin has
several plans to choose from, depend-
ing on how many minutes and text
Read This Before You Switch
IF YOU JUMP SHIP FOR A NEW WIRELESS CARRIER, MAKE THE TRANSITION AS
smooth as possible. First, check whether the carrier youre considering has good coverage
in your area. The tried-and-true method is to ask around: Survey neighbors, coworkers and
others who use their phones in the same areas you do. At www.rootmetrics.com, you can
zoom in to your location on a coverage map that combines crowd-sourced information from
cell phone users with RootMetrics own analysis to show how well major carriers rate on call
performance and data capabilities. Sites www.opensignal.com and www.coveragemapper
.com rely on user-generated information to create coverage maps.
Tempted to switch? Make sure you understand the details. Breaking your contract with
your old carrier likely means paying an early-termination fee of up to $350 (the size of the
fee typically depends on how far you are into the contract). If your new carrier doesnt cover
the chargeand even if it doessee whether the savings youd capture by switching is
greater than the fee. T-Mobile, for example, pays up to $350 per line to cover early-termina-
tion fees if you break your carriers contract, plus up to $300 in trade-in credit for your phone,
depending on its market value. But you cant bring your own deviceyou have to purchase a
new phone at full price from T-Mobile. AT&T and Verizon both offer contract-free plans with
which a family with four smartphones can share unlimited talk and texts and 10 gigabytes of
data for $160 a month. But youll have to pony up the full price for new phones or bring your
own compatible phones.
Also note that when you sign up for new service, your carrier may charge an activation fee
of up to $40 for each phone line. Watch for promotional deals waiving such fees. Or try ask-
ing the new carrier to forgo the fee before you commit your business.
*
KipTip
K11L-CELL PHONE.1.indd 75 9/11/14 5:22 PM
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KIPLINGERS PERSONAL FINANCE 11/2014
LIVING
BARGAIN HUNTERS
Best plan: STRAIGHT TALK UNLIMITED/MONTH
If you want a great deal on a plan
that includes plenty of minutes, text
messages and data, look beyond the
major carriers. What smaller compa-
nies lack in brick-and-mortar stores
and access to the latest technology,
they make up for in price. For $45
a month, the Straight Talk prepaid
plan provides unlimited talk, texts
and data (speeds are reduced after you
surpass 3GB of data usage in a month).
Straight Talk offers a selection of
smartphones, including the iPhone
(the 16GB iPhone 5s was recently
$550), or you can activate your own
compatible device. Your network cov-
erage depends on which networks
work with the device you choose.
Runner-up: REPUBLIC + 4G To keep plan
prices down, Republic Wireless em-
ploys an unusual strategy: It uses both
Wi-Fi and standard cellular coverage
to provide voice, text and data ser-
vices. When youre in an area with
Wi-Fi access, your phone uses it.
When Wi-Fi isnt available, Republic
Wireless relies on Sprints network.
The $40-a-month plan includes un-
limited talk and texts as well as unlim-
ited data over a 4G connection (speeds
may be slowed if you use more than
5GB in a month). For $25 a month, you
can get the same services but with a
3G network. Republic offers only two
smartphones, but they are good mod-
els for the price: the $149 Android
Moto G smartphone and the $299
16GB Moto X (you must use the Moto
X to get 4G service). Or customize
a Moto X starting at $350.
EARLY ADOPTERS
Best plan: T-MOBILE JUMP With this
early-upgrade plan, you can get a
new phone anytime you want as long
as you pay off 50% of the phones full
price (T-Mobile divides the price into
24 monthly installments). If you want
out of the program, you can pay the
level plan. With T-Mobiles other indi-
vidual Simple Choice plans ($50 to $70
a month, depending on how much
high-speed data you want), you can
stream as much music as you like from
services such as Pandora and iHeart-
Radio and it wont count toward your
data limit.
Runner-up: SPRINT $60 UNLIMITED PLAN
Sprint has reworked its unlimited-
data plan, and its new offering beats
T-Mobiles price by $20 a month.
The Sprint plan comes with unlimited
talk, texts and data, and customers
who use it must pay full price for a
phone or bring a compatible device.
Unfortunately, customers in some ar-
eas have dealt with poor service qual-
ity as Sprint upgrades its network, and
the company has been slower to roll
out speedy 4G LTE data than its com-
petitors. Still, Sprint is building a bet-
ter network. If coverage is solid in
your area (see the box on the previous
page), its a worthwhile deal.
full price of the phone and keep it.
You have to pay a $10 monthly fee
to enroll in the Jump program, which
includes insurance coverage on your
phone and security software.
Runner-up: AT&T NEXT AT&T lets you pay
for your phone over 20 or 24 monthly
installments. If you choose the 20-
month option, you can trade in your
phone and upgrade to a new one after
12 months; the 24-month option allows
you to trade in your phone at 18 months.
You can upgrade earlier, as long as
youve paid two monthly installments.
At that point, pay off the balance on
your agreement and youll be eligible
to trade up. If you decide you want to
keep the phone, youll pay full price.
Devour Less Data
TRY A FEW FREE TRICKS TO KEEP
data consumption on your mobile devices
at a minimum. The OPERA MINI mobile
browser (compatible with most smart-
phones) shrinks the amount of data you
need to open Web pages by up to 90%,
meaning sites may load more quickly, too.
The browser has a clean interface and is
easy to use. The OPERA MAX app (avail-
able in beta testing for Android devices)
compresses pictures and videos that you
view on your device so that they require
less databut you might notice a deterio-
ration in image quality.
The more widely available ONAVO
EXTEND app (Android, iPad and iPhone)
compresses data while youre online to
lower your consumption, though it doesnt
squeeze streaming video. The ONAVO
COUNT app (Android, iPad and iPhone)
monitors total data usage as well as the
amount of data each app is using. Your
wireless carrier may also provide an app
that tracks how much data youre burning
overall. The best way to save on data us-
age: Hook up to secure Wi-Fi connections
when theyre available. In your phones
settings, make sure Wi-Fi capabilities are
switched on.
*
KipTip
K11L-CELL PHONE.2.indd 76 9/12/14 1:32 PM
77
11/2014 KIPLINGERS PERSONAL FINANCE
F
R
O
M

