5 Signs You Aren't Ready to Marry Finances with Your Partner

October 28, 2015, 10:00 pm

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Filed under: Life Stage Lessons

By Charlene Oldham

Many couples claim to live by the axiom of "what's mine is yours and what's yours is mine," and opening a joint bank account represents one way to put that into practice. With a joint account, both partners have access to the funds and can make deposits and withdrawals. Both are also liable for bounced checks, overdraft fees or any other charges and expenses associated with the account.

Sometimes having a joint account makes sense for couples, since covering shared expenses is easier. And, for couples on the same banking and budgetary page, a joint checking account can help build trust, accountability and bank balances toward mutual monetary goals. But there are cases when opening a joint account can be a bad idea.

Here are some warning signs you shouldn't get a joint bank account and why you might want to wait.

1. You Aren't Married

"I hate to sound old fashioned, but there are legal ramifications beyond the warm fuzziness of sharing your names on checks. If you're not married, and this is the way you're showing a commitment to each other, reconsider the show of affection," said April Masini, an author and relationship expert at AskApril.com. "Jewelry is a nice gesture that isn't going to require two signatures to close the account. So are shared goldfish. Or a fern."

While Masini's tone is joking, her advice is anything but. Married couples can rely on the legal system to untangle their finances in the event of a divorce, but unmarried partners usually don't have the same protections. Relying on candid conversations -- and even a contract -- if you elect to open a joint account without being married, is the best you can do.

The decision to open a joint checking account should come only after numerous discussions of your money management techniques and the concerns and details that might come with a combined account. Then, according to Money Under 30, couples should create a simple contract that outlines which accounts and investments belong to a particular partner and which are to be divided equally. Finally, even the most committed couple should leave some accounts separate if they aren't married or in another type of legally recognized relationship.

2. You're Still in a 'Partnership' With Parents

A 2013 Pew Research Center report found that, among adults between 40 and 59 years old with at least one grown child, 73 percent said they'd helped support an adult son or daughter in the prior year, with half of those parents saying they were their child's primary means of support.

Personal finance educator Taffy Wagner said financial dependence on parental payouts is one sign you and your partner might not be ready to open and manage a joint checking account. For example, if you're married, have taken a loan from parents since tying the knot and made no moves to pay it back, sharing money with someone else is likely a bad idea. Taking handouts can also lead parents to become de facto money managers within the marriage.

"Your parents are handling you finances even though you are married. They are calling the shots," Wagner said when describing the scenario. "This is interfering with your marriage, but you don't stop them from managing your money."

So couples need to cut the parental purse strings before deciding on a joint account, for the good of their financial future as well as their romantic relationship.

3. You Are Spending and Saving Opposites

"If one of you is a big spender and the other is a big saver, you're going to create big drama by co-owning a checking account," Masini said. "Financial discrepancies can be deal breakers, and they should be taken seriously. Opening a joint checking account can create deal-breaking problems in your relationship."

Wagner said some other issues can also break the bank. If you or your partner are carrying significant debt without a clear payoff plan or have undesirable spending habits including not paying bills on time, spending money that should be devoted to necessities on meals out or mall binges, or frequently borrowing money from friends and family, those issues should be exposed and addressed before you open a joint account.

4. You or Your Partner Are Secretive or Sensitive About Finances

It's a clear indication you aren't ready to open a joint bank account if "whenever the topic of money comes up, you get argumentative as if someone is blaming you when they don't even know your money situation or lack of habits," said Wagner.

I think the most important factor in doing something like that is that there needs to be total and complete transparency between the parties.

Opening an account together requires a willingness to be accountable and honest about spending habits, earnings and other financial issues, said Matthew K. Skarin, a family lawyer with Feinberg, Mindel, Brandt & Klein. And some couples in serious romantic relationships, or even marriages, aren't quite ready to share spreadsheets.

"I think the most important factor in doing something like that is that there needs to be total and complete transparency between the parties," he said. "But it's often difficult to find a happy medium between transparency and being overbearing."

Skarin and his wife decided to combine finances after about a year of marriage, but each sets some "fun money" aside in an individual accounts that they can spend on gifts for one another or impulse buys that they don't have to justify when the monthly bank statement appears. "And that also gives [us] a feeling of independence," he said. "But, for the most part, we keep everything combined."

5. You or Your Partner Pay Child or Spousal Support

"Just because you have a custody schedule worked out or a child support amount set doesn't mean it's set in stone," Masini said "Things change, and it might just be a good idea to ask your attorney about the implications of a joint checking account as opposed to sole and separate accounts until the kids are 'of age' and out of the child support game."

Legally, Skarin said child and spousal support payments are considered the responsibility of the individual who brought them into a new partnership or marriage. But he agrees it can be a good idea to keep separate accounts for other legal reasons. For example, the individual accounts can be important if the partner responsible for the child or spousal support payments doesn't bring in enough income to cover them and needs to prove that in court.

"But, absent that, I think if [support payments] come out of a joint account, that's fine as long as everyone knows what to expect," he said.

Don't Rush a Joint Account

There's no reason to rush opening a joint bank account with your partner. Make sure you're both on the same page first and communicate your goals and concerns clearly before signing that dotted line.

Avoiding secrets and surprises is critical for any couple with a joint checking account, said Skarin, also a certified public accountant. He and his wife use spreadsheets and smartphone apps to help manage their joint accounts, which makes it unlikely either will lose track of how much they can afford to spend. When couples are ready to blend some finances, implementing an accounting and accountability system also helps eliminate doubts about money matters overall.

"With this level of transparency, none of that is an issue," Skarin said. "You have more of a team approach to the family finances. When my wife and I look at the spreadsheets and look at the accounts, we can say, 'This is our project and we're working on it together.' And I think it's actually helped our relationship quite a bit."

This story, 5 Signs You Aren't Ready to Marry Finances with Your Partner, originally appeared on GOBankingRates.com.

 

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12 Ways to Get Good Furniture Cheap

October 28, 2015, 10:00 pm

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Filed under: Shopping, How to Save Money, Deals, Furniture, Home & Garden

By Allison Martin

Purchasing a home is a massive, yet exciting, undertaking. But what about all of the additional expenses that are part of the equation? Many homebuyers forget to account for them.

One of the most costly purchases, alongside major appliances, is furniture. It's a must-have, unless you don't mind passing time on the floor.

Fortunately, you don't have to go further into debt to make your new home cozy and aesthetically pleasing. Besides planning ahead, so you won't engage in impulse shopping, there are other ways to save a ton of money on furniture, both new and used.

1. Craigslist. You may be skeptical about shopping for furniture on Craigslist, so here's the trick: Search for listings in high-end areas to increase your chances of locating the high-caliber goods. Just be sure that the costs of repairs and cleaning, if necessary, don't add substantially to the purchase price.

Want to maximize your savings? Check out Freecycle.org for free furniture.

2. Reupholstering and refinishing. Do you actually need new furniture, or can you spruce things up with a face-lift? If the latter is true, try having your items reupholstered or refinished. The Internet is full of how-to tips and ideas, such as DIY Network. The staff at home improvement stores like Home Depot and Lowe's are often full of advice on products and shortcuts.

Then recombine your upgraded furniture in your home with new décor, such as pillows, lamps and rugs.

Conduct an online search for interior design ideas and try visiting stores, such as HomeGoods, Marshalls and T.J. Maxx, to locate accent pieces and accessories. Small changes can make a huge difference and save you a ton of cash.

3. Moving sales, yard sales, estate sales. Is anyone in your area moving to another city? If not, check out individual and community garage sales to take advantage of bargains. The "everything must go" mentality is the key to the best deals.

And if you run across an estate sale, keep in mind that the best items go fast, says Apartment Therapy. However, "if you come after the rush (later in the day or the next day), you will feel less frazzled and are in a better position to haggle," the website says.

4. Going-out-of-business sales. The retailers must clear out the inventory and equipment in their facility before the doors officially close for good. If you have some flexibility, wait until the final weeks of operation to shop. Although selection may be limited, savings can be huge.

5. Thrift stores. The items are donated and quite likely will vary greatly in how gently used or abused they were. Still, you might find some great deals that can look like new with a little attention.

6. Discount furniture stores. In Florida, we have clearance centers, such as American Freight and Big Lots, which sell name-brand furniture at big discounts. The Rooms to Go Outlet also sells items with slight scratches and dents. Check to see if these stores or ones like them are in your area.

Also, your local furniture store may have great discounts on floor models and items that are a bit dinged.

7. Furniture swapping. No cash available for new furniture? Try trading with others (here comes Freecycle again) who have items that interest you. Another way to find partners is via Craigslist: The trick is to make sure what they are offering is comparable in terms of value to your goods.

8. Consignment shops. Furniture at these locations is usually decent enough to generate a profit for the shop, as well as some cash for the original owner. And the boutique shops sometimes carry high-end designer brands.

9. Special promotions. The best time to buy furniture is when stores have to make room for new inventory. The timing varies, but check holidays like Memorial Day and Veterans Day, plus the months of February and August. Hold off, and the price might drop even more.

Track the prices on your favorite pieces so you can pounce when there's a major mark down.

