Did The Rich Get All Of Trump's Tax Cuts?
by Lawrence Kotlikoff
February 28, 2020
Trump's tax cuts - Who benefitted?
February 26, 2020
Stocks are Risky; Pre-retirees and Retirees Must Consider your Time Horizon
The large drops in the stock market over past few days related to the coronavirus epidemic should be a wake up call to investors. Let's review some basic principles of investing.
Remember that your time horizon for retirement investing is the rest of your life and you may live to be 95 or 100!
Selling stocks when the market drops locks in permanent losses.
Stocks often rise and fall dramatically in very brief spurts in reaction to global events. Stock markets do NOT rise and fall in nice steady steps. Dramatic drops and increases are the norm. NO ONE can predict when these dramatic ups and downs will occur!
Stocks are investments for the long run. No money that you will need in the next five years should be invested in stocks. Funds needed in the short run should be set aside in safe places like savings, CDs, money market funds, I-bonds, T-bills, and corporate bonds.
The Bucket Approach to investing takes into consideration the time-related needs of investors. Money needed in the next 1-3 years (depending on your risk tolerance) should be in safe places that will not lose nominal value. Funds expected to be needed in 3-5 years can be invested conservatively in dividend paying stocks, high quality bonds, and other conservative investments.
Funds for the long run (over 5 years) should be invested for growth in the stock market.
This strategy is specific to the retirement decision for pre-retirees (within 5 years) and persons in retirement.
SO:
Investors in the accumulation phase and more than 5 years from retirement should review their asset allocation and rebalance yearly.
Investors nearing retirement should institute a bucket approach for their investments, even if they also have a pension.
Investors in retirement: the recent market plunge should be a wake-up call to carefully review your retirement income plan. DON'T PANIC! If you sell your stocks today your are locking in permanent losses. We went through this with the global financial meltdown in 2008-09. Have investors learned from that experience?
Benefits of a bucket approach:
Predictability and peace of mind.
You can tap assets and still generate portfolio growth.
Considerations:
You need to be disciplined about generating a set return sufficient to meet your retirement needs.
Read all 3 articles below for slightly different perspectives on time horizons for the 3 buckets.
See: How to Use the Bucket Approach to Make Your Retirement Savings Last by pete Woodring
https://www.kiplinger.com/article/retirement/T037-C032-S014-bucket-approach-make-your-retirement-savings-last.html
"The bucket approach is an effective way to mitigate sequence and longevity risk. The general idea is to set up three or more distribution “buckets,” with different asset classes and different time horizons for liquidation. Note that the time horizon for the 3 buckets will differ depending on the author. This article takes a very conservative approach by allocating stocks to time horizons of 10 years of more.
Remember that your time horizon for retirement investing is the rest of your life and you may live to be 95 or 100!
Selling stocks when the market drops locks in permanent losses.
Stocks often rise and fall dramatically in very brief spurts in reaction to global events. Stock markets do NOT rise and fall in nice steady steps. Dramatic drops and increases are the norm. NO ONE can predict when these dramatic ups and downs will occur!
Stocks are investments for the long run. No money that you will need in the next five years should be invested in stocks. Funds needed in the short run should be set aside in safe places like savings, CDs, money market funds, I-bonds, T-bills, and corporate bonds.
The Bucket Approach to investing takes into consideration the time-related needs of investors. Money needed in the next 1-3 years (depending on your risk tolerance) should be in safe places that will not lose nominal value. Funds expected to be needed in 3-5 years can be invested conservatively in dividend paying stocks, high quality bonds, and other conservative investments.
Funds for the long run (over 5 years) should be invested for growth in the stock market.This strategy is specific to the retirement decision for pre-retirees (within 5 years) and persons in retirement.
SO:
Investors in the accumulation phase and more than 5 years from retirement should review their asset allocation and rebalance yearly.
Investors nearing retirement should institute a bucket approach for their investments, even if they also have a pension.
Investors in retirement: the recent market plunge should be a wake-up call to carefully review your retirement income plan. DON'T PANIC! If you sell your stocks today your are locking in permanent losses. We went through this with the global financial meltdown in 2008-09. Have investors learned from that experience?
Benefits of a bucket approach:
Predictability and peace of mind.
You can tap assets and still generate portfolio growth.
Considerations:
You need to be disciplined about generating a set return sufficient to meet your retirement needs.
Read all 3 articles below for slightly different perspectives on time horizons for the 3 buckets.
See: How to Use the Bucket Approach to Make Your Retirement Savings Last by pete Woodring
https://www.kiplinger.com/article/retirement/T037-C032-S014-bucket-approach-make-your-retirement-savings-last.html
"The bucket approach is an effective way to mitigate sequence and longevity risk. The general idea is to set up three or more distribution “buckets,” with different asset classes and different time horizons for liquidation. Note that the time horizon for the 3 buckets will differ depending on the author. This article takes a very conservative approach by allocating stocks to time horizons of 10 years of more.
The Pros and Cons of a Bucket Savings Strategy by Rebecca Lake https://money.usnews.com/investing/investing-101/articles/2017-11-10/the-pros-and-cons-of-a-bucket-savings-strategy Retirement investors should have "now," "soon" and "later" buckets. "The bucket strategy can insulate your retirement portfolio from sequence risk and longevity risk. The former refers to the risk of earning lower or negative returns early on when withdrawing retirement assets. The latter simply means outliving your savings."
