Thursday, May 28, 2020

Number One Indicator of People Who Retired with Dignity

Spoiler alert: Savings rate. 

Honest Advice About Getting Rich

Emotional Benefits of Strong Money Management

Originally published by Schwab, Inc. -- Even in the best of times, money concerns can cause a lot of stress. But according to a recent survey by the National Foundation for Financial Education, nearly 9 in 10 Americans say that COVID-19 is making money a primary cause of anxiety. Add to that the need to juggle working from home, child care, home schooling and health concerns and people are being stretched to the limit.

Understandably, people are worried about their financial future. Equally understandably, they often don't feel like they have the energy to deal with it. But as overwhelming as it can seem, there are strategies to help you cope and stay calm. As I wrote recently, you may have to think differently to get through these times, but there are ways to do it. And it starts with awareness.

Be aware of what you can control

First realize that no matter how uncertain you may feel, there are some financial things you can still control. That in itself will help ease your stress. For instance, to a certain extent, you can control your spending. That may mean you have to rethink your budget, but it's in your hands. You can also control the way you prioritize your bills. It may require you to do some negotiating, but it's possible. And you can control how much you save, even if you have to redirect some of your savings to more pressing financial needs for a while.

If you're an investor, while you can't control the markets, you can control the way you respond to market events. Trying to time the market is rarely a good strategy, and bailing out at the wrong time can be a costly mistake. So don't. Rather than overreacting to current volatility, thoughtfully rebalance based on your own goals and timeline.

Smart rebalancing means systematically selling investments that have increased in value and buying those that have decreased in value. In short, rebalancing can help you limit risk by selling high and buying low.

In all these areas, you're still in charge. Try to focus on what you can do proactively rather than reactively.

Understand how anxiety affects financial decisions

Studies have shown that anxiety has an adverse effect on almost all our financial decisions. Stress can make us spend more, save less, and rack up credit card debt. Kind of like stress eating, we think spending will make us feel better. Saving, however, can provide you with peace of mind that you can better handle unexpected expenses, adapt to changes in income or take advantage of new opportunities. The best way to feel better right now might be to put unnecessary purchases on hold and save more.

Put everyday money management on automatic

If you haven't already, clear your mind and save time by using bill pay for regular monthly payments like mortgage, rent, utilities, phone, internet, car loans, student loans, even credit cards. All these can be paid automatically through your bank so you don't have to stress about missing a payment. (It might even qualify you for some discounts!) You just have to make sure you have the money in your checking account to cover them.

Do the same for your savings. If you have a 401(k), you're already saving for retirement automatically. You can set up regular payments from checking to savings accounts for your other savings goals.

Share your fears

Still waking up at night with worry? Talk it out. If you have a spouse or partner, work through your financial fears—and your solutions—together. Whether it's your partner, a family member or a trusted friend, listening to another perspective may help you think more clearly. And sharing your concerns and voicing your questions can help you come up with a plan of action. Which brings me to my next point.

Reach out to an advisor

Consider talking to a financial advisor or financial planner. There's a misconception that advisors are only for the wealthy. Not so. A financial advisor can help you see beyond today's struggles and feel more confident in the future. And everyone can benefit from that.

From everyday budgeting to proper insurance to long-term goal setting for things like retirement or a child's education, a financial planner can make suggestions on how to prioritize your current needs, and outline steps you can take now toward future goals. Even a one-time consultation could offer you a helpful course of action. Plus, there's a whole range of financial advice available to fit any budget. The Foundation for Financial Planning is even working to expand pro bono counseling to vulnerable populations including low-income individuals and families, military personnel and veterans, domestic violence survivors, and people affected by natural disasters like COVID-19 or serious medical crises.
Rather than worry about the unknown—prepare for it

Coming up with a plan of action during uncertain times can seem counter-intuitive. How can you plan ahead if you don't know what's coming? By being flexible. Think of a plan as more of a process that will evolve over time as your goals, your life and the world around you change. It's a way to replace worry with preparation.

To me, the best way to be prepared for whatever the future holds is to follow some tried and true money management principles: spend wisely, set goals, save for emergencies, and invest for the long-term. These are the knowns you can count on to help you reach your financial goals in both good times and bad.