L
E
F
T
:

C
O
U
R
T
E
S
Y

N
E
S
T
;

C
O
U
R
T
E
S
Y

W
I
N
K
Remote-Control Your Home
Smarter apps let you turn your appliances on and off no matter
where you are. Some can even learn your habits. BY JEFF BERTOLUCCI
TECH
YOU COULD CALL IT THE
march of progress. First,
technology allowed you to
preset your VCR, and later
it let you program your TiVo.
Now you can watch videos
on demand on your phone
or tablet. Next up: devices
and apps that let you set and
reset your homes systems
and appliances.
Home video. Got an extra
iPad, iPhone or iPod touch?
Repurpose it as a home se-
curity cam. Just download
People Powers PRESENCE
app to an Apple device (free
from the Apple App Store;
requires iOS 5.0 or higher)
and plug it into an electrical
outlet. Then aim the camera
at whatever you want to
watch remotely. (The com-
pany sells optional stands,
including the $100 Galileo,
which rotates 360 de-
grees on your com-
mand.) Motion
sensors trigger
the video feed;
to watch, sign
into Presence
from another
iOS device.
PRESENCE PRO
VIDEO (www
.presence
pro.com; $5
monthly or $50
a year) adds several
features, including 2
gigabytes of cloud storage
for your videos and the abil-
ity to make longer record-
ings (five minutes versus
one minute). The company
says it plans to add the abil-
ity to view the feed from a
Web browser soon.
Smarter lock. Copying a key
and handing it to anyone
who needs to get into your
house isnt wise. AUGUST
SMART LOCK (www.august
.com; $250) is an innovative
alternative: Its a deadbolt
that unlocks via a smart-
phone app. The Bluetooth-
enabled Smart Lock replaces
the latch on the inside of
your door; the outside hard-
ware remains the same.
Using your iPhone or An-
droid phones contacts, you
send a virtual key that
allows the recipient to un-
lock the door wirelessly.
Bonus: Smart Lock, which
runs on four AA batteries,
works with a real key if the
juice runs out.
Stream heat. Googles NEST
LEARNING THERMOSTAT (www
.nest.com; $250) studies
your habits and adjusts
itself accordingly. For in-
stance, if you lower the
temperature a few days in
a row at 4 p.m., Nest starts
making that change auto-
matically. The mobile app,
which works with Apple
and Android devices, allows
you to check your energy
usage and change the tem-
perature settings remotely.
That could come in handy
if you forget to dial the tem-
perature up or down before
leaving on a trip.
Cool down. The free WINK
app (www.winkapp.com)
lets you use your Android
or Apple device to control
more than 60 home appli-
ances, including lighting
systems, thermostats, smoke
alarms and sprinkler sys-
tems. The most inventive
use of the Wink technology
may be the AROS SMART WIN-
DOW AIR CONDITIONER ($280),
which, like Nest, learns from
your usage patterns. It is the
product of a collaboration be-
tween General Electric and
Quirky, a crowd-sourcing
site for inventors.
Communicate with your appli-
ances. Competition is heat-
ing up (and cooling down)
for ranges and refrigerators
that can be controlled from
your smartphone. For ex-
ample, GE BRILLION double
wall ovens ($3,100 to
$3,800) and freestanding
ranges ($1,600 to $2,100)
let you turn on the oven
and control the temperature
with a mobile app for Apple
or Android when youre out.
You can monitor the self-
cleaning progress of LG
Electronics SMART THINQ
range ($1,400) from your
phone. SAMSUNG has a high-
end, smart refrigerator
($3,600), which comes with
an 8-inch Wi-Fi-enabled
LCD that connects wire-
lessly to a home network.
Our take: You may want
to hold off until you have
even more choices and
prices come down.
THE NEST THERMOSTAT LEARNS
YOUR FAMILYS SCHEDULE. THE
WINK APP LETS YOU CONTROL
MORE THAN 60 APPLIANCES.
K11L-TECH.1.indd 77 9/12/14 12:21 PM
78
KIPLINGERS PERSONAL FINANCE 11/2014
L
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M
E
T