What Is The "Bucket" Approach Strategy To Retirement Income Planning? by Jamie Hopkins https://www.forbes.com/sites/jamiehopkins/2019/04/25/what-is-the-bucket-approach-strategy-to-retirement-income-planning/#7b09608539d6
February 23, 2020
2020 Presidential Candidates’ Views on Social Security
"The 2020 presidential candidates have proposed various changes to Social
Security’s retirement program. The Center (for Retirement Research at Boston College) has collected a list
comparing these changes. The list will be updated on a regular basis
throughout the campaign season."Click on "download the comparison chart."
https://crr.bc.edu/newsroom/2020-presidential-candidates-views-on-social-security/
February 22, 2020
Follow a Course to Smart Investing
The Financial Industry Regulatory Authority (FINRA) offers short online investing "courses" to help you make better decisions.
And lots more education and information on the website: https://www.finra.org/investors#/
- Setting Goals
- Defining Terms
- Risk and Return
- Rate of Return
- Diversification
- Fees and Commissions
And lots more education and information on the website: https://www.finra.org/investors#/
Stop 'Dollar-Cost Ravaging' Your Portfolio in Retirement
Your Retirement Paycheck: the 4% retirement withdrawal rate and realistic alternatives
Writing for Kiplinger's Jason Lambert explains why retirees need to shift from the old 4% withdrawal guideline to focus on income generation.
Researchers and thoughtful advisors understand that the 4% withdrawal rate guideline makes too many assumptions based on historic returns that don’t translate to lower stock and bond returns in current (and future) market.
Lambert explains the 4%"rule" and why it is no longer an appropriate guide to retirement withdrawals.
"Accumulation gets all the glory in retirement planning, but it’s a thoughtful decumulation process that will make your retirement a true success."
Lambert advocates a significant mindset shift, from “How much return do I hope to get from my portfolio?” to “How much reliable income can I count on?”
https://www.kiplinger.com/article/retirement/T037-C032-S014-stop-dollar-cost-ravaging-your-retirement-savings.html
Researchers and thoughtful advisors understand that the 4% withdrawal rate guideline makes too many assumptions based on historic returns that don’t translate to lower stock and bond returns in current (and future) market.
Lambert explains the 4%"rule" and why it is no longer an appropriate guide to retirement withdrawals.
"Accumulation gets all the glory in retirement planning, but it’s a thoughtful decumulation process that will make your retirement a true success."
Lambert advocates a significant mindset shift, from “How much return do I hope to get from my portfolio?” to “How much reliable income can I count on?”
https://www.kiplinger.com/article/retirement/T037-C032-S014-stop-dollar-cost-ravaging-your-retirement-savings.html
Retirement Preparation 101 video
Check out this 17 minute video, courtesy of the Squared Away Blog:
https://squaredawayblog.bc.edu/squared-away/video-retirement-prep-101/
Kevin Bracker, a finance professor at Pittsburg State University in Kansas, presents a solid retirement strategy to workers who need to get smart about saving and investing.
Bracker explains the most important concepts clearly – why starting to save early is important, why index funds are often better than actively managed investments, the difference between Roth and traditional IRAs, etc.
https://squaredawayblog.bc.edu/squared-away/video-retirement-prep-101/Kevin Bracker, a finance professor at Pittsburg State University in Kansas, presents a solid retirement strategy to workers who need to get smart about saving and investing.
Bracker explains the most important concepts clearly – why starting to save early is important, why index funds are often better than actively managed investments, the difference between Roth and traditional IRAs, etc.
Rampant Social Security Scams
Have you received a threatening phone call (on mobile or land line) urging you to provide your Social Security number?
Social Security scams are growing at an alarming rate. Please heed this warning from the Social Security Administration:
"Scammers are pretending to be government employees. Scammers will try to scare and trick you into giving them your personal information and money. They may threaten you or your family and may demand immediate payment to avoid arrest or other legal action."
1. Hang up!
I never answer my cell phone unless the caller is in my list of contacts. If a person wants to leave a message, I'll consider returning the call but never if it sounds like a scam. If you have a land line and caller ID, don't answer if you don't recognize the caller. They can leave a message. No phone call needs an immediate response. Waiting and considering the message gives you time to consider if it might be a scam.
"Scammers are pretending to be government employees. Scammers will try to scare and trick you into giving them your personal information and money. They may threaten you or your family and may demand immediate payment to avoid arrest or other legal action."
IF YOU RECEIVE A SUSPICIOUS CALL:
1. Hang up!
2. DO NOT give them money or personal
information!
3. Report the scam at
OIG.SSA.GOV!
I never answer my cell phone unless the caller is in my list of contacts. If a person wants to leave a message, I'll consider returning the call but never if it sounds like a scam. If you have a land line and caller ID, don't answer if you don't recognize the caller. They can leave a message. No phone call needs an immediate response. Waiting and considering the message gives you time to consider if it might be a scam.Social Security may call you in some situations but will NEVER:
- Threaten you
- Suspend your Social Security Number
- Demand immediate payment from you
- Require payment by cash, gift card, pre-paid debit card, or wire transfer
- Ask for gift card numbers over the phone or to wire or mail cash
February 18, 2020
How to Find the Best C.P.A. or Tax Accountant
So... you don't want to prepare your income tax return; you want to hire someone to do it for you. How do you find a reliable preparer? Almost anyone can become a paid tax preparer. "Most states have few
to no requirements for certification, training, or even competency
testing" according to a Certified Public Accountant and contributor to
Wirecutter, a product recommendation site owned by The New York Times
Company.
If your financial life is simple: Consider free tax-preparation resources
"If you make less than $56,000 per year or are age 60 and older, you may
want to look into having your tax return prepared through the Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (T.C.E.) programs."
If you want a professional:
Step 1: Compile a list of potential C.P.A.s and tax accountants
Ask friends, family, and co-workers for referrals. Ask people who are in a similar financial situation to you.