Do it for your health

While we may not be consciously aware of it, money worries can be detrimental to our physical and emotional health. Conversely, it's been shown that staying on top of our money can have positive side effects. For instance, savings can act as an emotional buffer to reduce anxiety. A financial plan can give you more confidence and help you stay focused.

So just as you try to keep physically fit during this particularly difficult time, make a carefully thought out effort to keep yourself financially fit. You don't have to do everything at once, but each extra step you take to manage your money will make you feel that much better—mentally, physically and financially.

Monday, May 25, 2020

Dan Crenshaw on Socialism and the role of government

Dan Crenshaw, R-TX, speaks to Arizona State University students on socialism, taxation, gratitude, the role of government and other subjects of interest. Liberty is ordered freedom. Well worth the 51 minutes of your time.

Friday, May 22, 2020

A surge in day trading: Are people gambling their stimulus checks?

From Barron's: Boredom seems to be driving a surge in day-trading, Randall Forsyth reports. The one-time stimulus checks have often been used to bet on stocks. Sports gamblers without sports are now betting on companies without customers. According to TD Ameritrade, page visits to its “education center” spiked 280% in April compared to last year. These retail traders could be an extra source of liquidity -- and volatility -- during the normally quiet summer months.

A full-blown retail mania has taken hold in buying and selling small lots of stocks and options, says Jim Bianco, head of the eponymous Bianco Research, who over the years has been in front of the big trends in markets, in part because he watches things that conventional indicators don’t pick up.

From Bloomberg: Forget buy-and hold. Stuck at home and dreaming of a killing, bored retail traders are branching out into all manner of Wall Street exotica.

Darting in and out of stock options, dabbling in complicated exchange-traded funds, devouring trading how-to books by the dozen -- all have become tools in the self-directed portfolio playbook. Locked down and socially distant with lots of time and (apparently) money to spare, they’re leveraging zero-percent brokerage fees in new and surprising ways.

Big shock: Wall Street says it will end badly.

“There is a long, documented history of retail investors chasing a handful of story stocks and then getting burned,” said James Pillow, managing director at Moors & Cabot Inc. “We humans love a good narrative. I cannot imagine this time around ending any different.”

On a personal note: I put my stimulus money in short-term treasuries (ETF). Not exciting, but until the dust settles, my capital is preserved.

Wednesday, May 20, 2020

The economics of California vs. Texas

Why are millions of people leaving California and moving to other states? What do those states have that California doesn’t? PragerU’s first mini-documentary explores the root causes of this mass exodus from the Golden State. “Fleeing California,” featuring PragerU’s own Will Witt, sheds light on one of the most significant but underreported stories of our time.

Tuesday, May 19, 2020

Crenshaw on why America is divided over reopening

Americans are deeply divided over the reopening of the country, and like most everything else these days, it’s political.
In an op-ed for The Wall Street Journal, Rep. Dan Crenshaw (R-TX) breaks down why.
“Liberals emphasize the dangers of an open society, shaming those who want to go back to work. Conservatives argue the opposite. Red states are steadily reopening, while most blue states lag,” he writes. “House Democrats believe it isn’t safe for lawmakers to go back to work, while the Republican-controlled Senate is back in session.”
One explanation advanced is that liberals will do, say, and desire the opposite of whatever President Trump believes, he says. There’s also the geographic breakdown—the urban vs. rural divide, although this is not as black and white as it seems. And finally, the economic devastation of the shutdown may be felt less by the left-leaning and college-educated who are more likely to be able to work from home, while less educated, working-class Americans have been harder hit. 
“Finally, the far left is treating the lockdowns and the consequent economic devastation as an opportunity to 'restructure' America into a socialist utopia,” he writes. “So they’re in no rush.”
But he offers a deeper analysis for why we’re seeing such a great divide over reopening.
These factors contribute to the partisan divide, but I believe a complete account would take us deeper, into the realm of psychology and morality. Liberal and conservative brain function has been shown to differ considerably during exercises in risk-taking. These differences led researchers to conclude that socially conservative views are driven, at least in part, by people’s need to feel safe and secure. While liberals present themselves as more open to experience and change, conservatives seem more likely to protect that which we know. This divide appears to apply to multiculturalism, traditional institutions and financial risk, but not all unknown risks.
Today conservatives are the ones ready to confront risk head-on. That’s consistent with my experience in the military, where the overwhelming majority of special operators identify as conservatives. Recent data confirm my experiences, indicating that high-risk civilian occupations tend to be filled by those who lean right. If conservatives show more brain activity when processing fear, they also seem better at overcoming it.
Liberals are also more comfortable with a government that regulates more behavior and provides more services. They often say, “You can’t be free if you don’t have service X, Y and Z.” Such statements sound nonsensical to conservative ears. The conservative emphasis on personal responsibility leaves less room for the government micromanagement we’re witnessing now. (WSJ)
In the end, Crenshaw says it's time for America to reopen "in a smart and deliberate fashion." The left shouldn't be demonizing the right because they want to get back to work and take the risks associated with doing so, he argues.