MarketWatch says the sale items are often at the back of the store, so that customers are forced to walk through the full-priced items to get there. Don't get distracted. Make a beeline for the discounted stuff.

10. Haggling. The advertised prices for furniture are not set in stone, and the store owner can easily drop the price and still make a decent profit. Says MarketWatch: "Most furniture retailers mark up their prices by about 80 percent (and in some cases more) to maximize profits."

11. Price matching. If you find something you like, find out if the store offers price matching for similar or identical products. Check around with competing stores for a lower price to present to the seller. (You can do this on your phone while standing in the store, which often prompts the furniture dealer to offer a lower price even if you don't find the same product elsewhere.)

12. Wholesalers. The inventory tends to turn over frequently, so pop in as often as you can to take a look. And if you see something you like, jump on it immediately. But be on the lookout for slightly damaged goods.

What tactics have you used to save big bucks on furniture? Let us know in the comments below or on our Facebook page.

Ari Cetron contributed to this post.

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6 Car Expenses That Are Really Worth the Money

October 28, 2015, 10:00 pm

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Filed under: Travel, Shopping, Transportation, How to Save Money, Home & Garden

By Hana Livingston

As any driver knows, it's easy to get overwhelmed by the abundance of car-related goods and services, from pricey detailing to third-party warranties to premium fluids. Car owners on a budget must decide when to invest and when to cut corners. Pinching pennies in the wrong places can cost more down the road and raise concerns about safety. Cheapism.com consulted auto manufacturers, technicians and maintenance guides to determine what's worth the money when it comes to your car.

Regular Tire Rotation. If you've ever looked at the bottom of your shoe and noticed that one area is more worn than another, you already have an idea about the need to rotate tires regularly. Tire treads wear unevenly through normal driving, a process worsened by incorrect tire pressure and uneven alignment. When tires are rotated properly, they wear more uniformly, resulting in a smoother ride, more balanced handling, increased traction and more effective braking. Plus, rotating tires makes them last much longer and improves gas mileage. Use the opportunity to make sure they are inflated to the appropriate pressure.

Check the owner's manual to see how frequently tires should be rotated. Manufacturers generally recommend doing so every 6,000 to 8,000 miles. If tires make noise even on smooth roads -- typically a loud humming sound -- that can be a sign that they need to be rotated. The job takes less than an hour and the average cost ranges between $27 and $35, according to RepairPal. Car owners who purchased tires from Costco, Sam's Club, Walmart and Sears really have no reason to shirk -- this service comes at no charge.

Certification Program. When buying a used car it's worth spending the extra few hundred or thousand dollars on one that's "certified pre-owned." These vehicles often come with an extended manufacturer's warranty. Plus, if any problems crop up after the warranty expires, the manufacturer may be willing to help out -- good luck getting anyone to do that for a vehicle that was purchased without the certification.

Buying a certified pre-owned car also provides assurance that the car is in working order and won't break down as soon as you drive it off the lot. American Honda, for example, requires a 150-point inspection for a vehicle to earn the certified pre-owned title. Among other things, the inspection looks for aftermarket parts on the car, which Honda (and some experts) contend can affect the vehicle's safety, reliability and performance. Moreover, using aftermarket parts generally voids the manufacturer's warranty.

Oil Changes on Schedule. An oil change is one of the least expensive maintenance services and also one of the most critical, so there's no excuse for neglecting it. Oil keeps a vehicle's engine clear of sludge and build-up and ensures that all components run together smoothly. Dodging regular oil changes can lead to a host of problems, from worn pistons to all-out engine failure, that require extremely expensive repairs.

Even car owners on a tight budget should stick to the schedule. Having a trusted technician looking at the vehicle on a regular basis is a smart habit because it draws attention to small issues, such as fluid leaks or worn-out parts, before they become unsafe or costly disasters.

Oil changes generally are recommended every 2,500 to 3,000 miles, but check the owner's manual for the manufacturer's specific recommendation. It will also indicate the recommended grade of motor oil, which is important because the wrong grade can reduce a car's gas mileage by 1 or 2 percent, according to the U.S. Department of Energy.

Frequent Washes. It might seem frugal to forgo car washes in order to save money, but this is an outlay that pays off. Bird droppings, for example, can cause permanent damage: When the paint on a vehicle gets hot, it softens and molds itself around the hardened droppings. The result is uneven paintwork that appears scratched, pitted and dull. Getting a fresh clear coat is costly and blemished, unsightly paint reduces a car's resale value. The longer the droppings remain, the worse the damage, so remove them promptly and in general wash the car frequently.

Periodic Waxing. If a future sale is in the cards, occasional waxing is critical to maintaining the value of the car. Wax does more than just add extra shine -- it prevents paint from fading and dulling and preserves the clear coat. Wax protects the car's exterior from the elements, such as UV rays, salt, exhaust, acid rain, ice, bug splatter, scratches, dirt and so on. When it comes time to sell the vehicle, the better the exterior looks, the higher the asking price can be. Prospective buyers always notice the exterior even if they have no idea what to look for under the hood.

Most experts recommend hand waxing every three months or so or at least every six months. To gauge the need, splash a little water on the car: If it doesn't bead up, it's time for fresh wax. A little practice makes this a cheap DIY job. Alternatively, go the professional route; CostHelper users report paying $40 to $90 for a simple wash-and-wax. Splurge for a hand wax. The wax add-on at automated car washes doesn't offer much real protection.

Brake Pad Replacement. When it comes to brake pads, a little prevention and maintenance go a long way. If worn brake pads are not replaced, the brake rotors will warp and need to be resurfaced or replaced, both of which are costly. It's easy to get brake pads checked during a standard oil change or tire rotation.

Brake wear depends on several factors, so there's no hard-and-fast schedule for replacing brake pads -- consult a trusted professional technician. However, if you hear a squeaking, screeching or grinding sound or feel pulsing or vibrating when braking, it may be time for new pads. Decreasing brake effectiveness -- it takes longer to stop or you must press the pedal harder than usual -- is another common sign of brake wear. Replacing brake pads is both a money saver and a crucial safety measure. New brake pads cost cost between $100 and $250 -- an expense that's worth every dime.

 

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Inventories Hurt 3Q GDP, Domestic Demand Strong

October 29, 2015, 1:39 am

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Filed under: Energy, Economic Indicators, GDP, Manufacturing, Economy

By Lucia Mutikani

WASHINGTON -- U.S. economic growth braked sharply in the third quarter as businesses cut back on restocking warehouses to work off an inventory glut, but solid domestic demand could encourage the Federal Reserve to raise interest rates in December.

Gross domestic product increased at a 1.5 percent annual rate after expanding at a 3.9 percent clip in the second quarter, the Commerce Department said Thursday.

The inventory drag, however, is likely to be temporary and economists expect growth to pick up in the fourth quarter given strong domestic fundamentals.

"The guts of the report were healthy, they still show strong underlying momentum in the economy and that puts a December rate hike firmly on the table.

"The guts of the report were healthy, they still show strong underlying momentum in the economy and that puts a December rate hike firmly on the table," said Thomas Costerg, a U.S. economist at Standard Chartered Bank in New York.

The Fed on Wednesday described the economy as growing at a "moderate" pace and hinted at a December rate increase by making a direct reference to its next policy meeting. The U.S. central bank has kept benchmark overnight interest rates near zero since December 2008.

Stocks on Wall Street and prices for U.S. Treasury debt fell on the data. The dollar weakened against a basket of currencies.

The economy has struggled to sustain a faster pace of growth since the end of the 2007-09 recession, with average yearly growth failing to break above 2.5 percent. This year, it has faced headwinds from a strong dollar and deep spending cuts by energy firms following a collapse in oil prices.

Businesses accumulated $56.8 billion worth of inventory in the third quarter, the smallest since the first quarter of 2014 and down sharply from $113.5 billion in the April-June period. There were declines in manufacturing, wholesale and retail inventories.

The small inventory build sliced off 1.44 percentage points from third-quarter GDP growth, the largest since the fourth quarter of 2012.

"That inventory drawdown represents a bit of a healthy purge that should set the economy up for stronger growth in the coming quarters," said Jim Baird, chief investment officer for Plante Moran Financial Advisors in Kalamazoo, Michigan.

Consumer Save the Day

The blow from inventories was, however, blunted by bullish consumers, who are getting a tailwind from cheaper gasoline and firming housing and labor markets.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 3.2 percent rate after expanding at a 3.6 percent pace in the second quarter. A measure of private domestic demand, which excludes trade, inventories and government spending, rose at a sturdy 3.2 percent pace.

Spending is likely to remain supported by a fairly healthy labor market and low inflation, which is boosting household purchasing power. Income at the disposal of households increased 3.5 percent in the third quarter after rising 1.2 percent in the prior quarter.

"The consumer remains the main engine of economic growth. We expect this dynamic to remain in place," said Jesse Hurwitz, an economist at Barclays in New York.

A separate report from the Labor Department showed new applications for unemployment benefits last week hovering near levels last seen in late 1973.

With the dollar strengthening, export growth decelerated in the third quarter. The drag was, however, offset by a slowdown in imports, especially automobiles, leaving trade's impact on growth neutral.

