January 17, 2017

How safe is Social Security in a Republican-dominated Congress?

"There's no way to predict with certainty what might happen to Social Security, but here's what we know now," by Matthew Frankel. "If you watch or read the news on a regular basis, chances are you've seen a headline or two to the effect of "Social Security is going broke." If you're a retiree collecting a Social Security check, or if you're a worker hoping Social Security will still be around when you get older, then the question of "how safe is Social Security?" is an important one. Here's the reality of Social Security's finances, what we can do to solve the problem, and what to expect from the new Republican government."
"Social Security is not broke. Social Security had more than $2.8 billion in reserves in its trust fund at the end of 2015, and it was expected to run a small surplus in 2016. In fact, Social Security's income from payroll taxes, taxes on certain Social Security benefits, and earnings on its invested reserves are expected to exceed the program's expenses through 2019." By 2020 payout are likely to exceed tax revenues; the trust fund (accumulated surpluses) are likely to be depleted by 2034... IF Congress fails to act. Frankel explains ways to fix the shortfall problem and notes that Trump has pledged not to mess with Social Security. However, there are moves among Republican legislators to severely reduce SS retirement benefits. Get the details at: https://www.fool.com/retirement/2017/01/16/how-safe-is-social-security.aspx

January 16, 2017

Medical Bills Are the Biggest Cause of US Bankruptcies

With Republicans vowing to repeal (and replace?) the Affordable Care Act, the headline that "Medical Bills Are the Biggest Cause of US Bankruptcies" was no surprise to this researcher who devoted many years to the study of consumer bankruptcy.  Dan Mangan wrote in 2013: "Bankruptcies resulting from unpaid medical bills will affect nearly 2 million people this year—making health care the No. 1 cause of such filings, and outpacing bankruptcies due to credit-card bills or unpaid mortgages, according to new data." But here is the real kicker: "even having health insurance doesn't buffer consumers against financial hardship." http://www.cnbc.com/id/100840148
According to the federal government's Office of Personnel Management, https://www.opm.gov/healthcare-insurance/healthcare/ federal employees, including members of Congress, "retirees and their survivors enjoy the widest selection of health plans in the country" through The Federal Employees Health Benefits (FEHB) Program. So your Senators and Congress members don't have to worry about access to health insurance. So repealing the Affordable Care Act is OK with them.

Where unwanted gifts end up

Long an advocate of less consumption and more investment, with advice like contributing to charity or 529 college savings funds instead of gift cards or buying gifts that are often unwanted, I was intrigued with the growth in on-line "consignment shops." According to Patrick McGroarty, writing for The Wall Street Journal, "unwanted holiday gifts and lightly worn clothes from years past are swelling the inventory of fast-growing online consignment and secondhand clothing retailers like Swap.com." An estimated 30% of holiday gifts are returned. Inside a massive warehouse near Chicago, "Swap’s 200 full-time employees spend 10-hour shifts unpacking, photographing and repricing a mountain of clothing from sellers hoping to make a quick buck." Many of the items are new with tags attached, reflecting the disconnect between givers and recipients.
Time to re-think traditional gift-giving practices. 

January 9, 2017

Long Term Care: Rely on Saving Rather Than Insurance



Teresa Miller, the Pennsylvania insurance commissioner, and the head of the Long Term Care Innovation Subgroup says Americans must save more for potential long-term care costs and rely less on insurance. (See related posts about problems with the LTC insurance industry.) More savings may be the best option for the well-off but most Americans suffer from far too little in retirement savings. Medicaid (NOT Medicare) pays for long-term care in nursing homes for the indigent but Medicaid is in serious trouble due to lack of funding. Politicians get elected by promising to cut taxes but why do voters fail to ask what services and benefits will be cut? A good question for your members of Congress.

Why did God create economists? To make weather forecasters look good.

"The joke’s an old one, but it’s been given new life after the chief economist of the Bank of England—among the most important jobs in the profession—compared economics to one of the biggest forecasting failures of weather people."
"Andy Haldane is optimistic that, like meteorology after its fiasco, applying more data and advanced computing can help economic forecasting recover from its failure to predict the 2007-9 financial crisis."
"He shouldn’t be. The problem isn’t that forecasting the weather and forecasting economics are different (though they are, in important ways I’ll come back to). The problem is that they’re very similar, both trying to predict complex systems that can be tipped from one state to another by very small changes," writes James Mackintosh in The Wall Street Journal (1/9/17). He continues: "History suggests investors should put little trust in" economic forecasts and the upcoming year promises to be one of the most unpredictable ever with the new administration. So take any economic forecasts with a grain of salt and focus investment decisions on long run, fundamental principles espoused in this blog. 

January 8, 2017

"Utah payday lenders' average interest rate roughly double that of 1960s Mafia loans" SLT headline

Lee Davidson reports in The Salt Lake Tribune that Utah payday lenders charged an average 459% annual interest on tens of thousands of loans issued in 2015, according to the Utah Department of Financial Institutions.  Some Utah payday lenders charged annual interest as high as 1,408%  — or $27 a week on a $100 loan.
http://www.sltrib.com/news/4785118-155/utah-payday-lenders-average-interest-rate

Take account of how spending varies throughout retirement



"Spending during retirement tends to vary as retirees age, rather than being a matter of steadily drawing down funds, writes Michael Kitces of Pinnacle Advisory Group. A projection of spending based on age banding can show that 'retirees may not actually need to save as much or accumulate as large of a nest egg to retire in the first place,' he writes." Kitces is one of the top resources for retirement planning info; he is up to date on the most recent research and has an analytical mind to slice through to the core of the implications for consumers. Read: “Kitces: A better baseline for retirement planning.” http://www.bankinvestmentconsultant.com/news/kitces-a-better-baseline-for-retirement-planning
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