Search the I.R.S. directory.
the I.R.S. maintains a directory of P.T.I.N. holders (preparer tax identification number)—"such as C.P.A.s, enrolled agents (E.A.s), and attorneys — who have current credentials recognized by the I.R.S. The directory also includes people who have completed the Annual Filing Season Program, a series of voluntary continuing education classes covering federal tax law and ethics." Search the directory by ZIP code to find a professional near you.
the I.R.S. maintains a directory of P.T.I.N. holders (preparer tax identification number)—"such as C.P.A.s, enrolled agents (E.A.s), and attorneys — who have current credentials recognized by the I.R.S. The directory also includes people who have completed the Annual Filing Season Program, a series of voluntary continuing education classes covering federal tax law and ethics." Search the directory by ZIP code to find a professional near you.
Check with your state or national associations. E.A.s (enrolled agents) "are federally licensed tax practitioners who are authorized to
advise, represent, and prepare tax returns for individuals and
businesses."
If your financial life is simple: Consider free tax-preparation resources
"If you make less than $56,000 per year or are age 60 and older, you may
want to look into having your tax return prepared through the Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (T.C.E.) programs."
Step 2: Narrow down your options
Verify their credentials.
Read online reviews.
Make an appointment early in tax season.
Step 3: Interview prospective preparers
bring a copy of your most recent tax return.
Questions to ask:
How long have you been preparing taxes?
Do you have any specialties?
How do you bill for your services?
Are you available for questions outside of tax season?
Who will prepare my return?
The Student Loan Appeal Process the Government Doesn’t Tell You About
"In the deluge of complaints about a troubled program that pays off student loans
for people who work in public service, one stands out for its
frequency: Thousands of people say they were misled by loan servicers
working on the U.S. government’s behalf."
"It
is among the most vexing problems with a program that has become a
notorious quagmire, with a rejection rate of nearly 99 percent.
Lawmakers, consumer advocates and desperate public servants say the
Education Department should create a formal process to appeal denials,
especially rejections that borrowers say were affected by mistakes made
by servicers."
In reality the
Education Department has a system for investigating complaints
and fixing the problem — "it just keeps it very quiet" according to Stacy Cowley writing for The New York Times, 2/17/20.
Borrowers who feel they are a victim of a loan servicer’s mistake need to file a complaint with the Federal Student Aid office’s feedback system on the StudentAid.gov website. These complaints go to the agency’s Ombudsman Group, which should investigate the problem.
The NYT article provides plenty of additional information and stories of eligible borrowers who spent years trying to get their loan forgiven.
"Any mistake along the way can set off a cascade of problems — and so far, nearly all of the 109,000 people who have applied to have their loans forgiven have been rejected, according to the department’s latest data. (As of Sept. 30, only 1,139 had succeeded.)"
"The dispute process is not directly described on the websites of the department’s loan servicers — including FedLoan, the sole servicer for the public service program — or on the department’s Public Service Loan Forgiveness information site."
You need to file a complaint to the Education Department’s ombudsman.
Be persistent and engage the help of your members of Congress. Good luck!
https://www.nytimes.com/2020/02/17/business/federal-student-loan-appeals.html?te=1&nl=your-money&emc=edit_my_20200218&campaign_id=12&instance_id=16079&segment_id=21385&user_id=bde4c6c63beab087f13b761e1ee9fe1e®i_id=8372066420200218
The NYT article provides plenty of additional information and stories of eligible borrowers who spent years trying to get their loan forgiven."Any mistake along the way can set off a cascade of problems — and so far, nearly all of the 109,000 people who have applied to have their loans forgiven have been rejected, according to the department’s latest data. (As of Sept. 30, only 1,139 had succeeded.)"
"The dispute process is not directly described on the websites of the department’s loan servicers — including FedLoan, the sole servicer for the public service program — or on the department’s Public Service Loan Forgiveness information site."
You need to file a complaint to the Education Department’s ombudsman.
Be persistent and engage the help of your members of Congress. Good luck!
https://www.nytimes.com/2020/02/17/business/federal-student-loan-appeals.html?te=1&nl=your-money&emc=edit_my_20200218&campaign_id=12&instance_id=16079&segment_id=21385&user_id=bde4c6c63beab087f13b761e1ee9fe1e®i_id=8372066420200218
February 10, 2020
College Co-op Programs
"The right work experience can give graduates a boost, but there are lots of questions to ask."
Cheryl Winokur Munk, The Wall Street Journal, 2/10/20.
Since only 10% of college students graduate with formal work experience, it can give them an advantage in finding employment.
"Co-op programs and other work opportunities vary from one institution
to another, so students need to understand the particulars of each
program they consider. To help them make informed choices, students
should consider these questions:"
What is the nature of the program?
"In co-op programs, students usually spend at least one period of several months working, during which time they scale back or suspend their studies. They may or may not have to pay tuition while they’re working, depending on the program." How many opportunities are offered? When spending time away from classes for co-op, students may need an extra year to graduate. How does this affect tuition costs?
Who are "typical employers, what types of job opportunities exist, and whether they are for pay, school credit or some combination of the two."
"Drexel University, for instance, generally offers two co-op programs for undergraduates, one with three co-ops over five years, or a four-year program with one co-op—both for the same tuition. Generally, students are on each co-op for six months, alternating with six months of classroom study. They don’t pay tuition while on a co-op, but they do pay certain university fees. Typically a co-op is a paid, full-time work experience for which students also receive college credit."