Dan Crenshaw on Socialism, Congress, and the Miracle of America

Dan Crenshaw represents a congressional district covering north Houston, Tx.

Monday, May 18, 2020

New more excuses: Zero-based budgeting made easy

Nearly every article I've either read or written about personal finance always stresses the importance of budgeting. Budgets and emergency funds are the two primary keys to guaranteeing financial peace of mind.

Now you no longer have any excuses. EveryDollar is an app (desktop or mobile) that you can easily use to budget, if you don't want to use envelopes, notebooks or spreadsheets. It uses zero-based budgeting.

Just do it. Here's a short tutorial.

How white liberals really view black voters

1. The young white people thought that voter ID is racist, that minorities do not have easy access to IDs, access to services and the internet, or don't have the knowledge to take advantage of the internet.

2. Blacks thought these white people were ignorant, racist or stupid (or all three). All had IDs, were willing to show them when they vote, knew how to get services, and had internet access.

Go figure.

Sunday, May 17, 2020

To mask or not to mask

I'm not talking about the "unmasking" of Gen. Flynn, whatever that means. (It has to do with intelligence gathering methods.)

Here, let's look at the issue of wearing a mask, any mask, for the purpose of "protection" against the Covid-19 virus.

First, when I did a general Google search for face masks, the top 20 articles were either CDC, FDA, or other common agencies with articles on how to wear a mask, or where to buy one.

I was more interested if face masks where worth the bother, based on empirical data. So I did a search on Google Scholar for some scientific papers, and the conclusion was: They (most cloth masks) are not very effective, are not worn or used properly, instill a false sense of security, but are better than nothing. So I choose not to wear one unless I'm forced to, and then I may fight back. Hear that, Costco? I'm not coming to your store.

But -- if you choose to wear a mask, please do so. But do it correctly.

Covid-19: What is the evidence for cloth masks?

Experts have warned that recommending that members of the public wear masks can lead to shortages for those who are more in need: health and care workers and immunocompromised people, for example. It can also lead to complacency. There are several explanations as to why face masks have not generally been found to be effective if worn by the general population: they do not protect against the virus getting into the eyes (only close fitting goggles do this); people may not fit the masks properly or take them on and off; and people may have a false sense of reassurance and thus pay less attention to other behaviors key to reducing transmission, such as social distancing and hand washing.”

Face masks pose serious risks to the healthy – Blaylock

Dr. Russell Blaylock warns that not only do face masks fail to protect the healthy from getting sick, but they also create serious health risks to the wearer. The bottom line is that if you are not sick, you should not wear a face mask.

As businesses reopen, many are requiring shoppers and employees to wear a face mask. Costco, for instance, will not allow shoppers into the store without wearing a face mask. Many employers are requiring all employees to wear a face mask while at work. In some jurisdictions, all citizens must wear a face mask if they are outside of their own home.

Respiratory virus shedding in exhaled breath and efficacy of face masks

We identified seasonal human coronaviruses, influenza viruses and rhinoviruses in exhaled breath and coughs of children and adults with acute respiratory illness. Surgical face masks significantly reduced detection of influenza virus RNA in respiratory droplets and coronavirus RNA in aerosols, with a trend toward reduced detection of coronavirus RNA in respiratory droplets. Our results indicate that surgical face masks could prevent transmission of human coronaviruses and influenza viruses from symptomatic individuals.

