September 22, 2016

Minimum Wage and the Presidential Campaign

Raising the federal minimum wage from $7.25 an hour to $12 would lift pay for 35 million workers (and their children), or 1 in 4 employees nationwide.
Income for the median household has fallen 2.4% since 1999, despite a big gain in 2015.
The U.S. still had fewer middle-income jobs than it did before the recession.
It's not just teenagers earning the minimum wage. "Contrary to popular myth, low-wage jobs aren't dominated by teenagers earning extra spending money. About half of fast-food workers are 25 or over. And one-quarter have children."
Hillary Clinton supports increasing the minimum wage while Donald Trump opposes any increase saying U.S. wages are already too high.
Read: Why it matters: The Minimum Wage https://www.thestreet.com/story/13746801/1/why-it-matters-minimum-wage.html
When I was a teenager earning the minimum wage it was worth close to $10/hour. Check out the purchasing power of the minimum wage over time. Today it is only $7.25 and life is much more expensive. There were no computers, cell phones, and related services to buy back then. Housing prices are much higher today relative to the minimum wage. 

Dump Wells Fargo!

If you bank with Wells Fargo it's time to dump that scandal-plagued institution and find another bank, or better yet, a credit union. Why would any consumer continue doing business with a bank that defrauds its customers? The scandal has been front page news in The Wall Street Journal for the past week. Bank policies resulted in high pressure on low-paid employees to con customers into buying additional bank products they didn't really want and even making up fictitious customer accounts to make it appear as if the bank were growing.  It's really sad the CEO John Stumpf is collecting an outrageous salary while the bank has now fired the low-paid employees that were subject to pressure to produce or lose their jobs!
I know from experience that it is a time-consuming process to change financial institutions, especially when you have automatic deposits and payments but it is absurd to give this bank your business now that it's egregious policies (toward both customers and low-level employees) is public.
"Cross-selling," encouraging customers to buy other bank products, is common in the industry but WF took the practice to fraudulent extremes and now is punishing their employees who had no choice. The head of the unit that perpetrated this practice got a $125 million payout and is being allowed to retire with full benefits! The fired employees are out of a job for doing what their bosses insisted they do!
Almost everyone qualifies to join a credit union, financial institutions that are member-owned rather than stock holder-owned. Virtually every research study that has compared banks and credit unions on interest rates paid on savings and rates charged for loans has concluded that consumers are better off with a credit union than a bank.
Sometimes consumers feel helpless to bring about change. But this one is simple. DUMP WELLS FARGO! There are lots of much better options! If you stay with this bank you are voting for more of the same egregious behavior!
Read the Washington Post editorial (9/22/16): "Accountability at Wells Fargo" at the Salt Lake Tribune's website: http://www.sltrib.com/opinion/4384134-155/washington-post-editorial-accountability-at-wells
and Washington Post columnist Dana Milbank's opinion: "Wells Fargo: Too big to fail, too arrogant to admit it" https://www.washingtonpost.com/opinions/wells-fargo-too-big-to-fail-too-arrogant-to-admit-it/2016/09/20/5c7ee1fe-7f6e-11e6-9070-5c4905bf40dc_story.html

September 13, 2016

Target Date Retirement Funds: The competition heats up

Each year students in my investing class had to investigate individual retirement accounts (IRAs) and mutual funds to select the best fund for their IRA. With tight budgets, student loan payments looming after graduation, and credit card balances, saving for retirement was NOT their top priority. But after seeing examples of compound interest and how their money could grow over the 4+ decades before they anticipated retirement, they became experts at finding the lowest cost (in expense ratios and minimum initial investments) target retirement date funds (and index mutual funds). Schwab had the lowest initial minimum of $100 but only for stock index funds. Vanguard was the place for target date funds with the lowest minimum investment of $1,000 (0.14-0.16% expense ratio) but requires $1,000 to open the account.
But now Schwab has cornered the market on lowest initial investment, lowest expense ratio, target index funds. You can't beat their ultra-low 0.13% expense ratio for diversified mutual funds that automatically become more conservative over the decades as retirement approaches. see for yourself:
http://www.schwab.com/public/schwab/investing/accounts_products/investment/mutual_funds/mutual_fund_portfolio/target_funds

HELOCs versus Reverse mortgages

For senior homeowners facing large expense such as roof replacement or needing extra cash tomake ends meet each month, home equity lines of credit are one option; reverse mortgages another. Learn the pros and cons of each at https://www.thestreet.com/story/13698522/1/helocs-vs-reverse-mortgages-which-is-right-for-seniors-facing-a-financial-emergency.html

6 Unusual Ways to Get Out of Debt

"Driving for Uber, pet sitting through Dog Vacay and doing odd jobs through Task Rabbit are all options to pick up extra money" according to Andy Smith, a certified financial planner. Maryalene La Ponsie describes the pros and cons of other creative way to find money to pay off debt. Her article includes links to related resources. Renegotiating the balance owed can reduce the amount by 40%. Learn more at: http://money.usnews.com/money/personal-finance/articles/2016-09-08/6-unusual-ways-to-get-out-of-debt

Planning to work instead of save for retirement?