"Endicott College in Beverly, Mass., requires all students to complete two 120-hour internships, one during freshman year and one during sophomore year. Students are also required during junior or senior year to complete a semester long for-credit internship. For this, students are required to work four days a week and attend an on-campus seminar once a week. They earn a total of 12 credits for successfully completing the work and seminar components, and they pay normal semester tuition charges. There is no requirement for students to be paid, but they can be."
Taxes: "pay from a co-op is subject to income taxes." "Co-op earnings are excluded from the federal aid determination process—except for any portion unspent at the time the Free Application for Federal Student Aid, or Fafsa, is filed, which will be counted as student assets. Students might consider using at least a portion of co-op earnings to fund a Roth IRA, since retirement assets aren’t considered for federal aid purposes."
Getting Divorced? Don't cash out retirement accounts
Raiding Your 401(K) Can Be a Divorce Disaster
according to Stacy Francis, CFP®, CDFA®, CES™, President & CEO Francis Financial Inc.
"Many divorcing spouses find themselves strapped for money to pay for
mounting legal bills and the higher costs of supporting two households,
rather than one. With bank accounts and brokerage accounts drained to
zero, some look to tap their employer 401(k)s or IRAs for quick cash to
cover these costs."Early withdrawals from a 401(k) or IRA can be a financial and tax disaster.
You will owe income taxes on the withdrawal and a 10% penalty if younger than 59 1/2. think about the impact of paying federal, state, local, Medicare and Social Security taxes on the withdrawal plus 10% of the total amount withdrawn.
Instead consider a loan against your 401(k). IRAs do not allow loans.
Interest rates vary by plan, with the "most common is prime rate plus 1%, which is very low, and much cheaper than credit card rates."
401(k) loans typically need to be repaid within five years, usually, directly out of your paycheck.
Read the full article at:
https://www.kiplinger.com/article/retirement/T001-C032-S014-raiding-your-401-k-can-be-a-divorce-disaster.html
What is the best tax filing software in 2020?
The Best Tax Filing Software
Doing your taxes may never be fun, but the right tools can change it
from the worst chore of the year to a manageable — dare we say,
rewarding — afternoon. And for the estimated 90 percent of taxpayers
taking the standard deduction with simple returns, filing
taxes can be done easily and accurately with Credit Karma Tax.
In Wirecutter’s testing of seven different options this year, Credit
Karma’s free online tax software was the easiest way to file a basic
return with just a couple of supported forms, like a W-2 and a 1099-INT.
For slightly more complicated returns—for example, if you need to itemize because you own a home—TurboTax Deluxe is the best software for the job. 3 Simple Things to Improve Your Finances
1. Increase mindless saving
2. Decrease mindless spending
3.Save in an online bank account
1. Automate saving so you don't have to think about it. Pay yourself first with regular automated saving from your paycheck. It's so easy to do these days with electronic banking.
"Automate your savings so you never even have to think about saving anything. Take yourself completely out of the equation — you can’t miss (or spend) what was never there. Self-control is a myth anyway, so just don’t bother with it." writes Tim Herrera in The New York Times Smarter Living newsletter. Every Monday, S.L. editor Tim Herrera emails readers with tips and advice for living a better, more fulfilling life. Sign up here to get it in your inbox.
2. "As more of the services we regularly use become subscription-based — especially given the flood of streaming TV services — it’s more than worth your time to prune your subscriptions. One analysis by the online budget tool Mint found that in 2019, we each spent $640 on digital subscriptions."
Instructions to find and cut your subscriptions on many devices and services can be found here, but also go through your bank account and look for recurring expenses.
2. Decrease mindless spending
3.Save in an online bank account
1. Automate saving so you don't have to think about it. Pay yourself first with regular automated saving from your paycheck. It's so easy to do these days with electronic banking.
"Automate your savings so you never even have to think about saving anything. Take yourself completely out of the equation — you can’t miss (or spend) what was never there. Self-control is a myth anyway, so just don’t bother with it." writes Tim Herrera in The New York Times Smarter Living newsletter. Every Monday, S.L. editor Tim Herrera emails readers with tips and advice for living a better, more fulfilling life. Sign up here to get it in your inbox.
2. "As more of the services we regularly use become subscription-based — especially given the flood of streaming TV services — it’s more than worth your time to prune your subscriptions. One analysis by the online budget tool Mint found that in 2019, we each spent $640 on digital subscriptions."
Instructions to find and cut your subscriptions on many devices and services can be found here, but also go through your bank account and look for recurring expenses.
3. Switch to a high-yield savings account
Put compound interest to work for you. Most savings accounts pay a pathetically low yield. Switch to an online bank, many paying 1.6% interest or more and automate your savings from every paycheck into this account. Search online for online banks with high rates. What Parents Need to Know Before Borrowing Money to Pay for College
"With college costs burgeoning, parents often consider taking on debt to
help their children cover tuition. It could be a smart move. But it
could also have a devastating financial impact, so parents should
understand the pros and cons of each option."
Thanks to Cheryl Winokur Munk, writing in The Wall Street Journal, 11/1/19.
Federal Direct Plus loans
Private Parent loans
Home-equity line of credit or home-equity loan
It is more important for parents to invest for retirement than to help their children pay for a college that may be beyond their ability to afford. Children can find less expensive ways to attend college.
Thanks to Cheryl Winokur Munk, writing in The Wall Street Journal, 11/1/19.
Federal Direct Plus loans
- "Graduate and professional students can use these loans, as well; when parents do, the loans are commonly known as Parent Plus loans."
- offer some protections that private loans don’t.
- can be consolidated into a federal Direct Consolidation loan to access an income-based repayment plan.
