Savings Rate skyrocketed during Coronavirus: How to use your dividend wisely

 While many Americans are truly suffering from job losses, health related expenses, and the stress of working at home while trying to help children navigate Zoom school, our economy is becoming more divided. For those who can work from home and aren't eating out, traveling, and shopping as they used to, while getting a $1200/adult & $500/child coronavirus "bonus," now is the time to put those extra funds to work. If you haven't already donated to your local food pantry, crisis center, political candidates, etc., consider upgrading your home's (and vehicle's) energy efficiency. 

Another factor to consider is how low interest rates are on savings accounts and money funds: less than 1%. Better to put that money to use in energy savings. 

Now is a great time to upgrade major home appliances to the most energy efficient models of refrigerators, washer-dryers, furnaces, and hot water heaters. Start with the most energy intensive appliances and those that are oldest.

"Heating appliances consume the most energy, according to the U.S. Energy Information Administration."

"In total, these appliances consume about 46% of a home’s electricity. Specifically, air conditioning uses about 17% of your home’s energy, space heating an additional 15%, and water heating uses 14%." https://www.beupp.com/articles/home-appliances-power-breakdown/

The balance between heating an air conditioning obviously depends on where you live.

Consider a tankless hot water heater:  https://www.energy.gov/energysaver/heat-and-cool/water-heating/tankless-or-demand-type-water-heaters

Other benefits of tankless water heaters beside saving energy are: no need to secure a large tank to a firm upright to prevent disaster during an earthquake and think about the outcome when an aging water heater leaks... especially if you are away fromh ome when it happens.

"Because heating and cooling is a huge source of energy consumption, replacing an inefficient furnace or air conditioning unit will save the most energy and money. When purchasing new appliances, you can compare their energy efficiency by checking the yellow tag that displays the appliance’s energy rating." https://www.wisegeek.com/which-home-appliances-use-the-most-energy.htm

With more and more hybrid and electric vehicles coming to the market and expanded charging stations, now is a good time to upgrade to a more energy efficient vehicle. 

Best electric cars of 2020 and 2021: also includes plug-in hybrids: https://www.edmunds.com/electric-car/

Best Electric Cars for 2020 (USN&WR): https://cars.usnews.com/cars-trucks/best-electric-cars

Of course, if you are getting an electric vehicle, you should first invest in roof top solar panels so you aren't burning coal.  

 

The least dirty shirt in the laundry: Negative bond yields

 Well, we aren't there yet (negative interest rates) but anyone with a savings account or looking a bond yields lately (or listening to Federal Reserve Bank Chair Jerome Powell) knows that rates are falling fast. 

Many European countries are issuing bonds with NEGATIVE interest rates, meaning that the investor pays the bond issuer a fee to keep their money safe. It's a strange concept when we are used to getting paid by the issuer for the use of our money. 

Why would anyone pay someone to hold their money rather than put it under the proverbial mattress? Why get back at some date in the future less than you invested?

There are $16 trillion of bonds world-wide paying negative interest rates!

Simon Constable, writing for The Wall Street Journal (10/5/20) explains 5 reasons:

1. The bond offers security (at a cost). Think of the negative yield as the storage fee, the cost of security that you will get your money back (less a fee) in the future. Some U.K. banks already are charging savings-deposit customers a negative yield.

2. The chance of a quick trading profit. traders are willing to accept a negative yield if they expect rates to dive lower in the future. they could profit by selling the initial bond at a premium. 

3. When expected currency moves will likely offset the negative yields. This applies to international investors. However, "forecasting future currency movements is notoriously tricky." Not for the faint of heart.

4. When the bond is still safe, relatively speaking. "During the 2008-2009 financial crisis, investors often described the U.S. as the least dirty shirt in the laundry basket, meaning that while the U.S. wasn't in great shape, other countries were in worse condition." The same concept applies today with regard to negative interest rates. What options do you have? Lots of money is flowing into U.S. stocks because bond yields are so low, which explains why the stock markets seem to be ignoring the world-wide coronavirus pandemic. 