Ongoing spending cuts in the energy sector also undermined growth. A plunge in oil prices has prompted oil field companies like Schlumberger (SLM) and Halliburton (HAL) to slash investment.

Schlumberger said this month it didn't expect a recovery in demand before 2017 and anticipated that exploration and production spending would fall again in 2016.

Spending on mining exploration, wells and shafts tumbled at a 46.9 percent rate after dropping at a 68 percent pace in the second quarter. Investment in nonresidential structures contracted at a 4 percent pace, also weighed down by weak spending on commercial and healthcare structures.

Despite strong domestic demand, dollar strength and cheaper gasoline dampened inflation.

The personal consumption expenditures price index rose at a 1.2 percent rate after rising 2.2 percent in the second quarter. Excluding food and energy, prices increased at a 1.3 percent pace, slowing from a 1.9 percent rate in the second quarter.

 

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5 Stocks That Have Lost More Than Half Their Value in 2015

October 29, 2015, 2:12 am

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Filed under: Google, Wall Street Watch, Stocks, Stock Markets, Investing

I recently wrote about some surprising stocks that have more than doubled so far this year, but now it's time to check out some of the more unfortunate investments. Let's go over some of the stocks that have lost at least half of their value in 2015 as of the Oct. 25 market close.

Lumber Liquidators (LL) -- Down 78 percent

Things seemed to be humming along for the country's largest stand-alone hardwood flooring retailer until a "60 Minutes" report called out the potentially hazardous nature of some of its laminate flooring. The scathing segment tested Lumber Liquidators' China-sourced laminates, finding many of them to contain dangerous levels of formaldehyde.

Lumber Liquidators initially denied the claims, but ultimately decided to stop selling the flooring altogether. By then the damage was done. Sales took a dive, and they have yet to recover. This isn't the first time that Lumber Liquidators has courted controversy, but it's the first time that the implications have had health concerns. That's hard to bounce back from in the near term.

Keurig Green Mountain (GMCR) -- Down 60 percent

The company that revolutionized the way that we consume premium coffee at home with the original Keurig single-cup brewer has been quite decaffeinated in 2015. The downfall may have started in 2012 when the patents for its K-Cup portion packs expired, but things got really bad last year when it rolled out Keurig 2.0.

Armed with a label scanner, the new brewers only work with new K-Cups. Sure, clever java junkies have circumvented the process by slapping a new label on old, reusable or third-party portion packs, but the brand has taken a hit all the same. Year-over-year sales fell for the first time in its latest quarter, and the new Keurig Kold machine that makes chilled carbonated beverages isn't garnering rave reviews since last month's launch.

Yelp (YELP) -- Down 55 percent

The site that many foodies turn to for crowdsourced reviews has been giving investors indigestion this year. Yelp has been dogging allegations from disgruntled merchants for years that the site buries negative reviews for local businesses that pay to advertise on Yelp. It's been a different story on the consumer end, with folks relying on the site for peer reviews of restaurants, shops, spas, and other businesses.

The rub here is that mobile growth is slowing, and desktop usage is actually declining. There are also fears that Yelp relies too heavily on Google (GOOG, GOOGL) searches for traffic, something that could prove to be a sticking point if the leading search engine decides to promote its own ratings platform.

GoPro (GPRO) -- Down 54 percent

One of last year's hottest IPOs has wiped out this year. GoPro made wearable cameras cool, but decelerating growth can't seem to justify the lofty valuation the company had after last year's frenzied surge. GoPro's HERO cameras continue to sell well, but analysts see sales slowing considerably this holiday season.

Fossil (FOSL) -- Down 53 percent

Folks have been predicting the death of the designer watch for years. Who needs a wrist-hugging timepiece when there's a smartphone in the pocket? Now the death knell is all about smartwatches.

Fossil was able to defy gravity in recent years, but that hasn't been the case in 2015. Sales have started to decline, and profitability is taking an even bigger hit. Fossil is finally starting to live up to its name.

Motley Fool contributor Rick Munarriz owns shares of Keurig Green Mountain. The Motley Fool owns shares of and recommends Alphabet (A and C shares), GoPro and Lumber Liquidators. The Motley Fool recommends Fossil, Keurig Green Mountain and Yelp. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.

 

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Fewer Americans Sign Contracts to Buy Homes in September

October 29, 2015, 3:07 am

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Filed under: Mortgages, Real Estate, Economic Indicators, Housing Market, Home Buying

By JOSH BOAK

WASHINGTON -- September marked a slowdown in Americans signing contracts to buy homes, the second consecutive decline for a real estate market that has been rebounding for the first half of 2015.

The National Association of Realtors said Thursday that its seasonally adjusted pending home sales index dropped 2.3 percent to 106.8 last month. The index has risen 3 percent over the past 12 months, aided by solid hiring levels and low mortgage rates that fueled stronger demand during the traditional summer buying season.

But evidence of fading momentum has surfaced in recent months. Sales of newly built homes fell 11.5 percent last month, as choppy financial markets and rising home prices are creating affordability pressures for would-be buyers. The strong demand for housing due to stronger job market -- with unemployment at a robust 5.1 percent -- has failed to produce an influx of new listings that could help sales.

Pending sales are a barometer of future purchases. A lag of a month or two usually exists between a contract and a completed sale. Signed contracts fell in the Northeast, Midwest and South last month, while slipping slightly in the West.

Over the past 12 months, sales of existing homes have risen 8.8 percent over the past 12 months. But the inventory on the market has dropped 3.1 percent, the Realtors said last week.

A mere 4.8 months' supply of homes is available for would-be buyers, substantially below the 6 months associated with a healthy market.

The tight inventories have pushed up home values. The median home sales price was $221,900 in September, a 6.1 percent annual increase.

But historically low borrowing costs have offset the impact of rising prices.

The average fixed-rate, 30-year mortgage this week was 3.76 percent, down from 3.98 percent a year ago, according to the mortgage firm Freddie Mac.

 

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Medicare Premium Increases: Not as Bad as Predicted

October 29, 2015, 5:12 am

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Filed under: Health Care, Personal Finance, Inflation, Health Insurance, Social Security

By Krystal Steinmetz

The Obama administration and congressional leaders have finally reached a tentative budget agreement that will prevent a 52 percent spike in Medicare premiums for millions of Americans.

Without the bipartisan budget deal about 17 million Medicare recipients would see their Medicare Part B premiums soar to about $160 from $104.90, USA Today reports. Instead, those same Medicare beneficiaries, who represent about 30 percent of older Americans covered by Medicare, will see a 14 percent premium increase to $120 a month next year, plus a monthly surcharge of $3.

According to The Washington Post, the 17 million Medicare beneficiaries affected by the premium increase do not have their insurance payment automatically deducted from a Social Security check. "Among this group are people who do not collect Social Security, will be enrolling in Medicare's Part B next year for the first time, have incomes great enough that they are charged higher premiums, or are poor enough that they also qualify for Medicaid," the Post said.

The unprecedented spike in Part B rates for the rest would have come about in order to keep the Medicare system in actuarial balance.

A provision of federal law that links Medicare premiums to Social Security benefits, which won't increase for the third year in a row because of low inflation, is shielding the other 70 percent of Medicare beneficiaries from increased premiums.

"The unprecedented spike in Part B rates for the rest would have come about in order to keep the Medicare system in actuarial balance," the Post explained.

A loan from the U.S. Treasury to the Medicare trust fund will cover the cost of Medicare Part B in the new budget deal, according to USA Today. The loan will be paid back over the next five years with slight increases ($3 a month) in Medicare premiums.

"The approach to financing ... will allow premiums to increase more gradually, while spreading the cost over a longer period of time, and across a broader group of beneficiaries," Tricia Neuman, senior vice president at the Kaiser Family Foundation, told USA Today.

Medicare Part B covers most health care service outside hospitals.

Although the budget deal wards off a massive increase in Medicare Part B premiums, it does little to address the long-term financial stability of Medicare.

"While we have concerns about the way in which the Part B cost-sharing resolution is paid for, we are glad people who rely on Medicare can breathe a bit easier -- knowing their premiums and deductible will not skyrocket next year," Judith Stein, founder and executive director of the Center for Medicare Advocacy, told USA Today.

Will you be affected by the Medicare Part B increase in 2016? Share your comments below or on our Facebook page.

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Walmart Tweaks Discount Strategy for Holiday Season

October 29, 2015, 8:22 am

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Filed under: Amazon.com, Retail, Holiday Shopping, Advertising & Marketing, Wal-Mart

By Nathan Layne

Walmart Stores (WMT) said it would offer fewer "this weekend only" short-term deals during the holiday shopping season while discounting thousands of items for 90 days as it seeks to entice customers by being more consistent on pricing.

The retailer also said it was launching a new mobile application to reduce waiting times for in-store pickup of online orders as part of an effort to expand a service in which it believes it has an advantage over rivals, like Amazon.com (AMZN), which lack a bricks-and-mortar presence.

The moves were announced in a media briefing to outline its strategy for the November to December holiday shopping season, a crucial time for retailers during which they earn an outsized portion of their annual profits and sales.

We will not be beat on pricing this holiday. If we need to react we will.