- eligible for economic-hardship deferments; disability or death discharge; graduated or extended repayment plans; and Public Service Loan Forgiveness.
- charge higher interest rates and fees than other federal student loans.
- "There is no annual percentage rate provided on these loans. But free online calculators such as the Experian APR Calculator can help families calculate the APR and better compare the costs with loans from private lenders."
Private Parent loans
- every lender has different rates, perks and requirements, and some have application, origination or disbursement fees.
- private loans don’t have the same types of consumer protections of federal Plus loans.
Home-equity line of credit or home-equity loan
- Credit Line: floating interest rate, and 10 to 20 years to repay.
- Home-equity loan is a one-time lump-sum with a fixed interest rate.
- limited repayment options compared with other types of college loans,
- loans must be repaid if the home is sold.
- Any unspent proceeds are counted as an asset on the Free Application for Federal Student Aid (Fafsa)
It is more important for parents to invest for retirement than to help their children pay for a college that may be beyond their ability to afford. Children can find less expensive ways to attend college.
February 8, 2020
Life’s most important money lessons
Humble Dollar author and personal finance guru Jonathan Clements offers these recommendations:
1. A small home is the key to a big portfolio.
2. Debts are negative bonds. paying off debt almost always garners a higher after-tax return than you can earn by investing in high-quality bonds.
3. Watching the market and your portfolio doesn’t improve performance.
4. Thirty years from now, you’ll wish you’d invested more in stocks.
5. Nobody knows squat about short-term investment performance.
6. Put retirement first. Before buying a house.
7. You’ll end up treasuring almost nothing you buy. Focus on experiences rather than possessions—a wise use of money, says happiness research.
8. Work is so much more enjoyable when you work for yourself.
9. Will our future self approve? As we make decisions today, consider how your future self will look back on your choices.
10. Relax, things will work out.
Get the full details: https://humbledollar.com/2020/02/nobody-told-me/
February 7, 2020
How "No Loan" College Works (It doesn't mean free)
Although rare, more private colleges are joining the club of offering sufficient grants and work options to help students avoid or minimize student loan debt. Princeton started the trend more than 20 years ago. (Good luck getting accepted).
Writing for The Wall Street Journal, (12/9/19), Cheryl Winokur Munk explains.
1. "No loans" doesn't mean no out of pocket costs. Once the college determines a student's financial aid needs, they expect a contribution from parents and the student. So plan on working summers in high school to save some money for college.
Example: Cost of attendance (tuition, room, board, other costs) = $65,000. Depending on the family circumstances, they may be expected to contribute $25,000/year. The remaining $40k might be offered as grants and student employment.
Expected family contribution: https://studentaid.gov/help-center/answers/article/what-is-efc
2. Few schools offer "no loan" options and they tend to be selective.
While about 6 dozen institutions offer the program, that's a tiny segment of higher education. They are the highly selective, competitive institutions.
Examples: Amherst, Bowdoin, Brown, Colby, College of Ozarks, Columbia, Davidson, Harvard, Johns Hopkins, Princeton, Swarthmore, U of Pennsylvania, Vanderbilt, Washington & Lee, and Yale.
However, that means that "smart students from poorer families could end up paying less to go to a top private university with a no-loan policy than to a state school with a lower sticker price."
3. No-Loan policies vary
Every institution has it's own policies so check the fine print.
4. Still... you may still graduate with loans.
Some students may choose to take out loans to cover their expected student contribution rather than working as much as might otherwise be required.
Writing for The Wall Street Journal, (12/9/19), Cheryl Winokur Munk explains.
1. "No loans" doesn't mean no out of pocket costs. Once the college determines a student's financial aid needs, they expect a contribution from parents and the student. So plan on working summers in high school to save some money for college.
Example: Cost of attendance (tuition, room, board, other costs) = $65,000. Depending on the family circumstances, they may be expected to contribute $25,000/year. The remaining $40k might be offered as grants and student employment.
Expected family contribution: https://studentaid.gov/help-center/answers/article/what-is-efc
2. Few schools offer "no loan" options and they tend to be selective.
While about 6 dozen institutions offer the program, that's a tiny segment of higher education. They are the highly selective, competitive institutions.
Examples: Amherst, Bowdoin, Brown, Colby, College of Ozarks, Columbia, Davidson, Harvard, Johns Hopkins, Princeton, Swarthmore, U of Pennsylvania, Vanderbilt, Washington & Lee, and Yale.
However, that means that "smart students from poorer families could end up paying less to go to a top private university with a no-loan policy than to a state school with a lower sticker price."
3. No-Loan policies vary
Every institution has it's own policies so check the fine print.
4. Still... you may still graduate with loans.
Some students may choose to take out loans to cover their expected student contribution rather than working as much as might otherwise be required.
This is the year to reach your savings goals
Behavioral economists provide tips on how to improve the odds of reaching your goals. Now that the initial New Year's Resolutions have faded, it's time to get serious about reaching your financial (and other) goals with the help from research. About half of people who make these resolutions fail to achieve their goals. Now there is research-based help.
Source: "This may be the year you reach your savings goals" by Anne Tergesen, The Wall Street Journal, 12/28-29/19.
1. Set financial goals in January or on your birthday. Research shows these are good times to initiate change. Both wipe the slate clean and mark the start of a new year.
2. Set specific, realistic goals. Example: "I will increase my 401(k) contributions by 2%/year for the next 5 years."
3. Make a detailed written plan. Break your goal into small steps and get started.
4. Stress test your plan. "Behavioral economists recommend an exercise called mental accounting, in which people think about a desired outcome and why it matters." Ex. I am saving 15%/year so I can retire by age 67. Identify obstacles (buying frequently on Amazon) and brainstorm solutions (stop Amazon Prime subscription and disable one-click shopping).