5. Purchasing power is maintained. The main reason investors would invest in negative yields is during times of deflation (a sustained drop in prices of goods and services). If prices drop faster than the negative yield, one has more purchasing power.  "If your purchasing power grows over the investment period, it doesn't matter how negative the yield is on the bond." 

This article was followed in the WSJ on 10/9/20 with "Savers face limited option" by Julia Carpenter. Interest rates on savings accounts (including online accounts) are plunging with few options. "Looking for more yield, however, often means taking on more risk and sacrificing liquidity." Some options are money market funds (still low yields) and some fixed-income exchange-traded funds offering 1-2%. 

Just more dirty laundry!

Filing FAFSA (financial aid application) early is especially important this year

The new FAFSA (free application for federal student aid) form (available October 1) uses last year’s tax data. But families that have lost income this year need to take extra steps to qualify for aid. The FAFSA form is the major gateway to financial aid from the U.S. government, as well as from many states and colleges. 

"Completing the form early is always a good idea in order to meet varying deadlines for scholarships. But this year, college students or prospective applicants who have been affected by the pandemic may need to submit extra documents to their colleges."

Students whose families have been affected by the Coronavirus, suffering job loss, major medical bills and even deaths need to file early and provide updated information since the FAFSA relies on 2019 income tax data. Last year's income data won’t accurately reflect a student’s current financial picture, diminishing eligibility for need-based grants and scholarships.

Although the FAFSA will use 2019 data students with substantial changes in their family's finances should contact college financial aid offices to alert them to their changed situation and request a review known in as a “professional judgment.”

"A professional judgment review involves submitting new information — like layoff notices, unemployment checks or medical bills — to give financial aid officials a more accurate picture of a student’s current finances. With that review, financial aid administrators have discretion to make adjustments to the FAFSA so that students can qualify for more aid."

Thanks and credit to Ann Carrns writing for The New York Times for this information.

Are you really ready to retire? Mapping Out a Fulfilling Retirement

Thanks Kim Blanton, author of The Squared Away Blog for these posts. Check out https://squaredawayblog.bc.edu

"A big part of retiring is letting go of what can be a strong identification with work, and people are reluctant to give that up." Here is some help...

Boomers typically must go through four tasks as they transition to a satisfying retirement:

Decide to retire. Mapping Out a Fulfilling Retirement: https://squaredawayblog.bc.edu/squared-away/mapping-out-a-fulfilling-retirement/

Detach from work. Retirement is Liberating – and Hard Work: https://squaredawayblog.bc.edu/squared-away/retirement-is-liberating-and-hard-work/

Explore a new life structure.
the adjustment to retirement can be a difficult period.  the typical baby boomer comes to retirement with no more than an idea or two about how they might spend their time.

Consolidate a new life structure. Putting together the pieces of a satisfying retirement life requires setting priorities and following through on them with determination. 

 

 

DIGNITAS - To live with dignity - To die with dignity

DIGNITAS - To live with dignity - To die with dignity, is a "Swiss self-determination, autonomy and dignity group. We are a not-for-profit member’s society which advocates, educates and supports for improving care and choice in life and at life's end. Our advisory concept of combining palliative care, suicide attempt prevention, advance health care planning and assisted dying offers a basis for decision-making to shape life until the end. Since 1998, we are the spearhead for the worldwide implementation of ‘the last human right’" Check out their website: http://www.dignitas.ch

10 Social Security Rules Everyone Should Know

 Check this link for 13 slides explaining Social Security. Thanks to Emily Brandon writing for US. News and World Report. https://money.usnews.com/money/retirement/social-security/slideshows/10-social-security-rules-everyone-should-know?slide=1

Calculators to help you decide when to claim Social Security retirement benefits

 "One of the most important retirement decisions you will make is when to apply for Social Security. Several retirement calculators have been developed to help you determine the optimal retirement age to start Social Security payments." (Thanks to Emily Brandon writing for US News and World Report).

Here are 10 Social Security calculators worth trying:

• Retirement Estimator.
• My Social Security Retirement Calculator.
• Online Benefits Calculator.
• Planning for Retirement.
• Target Your Retirement.
• Social Security Benefits Calculator.
• Social Security Retirement Calculator.
• Social Security Calculator.
• Retirement Age Calculator.
• Life Expectancy Calculator.