The decision to offer fewer short-term discounts comes at a time when Walmart is seeking to burnish its reputation for low prices amid relentless competition online from Amazon.com, supermarkets and dollar stores. It said customers were frustrated by "gimmicks" and wanted more consistent pricing.

"We will not be beat on pricing this holiday," said Steve Bratspies, chief merchandising officer for Walmart's U.S. operations, noting its policy of matching rivals' prices at its stores. "If we need to react we will."

Walmart said that it would have more "rollbacks," or discounts that last for 90 days, than the 20,000 offered last year, although it didn't give an exact figure. Bratspies said the discounts would be across all categories.

Walmart also said it was introducing a "mobile check-in" function to its mobile phone application that would allow shoppers picking up online orders to easily notify the store when arriving to cut down on waiting times.

Walmart said that it was focusing on in-store pickup as a way to take advantage of its 4,500 stores in the U.S. It has recently expanded curbside pickup for groceries ordered online to 23 markets, with plans to add 20 more early next year.

 

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Market Wrap: Stocks Slip as Investors Digest Fed, Earnings

October 29, 2015, 9:58 am

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Filed under: Technology, Earnings, Market News, Drug Companies, Interest Rates

By Lewis Krauskopf

NEW YORK -- U.S. stocks ended slightly lower Thursday as the market digested the potential for an interest rate hike in December and some disappointing tech earnings reports.

The Federal Reserve, which kept rates unchanged at its policy meeting that ended Wednesday, downplayed concerns about global growth and indicated confidence in the U.S. job market's recovery.

Stocks had jumped Wednesday following the Fed statement and, after a strong run from the end of September, were due for a "reprieve," said Jason Ware, chief investment officer at Albion Financial, in Salt Lake City.

I would just say that we had a big move and this is a bit of a cooling pause the next day.

"I would just say that we had a big move and this is a bit of a cooling pause the next day," Ware said.

The three indexes are on track for their best month in four years.

S&P utilities, which tend to do worse when interest rates are rising, were the worst-performing S&P sector, off 0.6 percent.

The Dow Jones industrial average (^DJI) fell 23.72 points, or 0.1 percent, to 17,755.8, the Standard & Poor's 500 index (^GSPC) lost less than a point to 2,089.41 and the Nasdaq composite (^IXIC) dropped 21.42 points, or 0.4 percent, to 5,074.27.

The three indexes recovered much of the day's losses late in the session.

Stocks were "treading water" after the Fed statement, said John Mousseau, executive vice president at Cumberland Advisors in Sarasota, Florida.

"Low interest rates have been the anchor for stock prices for a while," Mousseau said.

Odds of a December hike increased to 50 percent from 43 percent Wednesday, according to the CME Group's FedWatch program.

The S&P health care sector rose 0.4 percent, making it the top-performing sector, as Allergan's (AGN) shares shot up 6 percent to $304.38. The Botox-maker confirmed it was in buyout talks with Pfizer. Pfizer (PFE) dropped 1.9 percent.

Sixty percent of the S&P 500 companies have reported quarterly results so far. Analysts now expect overall third-quarter profit to decline a modest 1.7 percent, compared with the 4.2 percent drop forecast on Oct. 1, according to Thomson Reuters data.

Movers and Shakers

NXP Semiconductors (NXPI) sank 19.7 percent to $73 after its bleak forecast. The slide took down other chipmakers, with the broader semiconductor index down 3 percent.

F5 Networks (FFIV) shares fell 9.3 percent to $110.08 after a disappointing outlook, making it the biggest percentage loser in the S&P 500 technology index.

GoPro (GPRO) slumped 15.2 percent to $25.62 after the action camera maker posted disappointing results.

Declining issues outnumbered advancing ones on the NYSE by 1,852 to 1,185, for a 1.56-to-1 ratio on the downside; on the Nasdaq, 1,820 issues fell and 959 advanced for a 1.90-to-1 ratio favoring decliners.

The S&P 500 posted 28 new 52-week highs and 6 lows; the Nasdaq recorded 102 new highs and 76 new lows.

About 7 billion shares changed hands on U.S. exchanges, about even with the 7.1 billion daily average for the past 20 trading days, according to Thomson Reuters (TRI) data.

-Caroline Valetkevitch and Abhiram Nandakumar contributed reporting.

What to watch Friday:

• The Commerce Department releases personal income and spending for September, and the Labor Department releases the third-quarter employment cost index.
• The University of Michigan releases its final survey of consumer sentiment for October at 10 a.m.

Earnings Season
These selected companies are scheduled to report quarterly financial results:

• Anheuser-Busch Inbev (BUD)
• Choice Hotels International (CHH)
• Colgate-Palmolive (CL)
• CVS Health (CVS)
• Exelon (EXC)
• Exxon Mobil (XOM)
• Weyerhaeuser (WY)

 

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9 Times It's Smart to Be in Debt

October 29, 2015, 10:00 pm

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Filed under: Life Stage Lessons

By Lou Carlozo

It's never advisable to rush out and take on debt, but there are times when it actually makes sense not to pay off debt.

Debt, it turns out, can be a kind of friend, even if it's just that flaky friend who can't really be trusted. You see, all debt is not alike. Some of the worst kinds, such as unsecured credit card debt, can wreck your budget, but even there, you have cases where it won't and could even work to your advantage. Other kinds of debt might seem imposing with those big red "Past Due" stamps but pose less of a threat to your financial future.

Here's a guide to handling that debt -- rather than bemoaning your inability to pay it all off -- either by slowing down the payment process or leveraging or reorganizing what you owe in clever ways. These are the nine instances where it might make sense not pay off debt.

1. Leveraging Zero Percent APR Credit Cards

Many zero percent APR credit cards have hit the market, and the idea behind them is great if you're part of the credit card industry: Lure customers in with a low-low introductory rate, and then make money off them when that rate expires and a new high interest rate soars into the double digits. While there are many dangers to treating a zero percent card properly -- from having new store purchases accrue at a high interest rate to overlooking the balance transfer fees -- there's a way to play this game and win.

Many zero percent offers have 12 months or more of interest-free financing -- even 18 months isn't uncommon. Keep in mind that if you tap the full amount available, you'll typically have a 3 percent fee to pay ($300 on $10,000). The idea here is to find a safe investment with a rate of return that will far outpace the transfer fee -- while taking advantage of the special offer's time frame. So if you're lucky enough to find a $10,000 investment with a 10 percent rate of return, and can liquidate the investment after a year, you'll have $1,000 in your pocket against the $300 you paid in transfer fees, while still paying off your credit card balance.

The only caveat -- and it's a big one -- is to make those minimum payments every month so you don't lose the zero percent perk. Then when the promo rate is finished, cut up the card and go in search of another similar offer. "If you are responsible and do not have a lot of debt, you can use this feature as a short term gap to fund something," said Bijan Golkar, senior adviser and principal at FPC Investment Advisory in Petaluma, California. The only caveat -- and it's a big one -- is to make those minimum payments every month so as not to lose the zero percent perk. Golkar cautions: "If you are not disciplined, do not even think about it."

2. Negotiating Medical Provider Debts

The decision to pay here depends on several factors including the medical provider, the amount of the debt and whether or not interest charges are applied. In many cases, especially with private practitioners, bills do not accumulate any interest, so it makes no sense to pay them off in full when you may have other high-interest debts sucking at your wallet.

That said, you don't want collection agencies flagging you down. In March, the three major credit bureaus -- Equifax, TransUnion and Experian -- also agreed not to report bad medical debts until after a 180-day waiting period. "This provides time for insurance to pay their portion and patients to pay their bills or work out a payment plan to pay them," says Todd Antonelli, managing director of Berkeley Research Group in Chicago. "When payment plans are devised and agreed to, this debt will not show up on your credit reports preventing one's ability to take out a loan, get a credit card, buy a car or a home."

Negotiate directly with the medical provider whenever possible to get a minimum payment schedule set up, and always see whether you can negotiate payment charges on a sliding scale -- so that $90 an appointment, for example, is reduced to $70 an appointment. This is common practice in disciplines such as psychology.

3. Fighting the Meter

In America's cash-strapped cities, a proliferation of red-light cameras and parking meter tickets has created a near epidemic of frustrated, frightened motorists. The sight of a ticket stuck to your window is enough to churn your stomach, but the next time you get one, use your head instead. Dispute every ticket you possibly can, because there's no telling how many will get thrown out by a judge or lost in the bureaucratic maze.

The Expired Meter website, for example, has become a big hit in Chicago, where motorists are taught how to fight back; many of the strategies here can be used in other cities as well. Every time you fight a ticket, you automatically delay the debt due without accruing a single cent of interest and penalty -- and you might just get off the hook.

4. Holding on to Mortgage Debt

Hurry up! Convert that mortgage from a 30-year loan to a 15-year loan! Your mortgage payments will skyrocket. But you'll pay a lot less in interest charges, and you'll own your home twice as fast. Sounds smart, right? Not so fast.

Assuming you live in an area where home prices are appreciating rapidly, the opposite strategy is more profitable. If a $300,000 home appreciates to $500,000 in five years, you'll get a much bigger return on investment a dollar when you actually put less money into paying your mortgage, not more. The uptick in local prices will still create gobs of new equity, and lower mortgage payments will give you breathing room to enjoy your home instead of being a slave to it.