5. Use behavioral strategies. Automate your savings!
Source: "This may be the year you reach your savings goals" by Anne Tergesen, The Wall Street Journal, 12/28-29/19.
1. Set financial goals in January or on your birthday. Research shows these are good times to initiate change. Both wipe the slate clean and mark the start of a new year.
2. Set specific, realistic goals. Example: "I will increase my 401(k) contributions by 2%/year for the next 5 years."
3. Make a detailed written plan. Break your goal into small steps and get started.
4. Stress test your plan. "Behavioral economists recommend an exercise called mental accounting, in which people think about a desired outcome and why it matters." Ex. I am saving 15%/year so I can retire by age 67. Identify obstacles (buying frequently on Amazon) and brainstorm solutions (stop Amazon Prime subscription and disable one-click shopping).
5. Use behavioral strategies. Automate your savings!
- Make "if-then" plans.
- Reward your successes. Treat yourself when you've stuck to your plan for 6 months.
- Use temptation bundling. Listen to an audio book while exercising; enjoy your favorite beverage while Reviewing monthly spending.
- Use behavior therapy. "Identify triggers of bad behavior and substitute alternative rewards."
- Use mental accounting. Save for separate goals in individual accounts. Have a visual reminder of each goal.
- Set occasional high impact goals. Set one month as a save as much as possible/spend as little as possible. This is similar to the alcohol-free January.
February 6, 2020
12 Facts about Social Security
Myths, misconceptions, and questions about Social Security abound. It is essential to understand how the program works. People often have strong opinions about Social Security; I used to ask these persons to take an easy 10 item true-false quiz and refuse to pay attention to their opinions if they flunked (scoring less than 7 items correct).
1. Social Security is NOT going bankrupt! Although there are concerns about the future, since it is a pay as you go system there will always be workers paying into the system so that benefits can be paid to beneficiaries. With a few simple adjustments to the system for future taxpayers and recipients, Social Security can be sure for the next 50-75 years... but that would take cooperation on the part of the two parties in Congress. Not likely under our current president.
Check out The Social Security Fix-It Book produced by the Center for Retirement Research at Boston College: https://crr.bc.edu/special-projects/books/the-social-security-fix-it-book/
2. Congress probably won't act to ensure the long-term health of Social Security anytime soon. The deep political divides in Congress mean we will have to wait for a more centrist administration.
3. Ideas to reform funding have been on the table for a long time. See The Fix-It Book.
4. Lawmakers do not raid the SS trust fund. The trust fund is invested directly into U.S. Treasury securities.
5. The SS system could be run better with more funding for employees. With the huge babyboom generation tapping benefits, we need more employees to serve them.
6. SS benefits may be subject to federal and state income tax, depending on your annual income. For the IRS, Single filers with incomes above $34,000 and joint filers with incomes above $44,000, up to 85% of SS benefits may be taxable. Only 13 states tax SS income. Utah is one of the 13.
7. SS was never intended to provide sufficient support for a comfortable retirement. That's why you need to invest in an IRA and employer sponsored retirement plan throughout your working years.
8. The purchasing power of SS benefits is shrinking. Despite annual cost of living adjustments, retirees face high medical costs that are rising faster than other goods and services.
9. You can earn income and receive SS benefits. But the agency will reduce your benefits if you are younger than your full retirement age and your earnings exceed a certain $ amount that changes yearly ($17,640 in 2019). The money that is withheld will be paid in higher benefits once you reach your fall retirement age.
10. SS pays benefits electronically and encourages every worker to set up a My Social Security Account https://www.ssa.gov/myaccount/
11. In addition to retirement benefits, Social Security pays for disability, survivor, and dependent benefits.
12. Most workers get back more than they pay into the system.
Source: AARP Bulletin.
Public Service employees such as teachers and firefighters who earn a government pension and pay no SS taxes on those earnings, will see a reduction in their SS benefits. due to the Windfall Elimination Provision (WEP). The WEP is meant to preserve a basic principle of SS: that low earners receive a higher percentage of their income in benefits compared to high earners. For workers who spent much of their career in public service earning pension but NOT paying SS taxes and then worked in a job where they did pay SS taxes, they would appear to be low earners, thus reaping a relatively large benefit. This the WEP is designed to acknowledge that public pension.
Source: Your Money: Financially Speaking by Jane Bryant Quinn, AARP Bulletin.
1. Social Security is NOT going bankrupt! Although there are concerns about the future, since it is a pay as you go system there will always be workers paying into the system so that benefits can be paid to beneficiaries. With a few simple adjustments to the system for future taxpayers and recipients, Social Security can be sure for the next 50-75 years... but that would take cooperation on the part of the two parties in Congress. Not likely under our current president.
Check out The Social Security Fix-It Book produced by the Center for Retirement Research at Boston College: https://crr.bc.edu/special-projects/books/the-social-security-fix-it-book/
2. Congress probably won't act to ensure the long-term health of Social Security anytime soon. The deep political divides in Congress mean we will have to wait for a more centrist administration.
3. Ideas to reform funding have been on the table for a long time. See The Fix-It Book.
4. Lawmakers do not raid the SS trust fund. The trust fund is invested directly into U.S. Treasury securities.
5. The SS system could be run better with more funding for employees. With the huge babyboom generation tapping benefits, we need more employees to serve them.
6. SS benefits may be subject to federal and state income tax, depending on your annual income. For the IRS, Single filers with incomes above $34,000 and joint filers with incomes above $44,000, up to 85% of SS benefits may be taxable. Only 13 states tax SS income. Utah is one of the 13.