"These calculators can help you begin thinking about what you can do to maximize the amount you will receive from Social Security in retirement." 

Take note! "When out to maximize the benefits that both spouses collect, that's different than maximizing when each person claims their own benefit," says Wei-Yin Hu, vice president of financial research at Financial Engines. "It turns out to be quite important to look at both spouses in a household together, because there are some interesting interactions about when the two should claim benefits in terms of both spousal benefits and survivors benefits playing a role in the picture."

Read the full article for more information about these calculators: https://money.usnews.com/money/retirement/social-security/articles/social-security-calculators-that-can-help-you-decide-when-to-claim

Misisng your stimulus check?

 Thanks to Michelle Singletary, financial writer for the Washington Post, for this helpful info. Lots of Americans may have thrown out what looked like junk mail but really contained not a stimulus check but a stimulus debit card. The cards were sent in May and June from MetaBank and came in a plain envelope with no governmental IRS or Treasury markings. Just another glitch in these trying times. 

So the Treasury is sending out reminder letters with a return address: Economic Impact payment Card, PO Box 247022, Omaha, NE 68124-7022. The letter provides instructions to call customer service: 800-240-8100 to report the card lost or stolen or to get a free replacement card. 

Your financial path to college graduation

 The Consumer Financial Protection Bureau (CFPB) offers lots of help for college students. https://www.consumerfinance.gov/paying-for-college/

Check out:

 "Your financial path to graduation" https://www.consumerfinance.gov/paying-for-college/your-financial-path-to-graduation/?utm_source=newsletter&utm_medium=email&utm_campaign=gradpath&houx=826&fdx=340&clhx=87&trnx=324&hltx=121&entx=94&retx=22&taxx=-6&othx=385

This tool can help you:

• Understand your financial aid offer
• Plan to cover the remaining costs
• Estimate how much you’ll owe and if you can afford that debt
• Compare offers from different schools
• Decide what to do next
  

Keep coming back as your plan evolves.

For many students, planning how to pay for school is complicated. It may require multiple conversations with family, advisers, and the school financial aid office to get more information. As you figure out your best options, come back and update your plan as many times as you need!

This tool does not save your personal data. Learn how we got the numbers and guidelines for our calculations.

To start, you will need:

• Your financial aid offer(s)
• An idea of how much money you and your family can put towards school
• A private loan offer (if you have one)
• The phone number or email address of someone in the financial aid office – it’s their job to answer your questions!

You may want to use this tool with someone you trust who can help you weigh your options.

 

New Data Reveals Hidden Flood Risk Across America

No one wants one more thing to worry about but... it would be wise to check out your home's risk for flooding, recognizing that damage from floods is specifically excluded from homeowner's policies. New data on flood risks across the U.S. reveals that the risk of flooding has increased substantially and that many homes at risk of flooding are not included in flood maps. 

"Across much of the United States, the flood risk is far greater than government estimates show, new calculations suggest, exposing millions of people to a hidden threat — and one that will only grow as climate change worsens."

"That new calculation, which takes into account sea-level rise, rainfall and flooding along smaller creeks not mapped federally, estimates that 14.6 million properties are at risk from what experts call a 100-year flood, far more than the 8.7 million properties shown on federal government flood maps. A 100-year flood is one with a 1 percent chance of striking in any given year." 

"Federal flood maps, managed by the Federal Emergency Management Agency, have long drawn concerns that they underestimate flood risk. Part of the problem is keeping the maps up to date, which is not only costly and labor intensive, but further complicated as climate change has worsened the dangers."

"In addition, FEMA’s maps aren’t designed to account for flooding caused by intense rainfall, a growing problem as the atmosphere warms."

Check out the article and map in The New York Times June 29, 2020 by Christopher Flavelle, Denise Lu, Veronica Penney, Nadja Popovich and John Schwartz  https://www.nytimes.com/interactive/2020/06/29/climate/hidden-flood-risk-maps.html?referringSource=articleShare