5. Keeping up Low-Interest Car Payments

In recent years, low interest rates on car loans have been a boon to consumers, with some dealerships still offering zero percent promotional financing. If your interest rate is low, most of your payments will go directly into paying off the car as opposed to interest. And in this case, the debt is secured, meaning that the car acts as collateral to the loan money. If it's a long-term loan with low interest -- a five-year loan for example, which has an interest rate as low as 2.49 percent -- then please, pay off the car slowly to take advantage of the favorable rate.

6. Declaring Bankruptcy

If you find that bankruptcy is the one option you face due to your mounting debt, there's little sense trying to make a goal line stand. Virtually all of the 910,000 personal bankruptcies that were filed in 2014 were either Chapter 7 or Chapter 13 bankruptcies, according to the United States Courts website. What's the difference? With a Chapter 7, the debtor's nonexempt assets are gathered and sold, with the proceeds used to pay off creditors. Certain possessions are exempt, but this varies widely from state to state. It takes three to four months to complete a Chapter 7 bankruptcy and obtain a discharge.

With a Chapter 13 -- also known as a "wage earner's plan" -- individuals with regular income repay all or part of their debts. Under this chapter, debtors propose an installment plan to creditors over three to five years. It also offers individuals an opportunity to save their homes from foreclosure by catching up on delinquent mortgage payments over time. You must make all mortgage payments that come due during the Chapter 13 period on time. But if this bankruptcy succeeds in restructuring your debt for a smaller amount, you could come out paying off less in the end.

7. Using Credit Counseling and Negotiation

If you are looking at $20,000 in credit card debt, for example, making minimum payments at 19.99 percent APR is the equivalent of spinning your wheels: The minimum payment will barely make a dent in the balance due. But nonprofits such as Money Management International can take on such cases and help you negotiate new payment plans with your creditors -- and at lower rates.

If you think this is a viable option -- especially after having positive conversations with a nonprofit counselor -- then you won't want to keep throwing good money down the drain just to keep up on the high-interest hamster wheel. You may even be able to negotiate a short break period where you take some time before resuming payments. In the short term, you can also try calling credit card companies directly to negotiate a lower interest rate.

8. Borrowing From Parents

Borrowing from your parents can be painful. And for sure, the idea here is not to borrow from your parents and stiff them, for hell hath no fury like the Bank of Mom and Dad when it has been scorned. You might, however, find your parents to be strong allies in your attempt to get rid of debt.

If you owe $5,000 on a high-interest credit card, be proactive. Go to them with a short review of how you accumulated the debt. Tell them that every penny of their $5,000 loan would go to zapping the high-interest card -- not even a slice of pizza or a can of beer would be deducted. Then you might try proposing repayment of only half the loan, with the other half taken out in grunt work. Does the house need painting? Can you perform basic home repair tasks or help out with a major family project? The barter system works well in scenarios where cash is short but the ability and willingness to pay back in other forms is not.

9. Letting Moldy Oldie Debts Lie

Some debtors will go after you with all the ferocity of a jet-powered hellhound, but even jet engines run out of fuel after a time. Again, this is not so much a way to game the system, as to start afresh. Federal law requires that credit-reporting companies remove most debts from your credit report after seven years from the time it became delinquent. Since the debt has already done its nefarious deed and put a dent in your credit score, by making a payment you only reaffirm the debt and reset the clock giving the debt collector more time to go after your cash.

This story, 9 Times It's Smart to Be in Debt, originally appeared on GOBankingRates.com.

 

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Smart Ways to Spend the End of Daylight Saving Time

October 29, 2015, 10:00 pm

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Filed under: Life Stage Lessons

By Stacy Johnson

Daylight saving time ends at 2 a.m. Sunday, giving back the hour that seemingly was taken from us in the spring.

For most of us, it's time to fall back this weekend. In addition to moving the clocks in your house back one hour before you go to bed Saturday night, use the end of daylight saving time as a reminder to check a few things around the house. After all, you're gaining an hour, why not put it to productive use?

Here's how to allocate your extra hour to get the most peace of mind, and bang, for your buck.

1. Smoke detectors: 10 minutes. The most important batteries in your house are those that power your smoke and carbon monoxide detectors. Even if they appear to be OK, replace them. But if those batteries are still good (because you changed them when daylight saving time began March 8, they probably are), don't toss them, save them for less critical household items like flashlights and TV remotes.

Did you know smoke detectors also expire? Check yours for an expiration date. If it's past its useful life, replace it. And speaking of fires ...

2. Home inventory: 20 minutes. When was the last time you made a list of all the things in your home? If your house burns down or is otherwise destroyed, a home inventory will be the most valuable thing you have left.

The ideal home inventory is a list of everything you have, along with the date you bought it and purchase price. If you lose all your possessions, you're ready to simply hand your list to your insurance company and get reimbursed. But if creating such a detailed list sounds onerous, at least walk through each room in your house with a video camera (even some smart phones will do) and create a video of your stuff, reciting the price and purchase date of the expensive items. Then you'll at least have the ability to create a list should the need arise.

Don't forget to store that video away from home, online would be ideal. If you'd like to use free software to create a more thorough inventory, you can get it from the Insurance Information Institute by clicking here.

While you're at it, here are tips to secure important paperwork and documents in the cloud.

3. Furnace filter: 5 minutes. You should be checking/changing your furnace filter every month. Clean filters can reduce heating costs by 10 percent, not to mention preventing expensive repairs. But if you haven't checked yours in a while, do it now. And keep doing it the first Saturday of every month from now on.

You'll find more simple things you can do to reduce energy costs and stay cozy in 16 Ways to Prepare Your House for Winter.

4. Retirement plan review: 10 minutes. It's been said many times: Most families spend more time planning a vacation than planning their retirement. Pull out your most recent 401(k), 403(b), IRA or any other retirement account statements: Do you have enough exposure to the stock market? Too much? One rule of thumb is to subtract your age from 100 -- that's the percentage you should have in some kind of stock fund. So if you're 35, you'd have 65 percent of your retirement savings in stocks. If you're 80, you'd have 20 percent.

But remember, this is a rule of thumb, not a rule. Do what makes you comfortable.

5. Insurance review: 15 minutes. Insurance can consume up to 9 cents of every dollar you spend. So it makes sense to ensure that you're getting your money's worth. You likely have (at least) four types of insurance: car, home, life and health. Pick one type every six months and make sure you're getting the best possible deal. There are plenty of places to compare insurance rates, including our insurance shopping tool. So pull out a policy and see if you can do better for the same coverage.

The simplest way to save on most insurance policies is to raise your deductibles to the highest number that you can comfortably afford. Remember, the purpose of insurance is to prevent financial catastrophe, not financial inconvenience. As I'm fond of saying, if you insure yourself so that you'll never lose a penny, you'll never have a penny to lose.

That's It!

If you did everything in the above list within the allotted time, you've accomplished some important stuff, and because you gain an hour this weekend, it theoretically took no time at all!

On the other hand, if all that seemed too ambitious and you end up simply spending an extra hour in bed, don't feel guilty. It's all good. But when you get an extra minute or two, do these things: It's truly time well spent.

How do you intend to spend your "free" hour? Share with us in the comments section or on our Facebook page.

Like this article? Sign up for our newsletter and we'll send you a regular digest of our newest stories, full of money saving tips and advice, free!

 

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7 Keys to Successful Price Matching

October 29, 2015, 10:00 pm

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Filed under: Retail, Shopping, How to Save Money, Deals, Stores

By Louis DeNicola

The best way to get a good deal is to shop around, right? But running from store to store can gobble up time and gas. That's where price matching comes in: Top retailers from Best Buy to Walmart have pledged to match competitors' prices, so consumers can get the best deals from around town with only one stop. Target recently expanded its policy to include a total of 29 online retailers. Problem is, these guarantees are far from straightforward. Cheapism.com examined eight retailers' price-match policies and found scads of rules and exclusions. Here are seven things every bargain shopper should know about price matching.

Only a few stores match online prices. Some retailers match local competitors' websites, but many policies exclude online pricing. Target is one of only a few stores that have agreed to match prices at select online retailers, even if there is no corresponding store nearby. The price-match guarantees at Best Buy and Walmart also extend to specified online competitors, including Amazon. Shoppers can scan items at these stores with the Amazon app on their phones to find out if they can get a better price without ordering online. One catch with online price matching: It does not extend to marketplace items listed by third-party sellers.

'Local' has different definitions. Most policies require the competitor to be a local store, but what qualifies as "local" may be up for debate. Retailers tend to leave it to store managers familiar with the area to decide what lies within the same market or within a "reasonable distance." Best Buy sets a specific radius of 25 miles, while JCPenney stores in Alaska will match the prices of any similar store in the entire state.

A competitor's print ad is the best evidence. Each retailer has its own rules about what qualifies as proof that another store is offering a lower price. A print ad with the competitor's price clearly displayed is the only verification accepted everywhere. A photocopy, picture or mobile version of the ad may not work. Walmart doesn't officially require any form of proof (an employee can call the other store to verify a claim), but shoppers suggest bringing in an ad to minimize the wait and hassle.