7. SS was never intended to provide sufficient support for a comfortable retirement. That's why you need to invest in an IRA and employer sponsored retirement plan throughout your working years.
8. The purchasing power of SS benefits is shrinking. Despite annual cost of living adjustments, retirees face high medical costs that are rising faster than other goods and services.
9. You can earn income and receive SS benefits. But the agency will reduce your benefits if you are younger than your full retirement age and your earnings exceed a certain $ amount that changes yearly ($17,640 in 2019). The money that is withheld will be paid in higher benefits once you reach your fall retirement age.
10. SS pays benefits electronically and encourages every worker to set up a My Social Security Account https://www.ssa.gov/myaccount/
11. In addition to retirement benefits, Social Security pays for disability, survivor, and dependent benefits.
12. Most workers get back more than they pay into the system.
Source: AARP Bulletin.
Public Service employees such as teachers and firefighters who earn a government pension and pay no SS taxes on those earnings, will see a reduction in their SS benefits. due to the Windfall Elimination Provision (WEP). The WEP is meant to preserve a basic principle of SS: that low earners receive a higher percentage of their income in benefits compared to high earners. For workers who spent much of their career in public service earning pension but NOT paying SS taxes and then worked in a job where they did pay SS taxes, they would appear to be low earners, thus reaping a relatively large benefit. This the WEP is designed to acknowledge that public pension.
Source: Your Money: Financially Speaking by Jane Bryant Quinn, AARP Bulletin.
Free ways to fight fraud in the digital age
Don't waste money on ID theft protection services before fully utilizing the many free options available. Also consider if you have aging parents who might be susceptible to phone and internet scams.
Credit Monitoring:
Review your credit reports with the 3 major credit reporting services at https://www.annualcreditreport.com/. You can get one free report from each agency per year so check one of them in rotation every 4 months. Other options: https://www.creditsesame.com/ and https://www.creditkarma.com/
Credit Freeze:
Credit freezes are now free to everyone. A credit freeze restricts access to your credit report unless you specifically allow sharing with the person/firm seeking that info. You need to contact each of the 3 major credit reporting bureaus: Equifax, Experian, and TransUnion.
Password Managers:
Free services such as LastPass, Dahlane, KeePass, and RoboForm will generate and remember your passwords in an encrypted vault. You just need one master password to log into your websites.
Call-Blocking Apps:
Truecaller, Hiya and Call Control offer free smartphone apps. AT&T and T-Mobile offer free basic protection.
Source: "Your Money: Scam Alert" by Sid Kirchheimer for the AARP Bulletin.
Credit Monitoring:
Review your credit reports with the 3 major credit reporting services at https://www.annualcreditreport.com/. You can get one free report from each agency per year so check one of them in rotation every 4 months. Other options: https://www.creditsesame.com/ and https://www.creditkarma.com/
Credit Freeze:
Credit freezes are now free to everyone. A credit freeze restricts access to your credit report unless you specifically allow sharing with the person/firm seeking that info. You need to contact each of the 3 major credit reporting bureaus: Equifax, Experian, and TransUnion.
Password Managers:
Free services such as LastPass, Dahlane, KeePass, and RoboForm will generate and remember your passwords in an encrypted vault. You just need one master password to log into your websites.
Call-Blocking Apps:
Truecaller, Hiya and Call Control offer free smartphone apps. AT&T and T-Mobile offer free basic protection.
Source: "Your Money: Scam Alert" by Sid Kirchheimer for the AARP Bulletin.
Consumer Privacy Act
"America’s first broad data privacy law, the California Consumer Privacy Act,
went into effect Jan. 1. These days, a wild range of companies gather
and sell your data, from Ford and Chipotle to Uber and Walmart. Now the
CCPA gives you the power to say cut it out."
"And while the law technically covers only California residents, Americans living anywhere can use the CCPA to reset their relationships with more than a dozen major businesses (and counting)."
"You’re going to have to jump through some hoops, but you can ask companies to access, delete and stop selling your data using the new California Consumer Privacy Act - even if you don’t live in California."
1) You can ask companies to show you exactly what data they’ve collected about you.
2) You can instruct companies not to “sell” your data. The word “sell” is in quotes because the law defines that pretty broadly as an exchange of value. (There’s a lot of debate about that, though — see below.)
3) You can ask companies to delete your data, unless doing so would create a security threat or interfere with someone else’s free speech.
"You have to go to each and every company to exercise your CCPA rights. Yes, that could become a never-ending project. But the good news is that many companies have web forms you can fill out like busywork."
Gather information before you start. "You’ll need to have access to your usernames, passwords and loyalty card numbers. (If you don’t already have a password manager to keep all your important information organized, this is an excellent time to get one.)"
https://www.washingtonpost.com/technology/2020/02/06/ccpa-faq/?arc404=true&utm_campaign=wp_post_most&utm_medium=email&utm_source=newsletter&wpisrc=nl_most
"And while the law technically covers only California residents, Americans living anywhere can use the CCPA to reset their relationships with more than a dozen major businesses (and counting)."
"You’re going to have to jump through some hoops, but you can ask companies to access, delete and stop selling your data using the new California Consumer Privacy Act - even if you don’t live in California."
Thanks to Geoffrey A. Fowler writing for The Washington Post, February 6, 2020
1) You can ask companies to show you exactly what data they’ve collected about you.
2) You can instruct companies not to “sell” your data. The word “sell” is in quotes because the law defines that pretty broadly as an exchange of value. (There’s a lot of debate about that, though — see below.)
3) You can ask companies to delete your data, unless doing so would create a security threat or interfere with someone else’s free speech.
