October 14, 2019

Pelosi's drug-negotiation proposal would save Medicare $345B

A provision in a bill introduced by House Speaker Nancy Pelosi, D-Calif., that would permit Health and Human Sservices to negotiate prices for as many as 250 drugs per year would save Medicare $345 billion from 2023 to 2029 and lower pharmaceutical industry revenues by $500 billion to $1 trillion over 10 years, according to a preliminary analysis from the Congressional Budget Office. A separate analysis from the CMS Office of the Actuary found Pelosi's plan would reduce health care spending by $480 billion and save US households $158 billion over 10 years through lower premiums and reduced cost-sharing on drugs. Details at: https://thehill.com/policy/healthcare/465491-cbo-pelosi-bill-to-lower-drug-prices-saves-medicare-345-billion

The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Its Cars

Do you wonder how your neighbor affords a new vehicle every few years? The truth is often ugly! Ben Eisen and Adrienne Roberts explain in The Wall Street Journal: "Approximately one-third of loans on new vehicles agreed upon in the first half of 2019 were for more than six years, compared with less than 10% a decade ago, according to Experian. With increases in vehicle prices outstripping income growth, the trend is seen as an indication many households struggle to finance their lifestyle." "For many Americans, the availability of loans with longer terms has created an illusion of affordability. It has helped fuel car purchases that would have been out of reach with three-, five- or even six-year loans." If you've ever tried to buy a vehicle with cash you likely experienced the hard sell to finance it instead. A buyer can feel like they are being held captive by the dealership if they want to make a cash purchase. That's because "dealers now make more money on the loans their customers take than on the cars they sell." "The average loan stretches for roughly 69 months, a record. Some last much longer. In the first half of the year, 1.5% of auto loans for new vehicles had terms of 85 months or longer, according to Experian. Five years ago, these eight- and nine-year loans were practically nonexistent." "As a result, a growing share of car buyers won’t pay off the debt before they trade in their cars for new ones, either because the car is in need of repairs or because they want a newer model. A third of new-car buyers who trade in their cars roll debt from old vehicles into their new loans, according to car-shopping site Edmunds." And people wonder why so few Americans are financially prepared for retirement!

How a kid’s allowance can teach money management skills

"Teaching children about money management is a big job for parents. Money talk often starts by paying an allowance. According to new research from the American Institute of CPAs (AICPA), two-thirds of parents (66%) give their child an allowance at an average of $30 a week. An allowance is just part of a larger conversation about effective financial management. Parents must make sure the lessons sink in." "The good news is that nearly half of parents (49%) say they take time to teach their child about money at least once a week. However, nearly a third (32%) say they only teach their children about money no more than once a month, including the 7% who admit they never teach their kids about money." Of course, much of what children learn about money management from their parents comes from daily observation. Parents who think they don't teach their children financial lessons are kidding themselves. The article explains how parents can make decisions about how much allowance to give, which should vary with age. Ideas on how to teach children prudent money skills are also addressed. Check out: https://blog.aicpa.org/2019/10/how-a-kids-allowance-can-teach-money-management-skills.html#sthash.ymIVwxYO.dpbs

October 9, 2019

Help choosing a college major and potential career

The Utah legislature mandated creation of a website to help college students choose a major and explore career options. Check out: https://www.utahfutures.org/ It is still a work in progress with features under construction. It's a good way for high school and college students (and their parents) to explore the important decisions facing post-secondary students. Thanks to Eric S. Peterson, Tori waltz, and McKhelyn Jones writing for The Salt Lake Tribune. 10/9/19

September 21, 2019

How to afford college

"COLLEGE STUDENTS who borrow graduate with an average $37,000 in loans. While many people believe loans are the only way to finance a college education, that’s simply not the case." Author Kristine Hayes is a departmental manager at a small, liberal arts college. Here are five ways to get an advanced education while minimizing debt:" 1. Stay close to home. 2. Comparison shop. On paper, private schools typically appear to cost more than public institutions, but it’s worth digging into the details. 3. Scholarships. Billions of dollars in scholarships are given to college students every year. 4. Condensed degree programs. 5. Tap your employer. Some employers offer tuition reimbursement programs "Many hospitals offer these types of programs for students interested in nursing. It’s even possible to attend medical school for free. Kaiser Permanente recently announced that the first five cohorts of students to attend its new medical school will pay no tuition. With medical doctors typically graduating with nearly $200,000 in debt, Kaiser’s program will no doubt generate significant interest." Read the full article for details: https://humbledollar.com/2019/09/educated-consumers/