Evaluating the efficacy of cloth facemasks in reducing particulate matter exposure

Standard N95 mask performance was used as a control to compare the results with cloth masks, and our results suggest that cloth masks are only marginally beneficial in protecting individuals from particles

Face masks for the public during the covid-19 crisis
  • The precautionary principle states we should sometimes act without definitive evidence, just in case
  • Whether masks will reduce transmission of Covid-19 in the general public is contested
  • Even limited protection could prevent some transmission of Covid-19 and save lives
  • Because Covid-19 is such a serious threat, wearing masks in public should be advised
Utility of Cloth Masks in Preventing Respiratory Infections: A Systematic Review

Although cloth masks generally perform poorer than the medical grade masks, they may be better than no masks at all. Filtration efficacy varied greatly depending on the material used, with some materials showing a filtration efficacy above 90%. However, leakage could reduce efficacy of masks by about 50%. Standardization of cloth masks and appropriate use is essential for cloth masks to be effective. However, result of a randomized controlled trial suggest that they may be ineffective in the healthcare setting.

Saturday, May 16, 2020

Is it OK to reopen?

To those calling it selfish and reckless to open:

You want a shutdown but expect your garbage to be picked up. You expect stores to be open with food and supplies. You expect farmers, packers and pickers to generate the supplies. You expect truck drivers to deliver them.

You expect Amazon to ship your packages while you sit at home. You expect the driver to leave it on your doorstep.

You expect your phone, cable and internet to work, and power to stay on. You expect your mail to show up, rain or shine.

You expect doctors and nurses to be available, although many have been furloughed.

The entire premise of shelter in place is based on the the idea that "others" must risk their health so you can protect yours. There is nothing virtuous about ordering your Amazon packages and making trip after trip to the store while claiming we need to stay shut down. And the new thing now is mask shaming, and roaming "deputies" spying on their fellow citizens to "encourage" social distancing.

It was once enough to flatten the curve. Yet officials don't want to give up their power and now want a vaccine or cure.

Even the United Nations now fears that the cure—the economic shutdown—could be worse than the disease, COVID-19. The U.N. warns that millions could starve (World Vision puts the number at 30 million children alone).

Using common sense, we can go back to life as it was. We can go to restaurants and get our hair cut. We could catch the virus, or any virus. We could catch the cold, even the flu. We take risks everyday. If you choose to stay home, that is your choice.

The rest of us do not want to see our economy crumble. If it collapses, so will every other economy worldwide. More people will die than Covid-19 and many other illnesses combined. If that happens, you will need to hide in your house.

Those that want to reopen do not want people to die. We want to take measures to protect our people and our country so people can live. We need to start the reopen in order to live.

The 'Heros' Act: Democrats new stimulus much more than stimulus

The House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions Act – the HEROES Act for short -- a $3 trillion follow-on relief package to the $2.2 trillion package signed into law in March.

The bill passed the House on a vote of 208 to 199. Lawmakers had less than three days to consider the 1,800 pages of legislation.

The math of House Speaker Nancy Pelosi’s latest bailout legislation, misleadingly called the Heroes Act, is mind-boggling.

There has already been roughly $3 trillion in coronavirus response spending approved. The Heroes Act contains another $3 trillion, for a total of $6 trillion. This $6 trillion is more than $18,000 for every person in the United States. Or more than $72,000 for a family of four.

Only a fraction of this is to pay for direct COVID-19 related health-care expenses. The bulk of it is to prop up the economy in one way or another.

For example, the act provides more than a trillion-dollar bailout for state and local governments. In combination with previous appropriations and other forms of financial relief, such as the federal government picking up a larger share of Medicaid expenses, state and local governments would receive around $1.6 trillion in federal assistance.

According to an analysis by the Tax Foundation, that equals 88% of everything state and local governments in the United States were projected to collect in local taxes, prior to the pandemic. That’s vastly in excess of even the most dire prognostication of what the pandemic hit to local revenues will be.