"You have to go to each and every company to exercise your CCPA rights. Yes, that could become a never-ending project. But the good news is that many companies have web forms you can fill out like busywork."
Gather information before you start. "You’ll need to have access to your usernames, passwords and loyalty card numbers. (If you don’t already have a password manager to keep all your important information organized, this is an excellent time to get one.)"
https://www.washingtonpost.com/technology/2020/02/06/ccpa-faq/?arc404=true&utm_campaign=wp_post_most&utm_medium=email&utm_source=newsletter&wpisrc=nl_most
February 3, 2020
Airline "Bereavement" Fares
So-called bereavement fares are a thing of the past. Almost always one can get a better fare by searching various airlines online rather than calling and asking for a low fare to attend a family funeral. Alaska Airlines is an exception, offering 10% discount of whatever the lowest fare is within 7 days of travel according to The Wall Street Journal, 1/9/20. The discount is available to immediate family (which includes grandchildren, aunts, uncles, nieces and nephews). You must call the airline to book tickets and adults must be members of Alaska's frequent flier program (free to join).
Delta offers a bereavement policy which is simply whatever is the lowest fare at the time of booking. Because one often has to fly on very short notice, don't expect low fares. But the advantage is the bereavement fare offers more flexibility than regular fares such as being able to change the return without paying a service fee. But you still have to pay the difference in fare.
So what is one to do? Use frequent flyer miles for funerals. You get a better deal for the miles on last-minutes arrangements.
Delta offers a bereavement policy which is simply whatever is the lowest fare at the time of booking. Because one often has to fly on very short notice, don't expect low fares. But the advantage is the bereavement fare offers more flexibility than regular fares such as being able to change the return without paying a service fee. But you still have to pay the difference in fare.
So what is one to do? Use frequent flyer miles for funerals. You get a better deal for the miles on last-minutes arrangements.
Effortless Environmentalism: Some easy ways to live more gently oon the earth
"If 2019 is truly “the year we woke up to climate change,” then 2020 should be the year we start actually doing something about it. Because we are very nearly out of time."
Effortless Environmentalism
by Margaret Renki for The New York Times
"Think of these suggestions as baby steps on the path toward a growing commitment to change."
"Vote. The climate crisis is the one issue that matters most in this election, and not just because the survival of the human race depends on it."
"Reframe your relationship with bugs. Insects are the bread and butter of the natural world, but they are dying out. Think of your yard as ground zero of the entire local food chain."
"Cultivate a glorious mess. Nature isn’t supposed to be tidy, and its messiness is purposeful. Fallen leaves fertilize the trees they fell from and simultaneously provide habitat for a whole host of insects, amphibians and reptiles."
KILL your leaf blower which is an environmental disaster due to noise and air pollution!
"Eat better. Agriculture accounts for about a third of greenhouse gas emissions, primarily through deforestation, the use of petrochemical fertilizers and methane production by livestock. To mitigate its effects, eat less meat and fewer dairy products."
"Shop your closet. In addition to its manifold human costs, “fast fashion” — cheap clothing designed to be temporary in the age of Instagram — is a significant cause of environmental degradation."
"Put your money where your values are. Support a fierce environmental nonprofit through automatic monthly drafts"
"Pay for your sins. Avoiding air travel is one easy way to lower your carbon footprint significantly, but you can also buy carbon offsets for the flights you can’t avoid."
"Lighten up on the plastic. It’s almost impossible to avoid single-use plastics altogether, but a one-time investment in reusable versions of your most frequent purchases can reduce your dependence on them."
"Don’t hold yourself to an unrealistic standard of purity. Just as it’s O.K. to eat the birthday cake, it’s O.K. not to be a perfect steward of the earth."
Read the details:
https://www.nytimes.com/2020/01/13/opinion/earth-environmentalism.html?smid=nytcore-ios-share
Effortless Environmentalism
by Margaret Renki for The New York Times
"Think of these suggestions as baby steps on the path toward a growing commitment to change."
"Vote. The climate crisis is the one issue that matters most in this election, and not just because the survival of the human race depends on it."
"Reframe your relationship with bugs. Insects are the bread and butter of the natural world, but they are dying out. Think of your yard as ground zero of the entire local food chain."
"Cultivate a glorious mess. Nature isn’t supposed to be tidy, and its messiness is purposeful. Fallen leaves fertilize the trees they fell from and simultaneously provide habitat for a whole host of insects, amphibians and reptiles."
KILL your leaf blower which is an environmental disaster due to noise and air pollution!
"Eat better. Agriculture accounts for about a third of greenhouse gas emissions, primarily through deforestation, the use of petrochemical fertilizers and methane production by livestock. To mitigate its effects, eat less meat and fewer dairy products."
"Shop your closet. In addition to its manifold human costs, “fast fashion” — cheap clothing designed to be temporary in the age of Instagram — is a significant cause of environmental degradation."
"Put your money where your values are. Support a fierce environmental nonprofit through automatic monthly drafts"
"Pay for your sins. Avoiding air travel is one easy way to lower your carbon footprint significantly, but you can also buy carbon offsets for the flights you can’t avoid."
"Lighten up on the plastic. It’s almost impossible to avoid single-use plastics altogether, but a one-time investment in reusable versions of your most frequent purchases can reduce your dependence on them."
"Don’t hold yourself to an unrealistic standard of purity. Just as it’s O.K. to eat the birthday cake, it’s O.K. not to be a perfect steward of the earth."
Read the details:
https://www.nytimes.com/2020/01/13/opinion/earth-environmentalism.html?smid=nytcore-ios-share
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