The items must be identical. The item you're buying and the item offered for less at the other store must be identical in every way -- brand, style, color, condition, size, weight and -- perhaps trickiest of all -- model number. Retailers such as Home Depot, Lowe's and Best Buy sell many high-priced appliances and electronics with store-specific model numbers, which rules them out for price matching.

Certain sales and promotions are excluded. Retailers won't match another store's going-out-of-business or clearance-sale prices. Limited-time promotions, rebates and offers of free products or gift cards with purchase are also unlikely to be eligible. One exception: Walmart matches buy-one-get-one-free offers as long as the ad lists the price of the item. In general, an ad must specify a price in order for a retailer to match it; a percentage or dollar amount off is not enough.

Many retailers offer price adjustments even after purchase. Shoppers may be able to request a price match for something they've already purchased, depending how much time has passed. Some policies include a specific time frame for price adjustment -- Target now allows 14 days, for example -- but often the decision is left to a store manager. Some stores offer a price adjustment only if they've dropped their own price, not if a customer spots a better deal from a competitor.

Policies are subject to employee interpretation. This can cut both ways. At JCPenney, Cheapism found that managers seem to have a lot of authority to match competitors' prices, so it may not hurt to stretch the limits of the store's price-matching policy. At Walmart, on the other hand, shoppers complain that employees deviate from corporate policy in denying customer requests. In either case, it helps to know the fine print going in. Cheapism's comparison of stores that price match highlights important features of each policy and offers some store-specific money-saving tips.

 

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Why You Should Buy Longevity Insurance

October 29, 2015, 10:00 pm

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Filed under: Bonds, Retirement Plans, Annuities, IRA, Social Security

By Jeff Brown

It's a dirty trick of modern life: escaping disease and accident to live long -- only to run out of money before the end.

With the withering of old-fashioned pensions combined with longer lifetimes and baby boomers flooding into retirement, the insurance industry is churning out a raft of new, deferred-income annuity products to provide guaranteed income later in life for a big payment upfront or over time. And new government rules allow investors to buy these products with money built up in tax-favored accounts, such as IRAs and a 401(k).

DIAs seek to overcome drawbacks in "longevity insurance," which has been around for decades without catching on.

Along with their cousins, immediate-income annuities, which start smaller payouts immediately after purchase, DIAs can provide dependable retirement income for life.

"Go back a generation or two. Did anybody not like having a pension?" says Douglas Dubitsky, vice president of retirement solutions at The Guardian Life Insurance Company of America. "We are saying, 'Well, you can create that yourself.'"

DIAs "are a good thing," says Anthony Webb, senior research economist at the Center for Retirement Research at Boston College. "They enable households to insure [against] the risk of living exceptionally long."

DIA sales are up. LIMRA International, the insurance trade group, says DIA sales reached $2.7 billion in 2014, up from about $1 billion in 2012. That's still a minuscule share of the multi-trillion-dollar financial services market, but many experts expect sales to continue growing as consumers catch on to the new offerings.

The old-fashioned longevity policy, which is still available as a plain-vanilla DIA, is simple. For example, you could spend $100,000 to buy a policy at 65, and 20 years later start receiving an income as high as $50,000 to $60,000 a year. The high payout is possible because the insurer has that 20-year "deferral period" to grow the initial $100,000 before payouts begin, and because many policyholders will die before they receive much income, if any. Once spent, the premium is gone for good.

Old-style longevity insurance never really caught on, largely because consumers didn't like giving up that big upfront payment for an income stream they might never receive.

In the past few years, insurers have addressed these concerns by offering optional features to allow the income to start earlier -- at 65 in many cases. With add-on features, the income stream, once it begins, will rise with inflation. Other features allow joint coverage for a couple, and some return the premium to survivors if the policyholder dies before payouts start, or before income received equals the initial premium. Providers say many people are purchasing DIAs in their 40s or 50s, with payouts to begin in their 60s or 70s rather than 80 or 85.

"We have a lot of clients who think of it as a health care coverage possibility" for old age, says Liz Forget, executive vice president of MetLife Retail Retirement & Wealth Solutions.

Add-ons, of course, come at a price: a smaller payout. One firm, for example, offers a 64-year-old man $55,584 a year at age 85 for a $100,000 premium. Add a feature to return the premium to heirs if the policyholder dies early, and the payout falls to $36,228.

Among the add-ons, premium return has proved the most appealing to purchasers, says Chris Blunt, president of the investments group at New York Life Insurance Co. Inflation protection, which can reduce the payout substantially, has less appeal, being adopted by only about 10 percent of policyholders.

That shows many consumers have things backward, Webb says. "Inflation protection is expensive but probably worth it. Return of premium is definitely not worth it."

Annuities generally have fees associated with them that make them more expensive than comparable mutual funds or [exchange-traded funds], and this negates any advantage in many cases.

That's because the whole idea is to insure against the risk of living a long time. If you die soon after buying a policy, you won't face that risk, but live a long time and inflation can chew up the buying power of your DIA payout.

DIAs have their critics, too. DIA critics typically worry that policies are hard to understand and that not enough policyholders will live long enough to make them pay off. David Weinbaum, associate professor of finance at Syracuse University, warns of costs embedded in DIA-payout calculations.

"Annuities generally have fees associated with them that make them more expensive than comparable mutual funds or [exchange-traded funds], and this negates any advantage in many cases," he says. "In other words, they are just too expensive for what they are, and most investors would be better served in traditional low-cost index funds. I would recommend that most people not invest in annuities at all."

Experts who do recommend DIAs generally say a purchase shouldn't exceed 10 to 30 percent of one's retirement assets.

In July 2014, the U.S. Treasury department issued new rules permitting DIA purchases with IRA and 401(k) assets, in a "qualified longevity annuity contract," or QLAC. This allows investors to tap what for many is the largest or only source of retirement funds. And the rules also allow the policyholder to wait until age 85 to begin taking required minimum distributions that IRAs and a 401(k) normally require after age 70½. The maximum QLAC purchase is $125,000, or 25 percent of IRA and 401(k) assets, whichever is smaller. (Note that if your 401(k) does not offer a DIA, you would have to first transfer the funds to a rollover IRA, which cannot be done until you have left the employer.)

These new rules are gradually being reflected in product offerings. "Advisers are very interested," Forget says.

While a DIA can be a useful tool, experts say that these days, some potential customers are holding off in hopes that higher interest rates over the next few years will make DIA payouts more generous.

Blunt says it's true that premium pools largely hold interest-paying securities like corporate bonds. The more the insurer earns on the pool, the more likely the firm will offer a larger payout for a given premium. "If you had a sense that rates were going to skyrocket in the short term, then you are better off waiting," Blunt says.

But he and other experts argue that what would be gained from a modest increase in interest rates could be more than offset by the payout cut from shortening the deferral period by waiting to buy.

"Most of the time, the people who have been waiting [to purchase a DIA] got crushed in the last six or seven years," Blunt says. Some DIAs offer a recalculation option or dividend payment to counter the effect of rising rates. And Dubitsky suggests buyers make several DIA purchases over time to improve odds of benefiting from higher rates later.

For those who live long enough, a DIA can be a good investment, as the payout relative to the premium far exceeds what can reasonably be expected from bonds, or even stocks. It would take a double-digit investment return for a $100,000 nest egg to grow enough to spin off $50,000 a year after 20 years.

A DIA purchase should be considered carefully, as payouts and other terms can vary considerably between providers. Many major life insurers offer DIAs. Online services like WebAnnuities Insurance Agency provide quotes, and financial services firms like Vanguard and Fidelity offer plans from multiple insurers. But before buying, it may be worthwhile to talk to a trusted insurance broker who can evaluate products from a variety of providers.

Jeff Brown spent nearly 40 years as a newspaper reporter, columnist and editor, including 20 years writing about investing, personal finance, the economy and financial markets. He spent 20 years at The Philadelphia Inquirer and has been freelancing since 2007.

 

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Why Financial Crises Aren't Such a Bad Thing for Your Wallet

October 29, 2015, 10:00 pm

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Filed under: Recession, ETFs, Investing Basics, Personal Finance, Financial Education

By Simon Constable

In the seven years since Lehman Brothers failed, tipping the world into a financial crisis, the U.S. government has enacted a plethora of regulations to prevent another one.

But trauma aside, there are some tangible benefits to such a crisis, from a Darwinian winnowing of weak businesses to curbing extreme risk-taking. Here are some:

1. They often provide investors willing to take a gamble with tremendous bargains. Just look at the deals available on stocks in March and April of 2009. Without the meltdown, when would you expect to buy at such reduced prices?

If you invested in the SPDR S&P 500 (SPY) exchange-traded fund, which tracks the Standard & Poor's 500 index (^GSPC), at the beginning of March 2009, you'd have done well. It would now be worth three times as much, not including dividends. Not bad for 6.5 years. Of course, you needed the nerve to invest when the investing world seemed finished forever.

2. Financial crises often cull the weakest firms, forcing them out of business. OK, so that didn't quite happen in 2008 and 2009 because the government decided to bail out some large financial firms and others to prevent further damage to the economy.