10 Alternate Ways to Pay for Long-Term Care

10 Alternate Ways to Pay for Long-Term Care Don't count on Medicare to pay for nursing home, assisted living or ongoing home health care. Medicare benefits for that type of care are typically only available after a hospitalization or injury and for a limited duration. While Medicare isn't an option, here are 10 alternatives that are: • Group Long-Term Care Insurance • Short-Term Care Insurance • Life/Long-Term Care Insurance • Health Savings Accounts • Long-Term Care Annuities • Life Plan Communities • Veterans Benefits • Home Equity • Pensions or Social Security • Medicaid Source: https://money.usnews.com/money/personal-finance/family-finance/articles/the-high-cost-of-long-term-care-insurance-and-what-to-use-instead

September 18, 2019

Retirement Income Security Evaluation Score (RISE Score™)

Retirement Income Security Evaluation (RISE) https://www.cnbc.com/2019/09/16/this-score-can-tell-how-financially-prepared-you-are-for-retirement.html “evaluates just where you fall in terms of having steady income in retirement, much like a credit score, on a zero to 850 scale.” “Consumers can access the tool online. After inputting factors such as the Social Security income you expect, any pension income you may have, how much you have saved and your monthly living and medical expenses, you can see how well you will fare financially in retirement.” The tool is aimed at individuals ages 45 and up with investable assets of $75,000 to $2 million. Check out the RISE score at: https://www.retireyourrisk.org/rise-score/ “The purpose of the Retirement Income Security Evaluation Score (RISE Score™) is to provide you with an estimated measure of income security to help you determine whether you're on track with your current retirement income plans. The RISE Score™ can help you assess how well your retirement portfolio will cover basic living expenses and health care costs in retirement. The RISE Score™ is also designed to help answer this simple question: How can my retirement security potentially be improved through the addition of lifetime income solutions in my retirement planning strategy?”

September 12, 2019

Don't wait to install solar panels

"Installing solar panels is expensive, but if you have the money, now might be the time to act. That’s because the investment tax credit, which offers significant deductions for installing a solar energy system, is set to expire soon." "If your system is hooked up and running before the end of the year, you’ll be able to deduct 30 percent of the installation costs from your tax bill. In 2020, the tax credit will fall to 26 percent. In 2021, it drops to 22 percent, and, in 2022, it will be phased out for residential customers." Source: NYTimes.com/climate

September 3, 2019

Small IRA, 401(k) differences can lead to big tax consequences

Writing for The Wall Street Journal, tax expert Laura Saunders explains the necessity of carefully reading the tax rules that affect the use of IRA and 401(k) funds. Failure to adhere to IRS regulations can result in a large unexpected tax bill. Especially if you are taking an early withdrawal, double check advice from a tax professional to ensure you won't owe a tax penalty.
"Because tax-favored retirement accounts are supposed to be for retirement, the rules often impose tax and a 10% penalty on withdrawals before age 59½. Younger IRA owners who take out up to $10,000 to purchase a first home don’t owe the penalty, while younger 401(k) participants do."
“The IRA and 401(k) rules are full of these booby-traps, and they hurt a lot of smart people who aren’t retirement experts,” says Natalie Choate, an attorney and retirement-plan specialist.

Education-expense withdrawals. Payouts before age 59½ from an IRA that are used for higher-education tuition, books and other costs are exempt from the 10% penalty. Similar withdrawals from 401(k) plans incur it.
Age 55—59½ payouts. Savers don’t owe the 10% penalty on withdrawals from a 401(k) before age 59½ if they were at least 55 in the year they left their job. But a 10% penalty applies to IRA withdrawals before the owner is 59½, except for certain exemptions.

Borrowing. Many 401(k) plans allow participants to borrow from them. Borrowing against an IRA is prohibited.

Creditor protection. Employer-provided plans such as 401(k)s are better shielded from creditors than are IRAs. 

Losing your privacy through medical data smart phone apps

As a Wall Street Journal reader I am reminded almost daily of the loss of privacy linked to the use of computers, smart phones, and other technology. Facebook is one of the worst offenders.
But now Natasha Singer, writing in The New York Times reveals the perils of smart phone apps for medical data.
"Americans may soon be able to get their medical records through smartphone apps as easily as they order takeout food from Seamless or catch a ride from Lyft."
"But prominent medical organizations are warning that patient data-sharing with apps could facilitate invasions of privacy — and they are fighting the change."
The American Medical Association is warning that patients "who authorized consumer apps to retrieve their medical records could open themselves up to serious data abuses. Federal privacy protections, which limit how health providers and insurers may use and share medical records, no longer apply once patients transfer their data to consumer apps."
So think twice before signing up to get your medical info on your smart phone. 