Z
G
E
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Expect Deals on New Models
T
his fall should be a very good time
to buy a 2015 car or truck. Vehicle
sales have heated up over the past
few years, fueled by a healthier econ-
omy and low interest rates. Now automakers
are fighting tooth and nail for market share.
Look for cash incentives in addition to low-
rate financing on more vehicles. Carmakers
will also dole out dealer cashwhich dealers
can pass on to you.
For an even sweeter deal, shop for a
2014 model. As the new models stream
into showrooms, dealers will be anxious to
clear their lots. Look for average discounts
to approach 10% off sticker prices by year-
end. Youll find the biggest bargains on
cars that buyers are steering clear of. That
includes compact and midsize sedans,
thanks to gas prices that were recently at
their lowest levels in four years. (Buyers
have been migrating to crossovers.) Lease
deals are also abundant on the 2014s. For
$200 or less a month, you could recently
lease a Honda Accord, Hyundai Elantra,
Nissan Altima or Mazda3.
A leaner, greener 2015. Among the more than
50 brand-new and redesigned models for
2015, the small-crossover segment is seeing
the most action. Small crossovers meet the
Goldilocks test. Theyre big enough to carry
your family and cargo, but small enough
that you wont pay an arm and a leg for gas
or feel as if youre driving a truck.
And some crossovers are getting even
smaller. Carmakers have been introducing
subcompact crossovers, which are just
a bit smaller than compacts, have lower
prices and get better fuel economy. The
Chevrolet Trax, Jeep Renegade and Honda
HR-Vall starting at about $20,000are
among the entries for 2015 from main-
stream brands. German luxury brands are
also launching subcompactsthe Audi Q3
(starting at $33,425) and Mercedes-Benz
GLA ($32,225)and others are coming out
with new compacts, including the Lexus
NX (about $35,000), Lincoln MKC
($33,995) and Porsche Macan ($50,895).
Luxury makes are also tweaking their
entry-level sedans to tempt you to make
the switch from mainstream brands. For
example, Audi has reconfigured its A3,
formerly available only as a hatch, as a
sedan ($30,795) and Mercedes revamped
the compact C-Class ($39,325).
Two midsize sedan stalwarts, the
Hyundai Sonata and Toyota Camry, are
redesigned for 2015, as are the Chrysler
200 and Subaru Legacy. All of these models
boast enhanced suspensions for better han-
dling, as well as better interior materials.
Have a big brood to haul? The Kia Sedona
minivan gets a redesign for 2015, with
First Class lounge seating in the second
row, a 360-degree-view monitor for park-
ing and a refrigerated glove box for cooling
drinks. General Motors is overhauling its
lineup of big SUVs to provide more power
and 10% better fuel economy. Plus, GM has
boosted legroom and enhanced ease of use
of the cargo area of the Chevrolet Tahoe and
Suburban and the GMC Yukon/Yukon XL.
As the industry strives to meet strict
average-fuel-economy regulations that
demand 54.5 miles per gallon by 2025, youll
find improved mileage, whether youre
considering a vehicle with a traditional
engine or an alternative powertrain. More
transmissions will sport seven to nine
speeds, and youll see more turbocharging,
direct injection and auto stop/start in inter-
nal combustion engines.
Sales of electric vehicles and hybrids
have plateaued for now, but youll still
see more EVs in 2015: the Kia Soul EV,
Volks wagen e-Golf and long-awaited Tesla
Model X crossover. Volkswagen, one of the
biggest sellers of diesel vehicles, is adding
a new TDI engine to its Beetle, Golf, Jetta
and Passat lineups, improving both power
and fuel economy.
JESSICA ANDERSON > Drive Time
ASK JESSICA A QUESTION AT [email protected], OR
FOLLOW HER ON FACEBOOK OR TWITTER AT JANDERSONDRIVES.