But a cleansing of companies that aren't succeeding isn't all bad. As has been said many times, the reason that Silicon Valley is so successful is that the investors there embrace the idea that many companies will fail. If an idea works, then they run with it.

If the new firm fails, then the funding is pulled and the people involved go find a more productive project on which to work. For every Facebook (FB) or Twitter (TWTR) that becomes a pop culture touchstone, there are hundreds or maybe thousands of startups on the scrap heap.

3. Meltdowns often highlight weaknesses in the system. Think about a 3-year-old child trying to destroy a piece of your furniture. All small children are budding engineers, and their antics often seem aimed at testing objects to the point of destruction. So if they succeed in breaking a chair, you know it wasn't particularly robust.

Likewise, in a financial crisis, you can see where the weakness is because weak companies simply can't hide.

One example is my former employer, General Motors (GM) , which went through a reorganization (aka bankruptcy) in 2009. I think it was clear to many that something needed to change at the automaker, and the financial crisis merely sped up the process. Ultimately, the Obama administration stepped in rather than allow the giant automaker to collapse.

4. Crises remind others to be prudent. Taking risks is important in capitalism, but it's important to weight the potential danger to your company: Is the risk something that will simply curb next quarter's earnings or one that might sink the company altogether?

Financial giant New York Life Insurance Co. uses the tag line, "The company you keep," seemingly as a reminder that many others before it haven't survived.

5. The alternative to crises can be worse. Financial meltdowns have a high cost in both money and social upheaval. I have friends who were at Lehman, and I know the hardship its collapse caused.

But avoiding the inevitable isn't necessarily a better alternative over the long term.

Look at Japan, where the economy has stagnated for decades now. There are many reasons for that, but a significant part of the problem in Japan was the presence of so-called zombie companies, firms neither alive enough to do business nor dead enough to get liquidated. They simply take up space and resources.

It's far better to take a company through the bankruptcy courts and let its resources be used more efficiently by new owners, than to be haunted by zombies. Countries that let firms fail tend to do better economically than those that don't.

The United States is still by far the richest country in the world, and companies are frequently being either created or liquidated. Where the failure rate is high, the wealth created often is also -- see my comments above about Silicon Valley.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

 

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Weak Economic Data Cloud December Rate Hike Possibility

October 30, 2015, 1:39 am

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Filed under: Economic Indicators, GDP, Inflation, Economy

By Lucia Mutikani

WASHINGTON -- U.S. consumer spending in September recorded its smallest gain in eight months as personal income barely rose, suggesting some cooling in domestic demand after recent hefty increases.

The Commerce Department data and another report Friday from the Labor Department also showed weak inflationary pressures, which would argue against the Federal Reserve raising interest rates at the end of the year.

U.S. central bank policymakers this week put a rate hike in December on the table with a direct reference to their final meeting of the year. The Fed has kept benchmark overnight interest rates near zero since December 2008.

It will be difficult for the Fed to justify a rate hike at a time when income, consumption and inflation are trending lower...

"It will be difficult for the Fed to justify a rate hike at a time when income, consumption and inflation are trending lower, leaving a December rate hike less likely than prior to the data," said Jay Morelock, an economist at FTN Financial in New York.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 percent last month after rising 0.4 percent rise in August. September's consumer spending data was included in Thursday's third-quarter gross domestic product report.

Consumer spending rose at a brisk 3.2 percent annual pace in the third quarter, helping to lift GDP growth to a 1.5 percent rate. Consumption has increased at a rate of more than 3 percent in each of the last two quarters.

Third-quarter growth was constrained by business efforts to whittle down an inventory bloat, a strong dollar and ongoing spending cuts by energy companies.

Stocks on Wall Street were trading marginally lower, while prices for longer-dated U.S. government debt rose. The dollar fell against a basket of currencies.

Weak Inflation

When adjusted for inflation, consumer spending rose 0.2 percent in September after increasing 0.4 percent in August, suggesting consumption will continue to support the economy through the rest of the year.

That view also was bolstered by a separate report showing the University of Michigan's consumer sentiment index rebounded in October from September. Consumer spending growth, however, is unlikely to maintain the brisk pace witnessed in the second and third quarters in the absence of a significant rise in income.

Income ticked up 0.1 percent as wages and salaries fell last month, especially in manufacturing, after rising 0.4 percent in August.

"Stronger income growth is needed to support stronger consumer spending," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

With spending sluggish, inflation was weak last month. A price index for consumer spending slipped 0.1 percent, the first decline since January, after being flat in August.

In the 12 months through September, the personal consumption expenditures price index rose 0.2 percent, the smallest increase since April, after increasing 0.3 percent in August.

Excluding food and energy, prices rose 0.1 percent for a fifth straight month. The so-called core PCE price index rose 1.3 percent in the 12 months through September after a similar gain in August.

Inflation has persistently run below the Fed's 2 percent target. A report from the Labor Department showed the Employment Cost Index, the broadest measure of labor costs, increased 0.6 percent after a 0.2 percent gain in the second quarter.

In the 12 months through September, labor costs held steady at 2 percent, below the 3 percent threshold that economists say is needed to bring inflation closer to the Fed's target.

"We are still in a modest compensation-gain environment and that implies inflation is not likely to accelerate sharply soon," said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania.

"The labor market may be tight but firms appear to be in no great hurry to raise compensation."

 

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5 Reasons You'll Pay YouTube $9.99 a Month

October 30, 2015, 2:24 am

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Filed under: Media, Google, Entertainment Industry, Internet, Music & Entertainment

YouTube is building a new paywall, but it doesn't mean that everyone will have to start shelling out cash to watch kids slipping off skateboards or cats being cats. YouTube Red rolled out on Wednesday, giving those with money to burn on digital media a premium experience on the iconic website.

Alphabet's (GOOG, GOOGL) video-sharing site will charge $9.99 a month for YouTube Red. Most clip-culture disciples will continue to consume the site in its original free incarnation, but there are some pretty good reasons to pay up if you have the means and spend a lot of time on YouTube's site or app.

1. We Are Now Used to Paying for Ad-Free Digital Content

Rolling out YouTube Red at the same $9.99 monthly price point as Netflix (NFLX) may seem risky, but Hulu just introduced a new pricing tier that at $11.99 a month will strip ad blocks from its streams. YouTube is pricing its product competitively, and it's happening at a time when folks are growing more receptive to paying up for streaming media.

Netflix expects to top 74 million subscribers worldwide by the end of the year. Spotify has more than 20 million premium users for its streaming music platform. The numbers are there.

2. YouTube Content Is Different

Netflix has led the push by premium video services to add original content. Netflix and Amazon.com (AMZN) have won Emmy awards for their proprietary shows.

This has raised the bar in terms of differentiation. If folks are expected to subscribe to more than one streaming service, each one has to have stuff that you can't find anywhere else. Well, differentiation is what YouTube is all about.

Anyone can upload content to YouTube, something that naturally doesn't apply to Netflix, Amazon or Hulu. Is a lot of it junk? Sure. However, the site's good about bubbling up compelling content to the top. At the end of the day, YouTube has more original content than any other platform -- and it isn't even close.

3. Your Time Matters

It's probably not a surprise that Netflix has become so popular because it offers ad-free content. Cable and satellite television providers that charge substantially more than Netflix even slap commercials on their on-demand content. You don't want that. You deserve better than that if you're willing to pay up to go through more content.

If you think TV commercials are bad, just spend a day on YouTube. Many of the shorter clips have ads, and while the ads are often skippable, it can be a hassle to actively select to end some commercials prematurely. The time you save is probably worth more than $9.99 a month, and it will make the overall experience even better.

4. Content Creators Will Make the Most of the New Revenue Stream

There are more than a billion active users on YouTube, and many of them -- like me and possibly even you -- upload original clips to the site. It pays to be a content creator. My Moonpies channel has let me pocket thousands of dollars over the years. I have more than 15,000 subscribers and am closing in on 4.6 million views, but that still makes me a small fry on the site. There's a growing number of magnetic personalities generating six figures a year through the site's ad-sharing platform.

YouTube Red will give them a new way to cash in. It remains to be seen if it will generate more or less revenue than having ads display on those premium accounts, but diversification is usually a good thing.

5. There Are Perks for Going Premium

YouTube Red isn't just about the ad-free experience and encouraging creators to upload more content to cash in on the new monetization platform. Folks paying $9.99 a month for the new offering will be able to access Google Play Music for streaming tunes. They also have the ability to save videos to watch offline. That may not seem like much of a perk in these Web-tethered times, but just think about the next time that you're hitting the road or experience an Internet outage.

YouTube hasn't fared well in the past when it has tried to offer premium channel subscriptions or pay-per-view streams, but things are different now. It's the right product at the right time. I signed up for the free one-month trial of YouTube Red on Wednesday. You will probably do so, too.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.

 

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Money Problems and Couples: How to Be a Better Partner

October 30, 2015, 3:45 am

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Filed under: Life Stage Lessons

There are plenty of things that put strain on a relationship. If you are a grown up person in some sort of partnership with another grown up person, you already understand this. You also know that money problems are at the root of a great deal of disharmony, which seems to be a universal trait.

