March 27, 2019

Till College Debt do We Part

"Marriage can change everything for couples-- in some cases even their student-loan payments" writes Cheryl Munk for The Wall Street Journal. 

The media has educated us about the high costs of attending college and the massive student debt load facing many millenials and their parents. Often house buying, procreation and investing for retirement are delayed as couples struggle to pay off student loans while earning less than stellar incomes in a high cost housing market.

Munk writes that "marriage also can trigger changes to one or both partners' actual student-loan payments and loan-related tax breaks."Specifically:

Marriage might make one ineligible for income-based repayment plans, depending on the couple's income or might raise the required payment.
Use this tool to determine the impact of marriage:
Think twice or three times and consult a tax professional if you are contemplating filing taxes separately when married. The implications and consequences are numerous.

Student debt taken on after marriage presents potential complications.
In community property states if one spouse defaults, creditors may pursue the other spouse for repayment.
In the event of divorce, complications arise if one spouse co-signed for the debts of the other spouse. The co-signing spouse is legally responsible to repay if the former spouse defaults.

Defaulting on a federal loan can result in wage garnishment, withholding of federal income tax refunds, and destroy the defaulting spouse's credit score. A default by one spouse can ruin a couple's chance of getting approved for a home mortgage.

Of course, no one expects any of the above to happen to them...
Buying a primary residence might not be as good of an investment as conventional wisdom suggests. However, there are still benefits -- financial and otherwise -- to owning a home.

Writing for US News and World Report, Miranda Marquit explains the economic costs and benefits of home ownership. Like most economic analyses, the bottom line is that home prices typically track inflation and are NOT a "good" investment when historically one could earn much more by investing in the stock market.

Of course the real estate agent and mortgage broker will claim that houses are the best investments. They want you to buy the most expensive home you can get a mortgage for because the larger the home price and mortgage, the larger their commissions. And they get paid up front and have no worries about whether you really can afford that house in the long run
Marquit explains the costs (beyond purchase price) of  primary residence over the years of ownership including:
  • Property taxes.
  • Homeowners insurance.
  • Maintenance.
  • Repairs.
  • Any upgrades or remodels.
  • Landscaping and yard care. 
Get the details at:

March 18, 2019

Big Firms Pay CEOs $1 Million a Month

Writing in The Wall Street Journal (3/18/19) Theo Francis explains that job growth has helped more Americans find employment while also helping corporate CEOs earn $1 million/month. Yes, per month. According to WSJ analysis, "median compensation for 132 chief executives of S&P 500 companies reached $12.4 million in 2018, up from $11.7 million in 2017." The median raise for CEOs was 6.4% even though most of these companies reported disappointing returns for shareholders.
Compensation for the head of Walt Disney corporation was $66 million last year, an increase of 80% over 2017. Yes, an 80% increase in pay!
And you can bet who has the ear of our politicians; it's not you or me.

Income Inequality Explained in a Cartoon and Why the Disparity Matters (and is getting worse)

Alvin Change explains: "Something massive and important has happened in the United States over the past 50 years: Economic wealth has become increasingly concentrated among a small group of ultra-wealthy Americans."
"You can read lengthy books on this subject, like economist Thomas Piketty's recent best-seller, Capital in the Twenty-First Century (the book runs 696 pages and weighs in at 2.5 pounds). You can see references to this in the campaigns of major political candidates this cycle, who talk repeatedly about how something has gone very wrong in America."
"Donald Trump's motto is to make America great again, while Bernie Sanders's campaign focused on reducing income inequality. And there's a reason this message is resonating with voters:
It's grounded in 50 years of reality."
"You can see lots of discussion and debate and political fighting over who has wealth in America, and whether that should change. Or, you can look at the the cartoon below to understand how the distribution of wealth has changed in America, and why."

Check out:

This Cartoon Explains How the Rich Got Rich and the Poor Got Poor

As a family economist I actually read Thomas Piketty's massive book but don't recommend it for the faint of heart. Instead, a much more readable and digestible book is Joseph E. Stiglitz's The Price of Inequality: How today's divided society endangers our future. Published in 2012 (2013 in paperback) before the last presidential election. And it's even more relevant today.Stiglitz won the Nobel prize in economics.

March 14, 2019

Wells Fargo CEO got 5% pay raise despite all the company's anti-consumer & illegal behavior!

The Wall Street Journal (3/14/19) reports that Wells Fargo CEO Timothy Sloan received (note I did not use the verb "earned") "$18.4 million in compensation for 2018, including a $2 million incentive award."
WOW! Can you believe #1 that level of compensation and #2 in the face of all the illegal and anti-consumer practices of that nefarious company? Writer Maria Armental also reports: "The pay disclosure comes a day after the San Francisco bank received a rare rebuke from a top regulator, minutes after Mr. Sloan finished testifying before Congress, and as regulators consider whether to force out top executives or directors."
Yikes! Get rid of those guys! It's time for a clean sweep at WF. If you aren't familiar with all the many misdeeds and misbehaviors of Wells Fargo executives, simply search online for "Wells Fargo Scandals."
And we wonder why we have an escalating gap between the 1% and the rest of us!
WF execs and board members are probably the same people who argue against raising the minimum wage!
If you are STILL a Wells Fargo customer... WHY?!?

Get help paying for prescription drugs

"Consumers are powerless to control spiraling medication prices, but low-income, uninsured and under-insured individuals can often get help paying for their drugs.
The help, in the form of subsidies or prescription price reductions, comes from four sources. The first is exclusively for seniors on Medicare, but the rest are available to everyone."
1. Medicare’s Extra Help program
2. Price discounts in an app
3. Drug company discounts
4. Pharmacies will negotiate prices  
Get the details from the Squared Away Blog:

How does my networth compare to other Americans?