August 27, 2019

Avoid student loan regret with 4 tips

Student loan pros and cons handwritten on a blackboard

Avoid Student Loan Regret With These 4 Tips

Nearly half of all Americans with student loan debt regret not going to a cheaper college, according to the FINRA Foundation's 2018 National Financial Capability Study.
And the study suggests many with student loans did not fully understand what they were getting into when they took out that debt, with just 43 percent reporting they tried to estimate monthly payments before taking out the loan.
If you or your child are among those who must borrow at least some amount to pay for college, fear not. Here are four ways to stave off buyer's remorse when it comes to that college education.

 Avoid regret with these four tips.

1. Understand the True Cost.  
2. Manage Your Salary Expectations.
3. Find Ways to Borrow Less.  
4. Know Your Goals—And How to Achieve Them. 

Read the details at: 


August 16, 2019

How much of your portfolio should be invested in stocks in pre-retirement and in early retirement?

The stock market has been extremely volatile in past few weeks. How much volatility can you tolerate on the verge of retirement?
Investors getting ready to retire should have no more than 60% of their portfolios in stocks, writes John Coumarianos, a former Morningstar analyst. A simulation showed that a person retiring in 2000 with $500,000 saved and withdrawing 4% annually would have $424,000 left in 2018 at 60% stocks, $508,000 at 30% stocks, and less than $200,000 left if fully invested in stocks.
Other analyses suggest that pre- and early retirees should have no more than 30-40% invested in stocks. Keep in mind that we are in the longest bull market in history. That doesn't mean a bear market is around the corner but... what if it is? Could you stand to lose (at least on paper and in the short run) up to 50% of your stock portfolio? especially if you have no guaranteed pension?
Time to review your asset allocation and recognize that your tolerance for risk is not as high as you think it is. 

August 15, 2019

Big drop in investment values in mid-August

Investment performance indexes across the world dropped 3% or more on August 14, 2019. Now is a good time to revisit your asset allocation and risk tolerance in relation to the time horizon for your investment goals.
Numerous studies and the experience of many financial advisors confirms that investors think they have a high tolerance for volatility and risk... as long as markets are going up. But the same people often freak out when big drops occur, confirming that their tolerance for risk is much lower than they thought.
Of course, losses are only on paper (or online) until you actually sell.
How soon will you need your money? No one knows when the next large drop will occur. We are experiencing the longest bull market in history. How long can it last, especially with the current president's crazy trade policies and erratic national policies.
Time to check out some of my blog posts on asset allocation and risk tolerance.

529 Education Savings Plans

Check out this updated info from FINRA about 529 plans which can know be used for K-12 expenses as well as college: http://www.finra.org/investors/alerts/529-savings-plans-before-invest?utm_source=MM&utm_medium=email&utm_campaign=S%5FAI%5F081319%5FFINAL

Also check out: 529 Savings Plan Investor Tips http://www.finra.org/investors/highlights/529-savings-plan-investor-tips?utm_source=MM&utm_medium=email&utm_campaign=S%5FAI%5F081319%5FFINAL
Among the tips: "Be aware that plans sold by brokers and advisers are generally more expensive than direct-sold plans sold by a state. If you're comfortable choosing a plan and selecting your investment options on your own, you can often save money investing in a direct-sold plan."

Utah's 529 plan has been consistently rated among the best state plans due to it's low expenses, age-based options and state tax benefits. Check out https://my529.org/
Utah's age-based plans start with an aggressive mix and automatically become more conservative as college enrollment nears. It's easy to choose the best investment option for your child, your spouse or yourself. Yes! adults can fund a 529 plan for their own education. 

August 5, 2019

Just Do It! Now! Today! Protect your identity and your credit

1. Freeze your credit!
2. Place a fraud alert with each of the 3 major credit reporting agencies.
3. Get credit monitoring; it's free if you've been affected by a credit breech.
4. CHANGE YOUR PASSWORDS! And, please, don't reuse passwords.
Details at:
Note the lock symbol and the "S" in https?

July 31, 2019

Capital One hack- did you ever apply for a Cap One card?

here we go again... another security hack of a financial company that pledged to protect your data... but didn't.
First, freeze your credit. This is the most important step to protecting your information. 
Call Equifax, Experian or TransUnion or go to their websites to do this.

Freezing your credit will prevent new lines of credit from being opened in your name, and it doesn’t affect your credit score. It is free and guaranteed by federal law. 
Write down the PIN the credit bureau gives you when you freeze your credit so you can lift the freeze. 