Having your money under control means greater personal security, a better chance at happiness, more options for the feature, more leisure time and a whole host of other life benefits. But when couples feel the pinch, sparks can fly. In fact, one recent study found that arguments about money are the single greatest predictor about whether married couples will one day divorce.

That's an interesting finding, seeing as the researchers found that it didn't matter if the couples were rich or poor, had debt or were debt-free. Fundamental disagreements about money transcend socioeconomic status, and when you and a partner don't see eye to eye, your relationship may pay the price. If you and your partner are on the rocks due to financial stress or if you want to avoid these problems in the future, here are some things to work on.

Don't Be So Materialistic

A BYU study found that people with the highest measure of "materialism," or the perceived importance of having lots of money and things, had the lowest measure of happiness. When one or both members of a romantic relationship scored high on the materialism index, the relationships seemed uniformly miserable. How do you be good with money without being materialistic? There's no easy answer. In the same way some people are intelligent without being arrogant, while other intelligent people are full of themselves, some people just seem to pull off the feat.

Practically speaking, investing money in meaningful shared experiences, maintaining a reasonable lifestyle regardless of income and becoming more charitable are all ways of staving off the creeping effects of materialism. It may require some attention and personal change, but anybody can learn to better prioritize money and things, in favor or human relationships and happiness.

Have the Same Money Goals

Partners who don't share money goals and spending strategies tend to have problems ... to put it mildly. Some research indicates that when one partner perceives the other partner's spending habits to be foolish, the couple is 45 percent more likely to break up. Going from financial harmony to cooperation is easier said than done. It may take a financial catastrophe, money education, or counseling. Both partners need to recognize the problem and work to correct it. It can be hard work, but establishing a workable budget and planning together for the future is integral to the stuff that makes lasting relationships.

In addition to shared goals, every couple should help manage money. One partner can cover daily inflow, while the other invests and makes sure the bills are paid. Whatever jobs you choose for yourselves, it's essential that both partners be involved daily. It's not enough to make a plan, then pass it on to one partner while the other partner ignores it completely.

Set the Problem Aside (for a Minute)

Money troubles have a way of sucking the air out of the room. If you and a partner are in debt, you likely don't enjoy fun times outside of the house, away from your problems, very often. If money trouble has taken its toll on your relationship, find a way to get a breath of fresh air. Go for a hike, spend time with close friends, have your parents watch the kids while you take a breather. Doing the work or rehabilitating your joint financial life is tough. This work can be as stressful as the money problems themselves. If you're doing the work of making your shared finances work better, take some time for yourselves. If your relationship can survive this time in life, it can get through anything. Give it all the help you can.

If money problems and miscommunication are weighing down your relationship, start investing in a better future. Money difficulty can be the most toxic element in an otherwise successful relationship. Fix these problems, and you and your partner with have a much greater chance at health and happiness.

 

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Week's Winners and Losers: GoPro Misses, Comcast Races

October 30, 2015, 3:58 am

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Filed under: Microsoft, Earnings, General Motors, Wall Street Watch, Investing

There were plenty of winners and losers this week, with the world's leading maker of wearable cameras falling well short of its own guidance and a cable giant making another smart move at its theme parks division.

Comcast (CMCSK) -- Winner

Comcast's Universal Studios theme park in Florida announced a new attraction will open come 2017. "Race Through New York Starring Jimmy Fallon" will replace the park's immersive "Twister" simulation.

Theme parks announce new rides often, but this particular addition makes the cut on its synergistic merit. Comcast owns the Universal Studios theme park chain and it also owns Fallon's late-night home of NBC. With the marketplace heating up for late-night shows, every little bit helps. Universal Studios Florida attracts millions of park guests a year, giving the new ride Comcast-friendly branding power.

General Motors (GM) -- Loser

This seems to be the year of auto recalls, and this week GM asked owners of 1.4 million older vehicles worldwide to bring in their cars to repair an issue in which drops of hot oil can cause engine compartments to catch fire.

Recalls are a part of the automotive industry, but this is the fourth time that GM has had a recall for the same problem.

Microsoft (MSFT) -- Winner

It's been nearly two years since the Xbox One hit the market, but now it's going to get a feature that it should've had from the beginning. Microsoft revealed that an upcoming software update will make the console backward-compatible with some Xbox 360 games.

The inability to play discs from the previous Xbox generation likely led some die-hard gamers to hold back on making the initial investment. It's hard to buy an Xbox One when you know you can't trade in your Xbox 360 for credit because you'll need it to play your favorite games.

The software update isn't perfect. Many of the bigger Xbox 360 games still won't be compatible. It's still a step in the right direction, and just ahead of the holiday shopping season to boot.

GoPro (GPRO) -- Loser

You would think that posting quarterly results featuring a 43 percent surge in revenue to $400.3 million and adjusted earnings more than doubling to 25 cents a share would be a cause for celebration, but that didn't happen for GoPro -- and with good reason.

The leading maker of wearable camera's earlier guidance was calling for revenue of at least $430 million and a profit of at least 29 cents a share. It's not a good sign when you can't live up to your own historically conservative guidance and GoPro's guidance for the current quarter isn't very encouraging.

Taco Bell -- Winner

History books will claim that the Kansas City Royals won the first game of the World Series, but another winner was Yum Brands' (YUM) Taco Bell. The fast-food chain teamed up with Major League Baseball for a promotion where it would reward all customers with a free A.M. Crunchwrap if someone stole a base.

Of course someone stole a base, and of course Taco Bell will now be giving away a ton of its signature breakfast wrap next Thursday. It's a brilliant move, as Taco Bell is trying to stand out since entering the cutthroat breakfast market last year.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends GoPro. The Motley Fool owns shares of Microsoft and recommends General Motors. Try any of our Foolish newsletter services free for 30 days. Check out The Motley Fool's one great stock to buy for 2015 and beyond.

 

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Save on Last-Minute Groceries -- Savings Experiment

October 30, 2015, 7:00 am

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Filed under: Savings Experiment, Food & Beverage, Did You Know

Did you know that last-minute grocery shopping can actually save you money? Here's how.

Store managers will discount meat, produce, dairy and bread up to 50 percent off when they don't think they will be able to sell these foods before they expire. These are usually marked with brightly-colored stickers.

To take advantage of these deals, ask your local grocer when they put out manager's specials -- they'll be happy to tell you when you can get the best prices. Using this strategy will require some flexibility in your cooking, but as long as you freeze or cook the food before its expiration date, it'll be perfectly safe to eat, and you won't be eating up your budget.

So, the next time you go food shopping, remember that buying your groceries at the last minute can pay off big.

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Feds: Switch Plans, Save on Health Insurance

October 30, 2015, 8:24 am

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Filed under: Health Care, Personal Finance, U.S. Government, Internet, Health Insurance

By CARLA K. JOHNSON

CHICAGO -- "It pays to shop" is the message from the government, two days before the start of the third sign-up season under President Barack Obama's health care overhaul.

The Department of Health and Human Services released data Friday on next year's prices in the insurance markets established by the law. Returning customers to HealthCare.gov can save, on average, $51 a month if they switch to the lowest-cost plan within their coverage level, according to the report. Most can find a plan for $100 a month or less, after financial help from a tax credit.

To hear the administration tell it, there are deals galore. But experts say the monthly premium is only part of the story. They say consumers should examine the quality and coverage of health plans, as well as their prices.

The price message appeals to young uninsured Americans and will be stressed in advertising and enrollment drives this season as the administration tries to find, woo and keep 10 million paying customers by this time next year, a modest target announced earlier.

Beyond the sticker price, consumers should keep an eye on what they will get for their premium dollars, experts said. Shoppers should consider how many hospitals and doctors are covered, for example, and which prescription drugs are included.

"What the message should be is 'be a smart shopper,' " said Caroline Pearson of Avalere Health, a private market analysis firm. "All we really see in this report is price, price, price. That's what the government thinks will draw [consumers] to the market, but it may also be what disappoints them when they get sick."

People do switch plans. In 2015, nearly a third of returning customers changed to a new plan on the marketplace. That's a far higher rate of plan-switching than among people who get their coverage through a job, said HHS Assistant Secretary for Planning and Evaluation Richard Frank.

Some consumers are being forced into new plans because of plan cancellations and the collapse of some health insurance cooperatives. The data released Friday show a choice of 50 plans a county overall, compared to 58 a county last year, and an average decline of two plans per insurer.

"That's not a change that concerns us," Frank said, calling it a sign of a "maturing market" as insurers drop unpopular plans.

It will take more time to fully analyze how insurers have restructured health plans for 2016. In some markets, there are fewer "preferred provider organization" plans. Those PPO plans give consumers the most flexibility about which doctors they can see. Some counties have no PPO plans on the market for 2016, leaving customers with a choice of HMOs and other more limited types of policies.

"It means that generally the networks are smaller. ... You can't go to providers outside the network just because you want to without paying the full cost," said Gary Claxton of the nonpartisan Kaiser Family Foundation.

The government plans to add tools to HealthCare.gov to make it easier for people to check if their doctor or a drug is covered in a plan. But those tools aren't ready and are still being tested for accuracy.

The bottom line, said Claxton, is "do your own research."

 

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