Youll find
the biggest
bargains on
cars that
buyers are
steering
clear of.
That includes
compact
and midsize
sedans.
K11L-DRIVE TIME.indd 78 9/11/14 3:15 PM
79
11/2014 KIPLINGERS PERSONAL FINANCE
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C
hard drive and an online
site, such as Flickr (see
kiplinger.com/links/digital
photos). Have your most
important images printed
using professional-grade
processes and materials.
3. Shoeboxes are for shoes.
Prints deteriorate when
exposed to excess light and
extremes of temperature and
humidity. Look for sheets or
envelopes that will protect
them and wont cause fading
or staining, and store them
in special binders or albums.
Such archival-quality prod-
ucts are typically made of
acid- and lignin-free paper
or inert polyethylene and
polyester. Good sources in-
clude Gaylord (www.gaylord
.com), Hollinger Metal Edge
(www.hollingermetaledge
.com), Light Impressions
(www.lightimpressions
direct.com) and University
Products (www.university
products.com).
4. Restore when necessary.
Scanning services will in-
clude touch-up and color
correction of your images.
But what if an important
1. Prepare to share. Family
members may want their
own copies of Grandmas
wedding album. You can
scan and digitize prints
and slides at home (a photo
scanner starts at about
$200), but if you have a
lot of pics, send them to
a serv ice such as FotoBridge
(www.fotobridge.com) or
ScanCafe (www.scancafe
.com). Ask for 600 dpi
(dots per inch) resolution
for prints and at least 3,000
dpi for slides so that recipi-
ents can enlarge the images
later. Youll pay 22 to 33
cents each for files saved
in JPEG format, which is
good enough to post, say,
on Facebook. But for archi-
val purposes, ask for files
saved as uncompressed
TIFFs (which include all
the images original data);
at ScanCafe, youll pay an
extra 24 cents apiece.
2. Back everything up. To pre-
serve your photos, you cant
beat redundancy. Save nega-
tives and slides in their orig-
inal packaging. Save digital
shots not only to your hard
drive but also to an external
What You Need
to Know About
Saving Photos
Organize, digitize, preserve and share your
family pictures. BY PATRICIA MERTZ ESSWEIN
LOWDOWN
family photo is torn, stained
or faded? A skilled conserva-
tor can repair and restore it,
but youll pay $125 to $250
an hour. So if you just want
to remember Uncle Franks
face, a corrected scan may
be sufficient. If you think
the photo might be a rare
example of a 19th- or 20th-
century photographic pro-
cess, have it assessed by an
appraiser (find one at www
.appraisersassociation.org)
or a conservator (www
.conservation-us.org) to
learn whether restoration is
worthwhile.
5. Add an ID. Preserving pho-
tos for the future is point-
less if theyre unidentified,
says professional photo con-
servator Tom Edmondson.
Label prints on an edge of
the back in pencil or with
a felt-tip marking pen with
pigmented ink that wont
fade or discolor over time.
Instead of organizing pho-
tos chronologically, sort
them into large and mean-
ingful categories, such as
The Seventies, Holidays
and Vacations. And be
selective. Weed out dupli-
cates and fuzzy shots.
6. Get expert advice. For
prints, go to the National
Archives Web site (www
.archives.gov/preservation/
family-archives). Youll
learn how to display photo-
graphs, care for vintage
albums, deal with photos
stuck to magnetic pages,
and more. For digital im-
ages, go to the Library of
Congress (www.digital
preservation.gov/personal
archiving).
K11L-LOWDOWN.indd 79 9/9/14 12:08 PM
GO LONG

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