Think again! 7 of every 10 workers in a recent poll claimed they just planned to keep on working... and working... and .... The reality is that about 3 in 10 retirees was forced to drop out of the workforce before they planned due to poor health, job loss/downsizing, or having to care for a relative (often a parent or spouse). So planning to work forever instead of investing is a poor strategy. While working past the traditional retirement age has many potential benefits, there is no guarantee the you will be physically and mentally able to do so or that family obligations will intercede. Even if you love your work and plan to work well into your 70s, it's prudent to invest to supplement Social Security retirement benefits.
Dan Kadlac explains the risks in the "work til I drop" strategy (or lack thereof) in
"How Planning to Work in Retirement Can Backfire" http://time.com/money/4483139/planning-to-work-in-retirement-can-backfire/

Smart Spending in Retirement... How to make your money last

Making the transition from a regular paycheck to a retirement paycheck is a real challenge in today's low interest rate environment. A great resource to help you decide how to budget and spend down your assets in retirement is available at: https://www.moneygeek.com/seniors/resources/smart-spending-in-retirement/

The (Non-Scary) Guide to Retirement Planning... for adults of all ages

"It’s never too late to start saving. Whether retirement is far in the distance or on your doorstep, what’s important is to figure out what you’ll need and start working toward that goal. Use MoneyGeeks Retirement Expenses Calculator to determine how much you need to save, then put the power of compound interest to work for you. Our Compound Interest Time Machine (below) shows that the amazing results of putting even a modest amount into savings early on." Whether you are 18 or 58 or older... Check out this terrific website for an easy to understand guide to planning for retirement: https://www.moneygeek.com/financial-planning/resources/saving-for-retirement/
Understanding compound interest is a key to motivating yourself (and your kids?) to invest for retirement. The earlier you start the easier it is to accumulate a comfortable nest egg to supplement Social Security. The website describes 7 steps and illustrates them in an attractive, easy to understand format. Check out this website today!

Maximizing Social Security Retirement Benefits

Social Security is the bedrock of retirement income security so it is absolutely essential that you understand how the system works in order to maximize your financial security in later life. For younger readers, consider educating yourself so that you can ensure that your parents are making wise decisions so they don't depend on you to support them. One of the best websites that clearly explains options is "The Social Security Guide" written by SS expert extraordinaire Laurence J. Kotlikoff. https://www.moneygeek.com/retirement/resources/social-security-guide/
Get the most from the benefits you've earned. Don't jump to file for benefits as soon as you are eligible unless you are desperate or expect to die young. 
Consider buying Kotlikoff's  book: Get what's yours: The secrets to maxing out your Social Security. Available as paper or ebook: http://www.simonandschuster.com/books/Get-Whats-Yours/Laurence-J-Kotlikoff/The-Get-Whats-Yours-Series/9781476772318

September 12, 2016

Defined Benefit Plan participants can split payout between lump sum and annuity

The IRS just finalized a proposal to allow defined benefit (DB) participants to take their retirement benefits as a combination of an annuity (traditional regular monthly payments) and a lump sum. this change in IRS policy allows much more flexibility for DB retirees. Read the details in the Journal of Accountancy.
Sally P. Schreiber, J.D.Sally
http://www.journalofaccountancy.com/news/2016/sep/defined-benefit-plan-split-distributions-201615151.html
The IRS believes plan participants are better served against the possibility that they will outlive their retirement benefits when they can choose to bifurcate their benefits between the two options. - See more at: http://www.journalofaccountancy.com/news/2016/sep/defined-benefit-plan-split-distributions-201615151.html#sthash.M0ZlifIM.dpuf
The IRS believes plan participants are better served against the possibility that they will outlive their retirement benefits when they can choose to bifurcate their benefits between the two options. - See more at: http://www.journalofaccountancy.com/news/2016/sep/defined-benefit-plan-split-distributions-201615151.html#sthash.M0ZlifIM.dpuf
The IRS believes plan participants are better served against the possibility that they will outlive their retirement benefits when they can choose to bifurcate their benefits between the two options. - See more at: http://www.journalofaccountancy.com/news/2016/sep/defined-benefit-plan-split-distributions-201615151.html#sthash.M0ZlifIM.dpuf
Defined benefit plan participants will have greater flexibility in choosing how to receive their pension benefits under final regulations issued by the IRS (T.D. 9783). The regulations finalized proposed rules issued in 2012 that permit participants to elect to receive split benefits of monthly annuity payments together with a lump-sum payout without disqualifying the plan. The IRS believes plan participants are better served against the possibility that they will outlive their retirement benefits when they can choose to bifurcate their benefits between the two options. - See more at: http://www.journalofaccountancy.com/news/2016/sep/defined-benefit-plan-split-distributions-201615151.html#sthash.M0ZlifIM.dpuf
Defined benefit plan participants will have greater flexibility in choosing how to receive their pension benefits under final regulations issued by the IRS (T.D. 9783). The regulations finalized proposed rules issued in 2012 that permit participants to elect to receive split benefits of monthly annuity payments together with a lump-sum payout without disqualifying the plan. The IRS believes plan participants are better served against the possibility that they will outlive their retirement benefits when they can choose to bifurcate their benefits between the two options. - See more at: http://www.journalofaccountancy.com/news/2016/sep/defined-benefit-plan-split-distributions-201615151.html#sthash.M0ZlifIM.dpuf
Defined benefit plan participants will have greater flexibility in choosing how to receive their pension benefits under final regulations issued by the IRS (T.D. 9783). The regulations finalized proposed rules issued in 2012 that permit participants to elect to receive split benefits of monthly annuity payments together with a lump-sum payout without disqualifying the plan. The IRS believes plan participants are better served against the possibility that they will outlive their retirement benefits when they can choose to bifurcate their benefits between the two options. - See more at: http://www.journalofaccountancy.com/news/2016/sep/defined-benefit-plan-split-distributions-201615151.html#sthash.M0ZlifIM.dpuf
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