Check out your status using the

Net Worth by Age Calculator for the United States

The Squared Away Blog explains: "An online tool tells you where you stand financially by stacking up your net worth against other Americans.
The calculator compares a family’s net worth – financial and other assets minus debts – with all other U.S. families. Homeowners can choose to include the value of their home equity in their total net worth – or not." Read more at:

Check out how your wealth compares:
Also find out:

What is the Average Net Worth By Age Group in America? (And Median Net Worth by Age)

Note the incredible differences between average wealth and median (mid-point) wealth (much higher than average due to the huge inequality gap in our country.

March 12, 2019

Maybe your financial "adviser" has been taking advantage of you

"The Securities and Exchange Commission's program to persuade investment firms to self-report conflicts of interest has led to a settlement under which 79 firms return $125 million in fees to clients. The firms placed clients in share classes with expenses higher than those in other share classes available without disclosing that fact." (Retirement Security SmartBrief)
"Advisers to Repay Fund Investors" by Dave Michaels in The Wall Street Journal (3/12/19) states that 79 investment advisory firms have agreed to pay $125 million to clients thwo were over charged for their investments.
If you are not familiar with the term "fiduciary" then it's time to search this blog and educate yourself.
These "advisers" sold high cost mutual funds to their clients in order to boost their own earnings or qualify them for earning prizes like vehicles and trips. These practices have been around for as long as the industry has been selling financial products. Equally suitable lower cost funds were available for these clients who ended up earning less on their investments due to the difference in fund costs.
Top of the list is Wells Fargo, the "king" of egregious consumer practices. Why does anyone still do business with Wells Fargo? Deutsche Bank is also involved in this settlement.

ID theft targets children

The Wall Street Journal (by Yuka Hayashi, 8/29/18) reports that a new federal law going into effect in September 2018 will make it easier for parents to check a child's name and freeze their credit to combat the growing problem of ID theft of children.
"A child's Social Security number can be used by identity thieves to apply for government benefits, open bank and credit card accounts, apply for a loan or utility service, or rent a place to live. Check for a credit report to see if your child’s information is being misused. If it is, visit to report and recover from identity theft."
Read about Child Identity Theft

The Medicare Debate

Health care is sure to be one of the focal points of the 2020 presidential election. While Trump is proposing substantial cuts to Medicare, Democrats are promoting variations on "Medicare for all" ranging from allowing persons 50 and older to buy into Medicare with annual premiums to more extensive plans to promote universal access to health care. 
Remember, health care is different from insurance. 
Check out this Washington Post article:
"Alternatives to Medicare-for-all that are worth studying and debating":

Sequence of Returns Risk in Retirement

Many have heard that it is "safe" to spend 4% of one's nest egg (adjusted for inflation) each year in retirement, expecting funds to last for a 30 year retirement.
Michael Kitces explains both the up and down side risk:
There are many reasons for adjusting one's spending during a lengthy retirement rather than expecting to spend the same inflation-adjusted amount each year. First, most retirees spend much more in the first few years of retirement than they did while working because of pent-up demand for leisure. This often translates to extensive travel, purchase of recreational vehicles, and more time in costly leisure activities such as golf or other sports and hobbies.
Second, U.S. Consumer Expenditure Survey data documents the decline in spending with age as retirees transition from the Go-Go years to the Slow-Go years to the No-Go period at the end of life.

March 5, 2019

Tax cuts = Massive federal deficit

"The federal government spent $310 billion more than it took in during the first four months of the new fiscal year, a 77 percent jump from the same period a year ago" and the tax cuts are primarily to blame according to the Washington Post.
How many times have you heard politicians say that budgets need to be balanced and prudent, that you can't live on debt. I remember the time, not so long ago, that the Republican party was the party of fiscal responsibility, ranting against liberal spending. Well... the latest tax cut is dumping a huge burden on Americans and burdening future generations. The deficits give Republicans an excuse to start attacking Medicare and Social Security.

Trump's tariffs and trade wars are costing consumers and businesses

“President Donald Trump regularly declares that he’s winning his trade wars. Yet evidence is growing that the U.S. economy is a net loser so far."

Writing for Bloomburg News,Shawn Donnan reports: "economists from the Federal Reserve Bank of New York, Princeton University and Columbia University found that tariffs imposed last year by Trump on products ranging from washing machines and steel to some US$250 billion in Chinese imports were costing U.S. companies and consumers US$3 billion a month in additional tax costs and companies a further US$1.4 billion in deadweight losses. They also were causing the diversion of US$165 billion a year in trade leading to significant costs for companies having to reorganize supply chains."

"Significantly, the analysis of import price data by Mary Amiti, Stephen Redding and David Weinstein also found that almost all of the cost of the tariffs was being paid by U.S. consumers and companies. That contradicts Trump’s claim that China is paying the tariffs."
This policy is the "worst-case scenario" for consumers.

March 4, 2019

Social Security and divorced spouses

My ex-husband is 60 years old. I am 62. Can I file for benefits now based on his work record?
No. Most workers need to be at least 62 years old to file for Social Security retirement benefits. (Exceptions include survivors and people with disabilities.) That requirement applies to divorced spouses, too.
Before you can claim benefits as a divorced spouse—you must be 62 or older and your ex-spouse must be “entitled” to Social Security. Your ex-spouse must be at least 62 to be eligible for benefits but he doesn’t have to have filed. He just needs to be at least 62 (unless disabled).
Further, if your former spouse hasn’t applied for SS retirement benefits, you must be divorced for at least two years before you can claim benefits on an ex’s work record.
Source: Glenn Ruffenach writing in The Wall Street Journal, Ask Encore, 2/28/19
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