You also can place a fraud alert when you are contacting the credit bureaus, which will make it harder for someone to open an account or credit card in your name.

Change your passwords! 

Even if you weren't affected by the Capital One breech... Do these protective steps anyway!

June 29, 2019

Long Term Care Insurance: Options for buying

Check out this opinion piece about the benefits of buying LTCI as part of a package deal with life insurance or an annuity instead of buying straight insurance:
"THE INSURANCE market for long-term-care coverage has had a checkered history—and yet there’s an increasing need for LTC insurance among aging baby boomers. My advice: Forget the original standalone insurance products and instead focus on the new hybrid policies. What went wrong with the original standalone products? They proved to be underpriced." from Humble Dollar.
Get the details:

Tax breaks are great... except for the consequences

CBO warns of unprecedented federal debt
A Congressional Budget Office report estimates federal debt will increase from 78% of GDP this year to 92% in 2029 and 144% in 2049, which would mark the highest level ever. "The prospect of such high and rising debt poses substantial risks for the nation and presents policymakers with significant challenges," the report says.
We sure aren't doing out kids and grandkids any favors!    

June 25, 2019

Is 4% withdrawal rule for retirement still a reliable guideline?

The general guideline of withdrawing no more than 4% of your portfolio each year during retirement has come under fire as of late. This guideline was the result of a study conducted almost 30-years ago by William Bengen, at a time when it was believed that 5% was a safe withdrawal rate. In the study William determined that 5% was too risky, and proposed the change to 4%. 
Based on PAST historical returns, the 4% rule appears to be valid BUT prolonged periods of very low returns on bonds in recent years suggest that withdrawing 4% per year adjusted for inflation is no longer a safe guideline. 

Research by Michael Finke, Ph.D., CFP®
Wade D. Pfau, Ph.D., CFA
David M. Blanchett, CFA, CFP®
suggests that the rule is no longer a valid guide because of persistently low interest rates.

The 4% Rule is Not Safe in a Low-Yield World

Executive Summary:
"The safety of a 4% initial withdrawal strategy depends on asset return assumptions. Using historical averages to guide simulations for failure rates for retirees spending an inflation-adjusted 4% of retirement date assets over 30 years results in an estimated failure rate of about 6%. This modest projected failure rate rises sharply if real returns decline.
 As of January 2013, intermediate-term real interest rates are about 4% less than their historical average. Calibrating bond returns to the January 2013 real yields offered on 5-year TIPS, while maintaining the historical equity premium, causes the projected failure rate for retirement account withdrawals to jump to 57%. The 4% rule cannot be treated as a safe initial withdrawal rate in today’s low interest rate environment.
 Some planners may wish to assume that today’s low interest rates are an aberration and that higher real interest rates will return in the medium-term horizon. Although there is little evidence to support this assumption, we estimate how a reversion to historical real yields will impact failure rates.
Because of sequence of returns risk, portfolio withdrawals can cause the events in early retirement to have a disproportionate effect on the sustainability of an income strategy. We simulate failure rates if today's bond rates return to their historical average after either 5 or 10 years and find that failure rates are much higher (18% and 32%, respectively for a 50% stock allocation) than many retirees may be willing to accept.
The success of the 4% rule in the U.S. may be an historical anomaly, and clients may wish to consider their retirement income strategies more broadly than relying solely on systematic withdrawals from a volatile portfolio."

SO... what to do. No one ever really recommended that you rigidly follow the 4% guideline every year regardless of portfolio returns. Besides, our need for income fluctuates over a 25-30 year period. Duh! Thus, it is prudent to to make adjustments to balance out returns and needs over a retirement lifetime.
What is "sequence of returns risk"?? If you are lucky to retire during a decade of high investment returns, you may end up with more money than you started with at retirement. However, if the first 5-10 years of your retirement yield negative returns... you're in trouble. 

Another factor to consider is the benefit of investing a portion of your retirement into a lifetime annuity to ensure that, along with Social Security, you won't run out of money.

June 21, 2019

How to Save for Retirement If You Have Your Own Business

Some small-business owners are failing to plan for retirement or are making critical mistakes that could hurt their long-term wealth. This article offers planning tips and an overview of three kinds of retirement accounts: SEP IRAs, solo 401(k)s and traditional 401(k)s.

Married women more at risk in retirement than singles

Women in their 50s who are married have a higher retirement risk than those who are single, widowed or divorced, according to a study that uses information from the National Retirement Risk Index. Factors include married couples' lack of enough savings for two people in 401(k) plans and the way Social Security benefits are calculated, writes Alicia Munnell, director of the Center for Retirement Research at Boston College.
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