Pelosi could never have imaged that her new HEROES bill could have passed the Senate and/or been signed into law by President Trump. She's been around Washington long enough to know this, but I think her strategy is that when the bill fails to pass, she can blame the Republicans and Trump on not helping the American people.

Unlike the last four coronavirus relief measures, the HEROES Act isn't a product of bipartisan negotiations. House Speaker Nancy Pelosi has defended the ambitious package, arguing that "we must think big for the people now, because if we don't it will cost more in lives and livelihood later. Not acting is the most expensive course."

That's my theory, anyway. Pelosi has always been about power politics; she doesn't care who she helps.

While the has the following provisions that could be considered relief measures, the bill also many provisions that have nothing to do with Covid-19.

The Heroes Act also includes numerous economic relief provisions, including the following:
  • Additional direct cash payments to households, including $1,200 per individual earning up to $75,000 per year. Families with dependent children could receive up to $6,000.
  • An extension of enhanced unemployment benefits (which is an additional $600 per week) to January 2021.
  • Hazard pay for essential workers.
  • Housing assistance to help renters and homeowners with rent and mortgage payments.
  • Debt collection relief.
  • Direct financial relief to state, local, and tribal governments.
  • Billions of dollars dedicated to Coronavirus testing and contact tracing initiatives.
  • Provides FY2020 emergency supplemental appropriations to federal agencies.
  • Expands paid sick days, family and medical leave, unemployment compensation, nutrition and food assistance programs, housing assistance, and payments to farmers;

Checks for illegal immigrants

The Heroes Act would provide $1200 stimulus payments to illegal aliens by letting people who filed taxes using an Individual Taxpayer Identification Number (ITIN) receive stimulus checks, Forbes reported Friday.

According to the Institute on Taxation and Economic Policy, the Heroes Act also includes a retroactive change to the CARES Act, which included the first round of stimulus checks. The change allows illegal immigrants who file taxes using an ITIN to receive money from initial payments.

Money to study diversity in cannabis

For example, the word "cananbis" appears more in the bill than the word "job," some 68 times. The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, includes a provision that would protect banks that service marijuana businesses from being penalized by federal regulators. The measure includes language requiring research on minority-owned and women-owned marijuana companies.

Representative Jodey Arrington (R-Texas) said it's "suspicious" when more language is devoted to marijuana than jobs.

"You know something is suspicious when the word 'cannabis' is used 68 times—more than 'job' or 'jobs' combined—in an economic stimulus bill. I'm not sure what they were smoking, but whatever socialist euphoria they're feeling will fade fast when it arrives in the Senate," he tweeted.

What else? Something for everyone

Five million dollars for new laptops and other tech equipment for members of Congress.

Ten million for the National Endowment for the Arts and another $10 million for the National Endowment for the Humanities—that's on top of the $75 million for the humanities endowment in an earlier stimulus package this year.

A provision to allow Food and Drug Administration to consider new over-the-counter sunscreen ingredients.

Aside from items intended to directly aid the nation's COVID-19 recovery like rental assistance, student loan bailouts, cash payments to Americans and money for state and local governments whose budgets have been wrecked by the pandemic, some of the priorities that Democrats tucked into the latest 1,800-page proposal include $50 million in "environmental justice" grants to study how communities with disproportionate environmental issues for poor and minority residents were impacted by COVID-19.

Another $40 million would go the U.S. Geological Survey for research related to wildlife-borne disease. The novel coronavirus is believed to have begun with animals before humans were infected.

At least $5 million in the bill would go to museums and libraries, while $250 million would be set aside for grants to help formerly incarcerated people and prevent recidivism.

Everybody gets something, it seems

Money for the U.S. Department of Agriculture to study soil health.

$50 million for the Legal Services Corporation.
$15 billion for state transportation departments.
$100 million for fisheries.

Big spending states get rewarded

Pelosi and her fellow House Democrats are seeking a more than $1 trillion federal bailout for state and local governments. This is in addition to the unprecedented aid Congress already has sent.

Instead of waiting on a handout from Washington, states should clear the way for a more robust economic recovery by addressing their unsustainable finances.

States and local government spending has increased over the recent past, demonstrating room for targeted spending cuts.

After adjusting for inflation and increases in population, state and local spending (in constant 2019 dollars) has grown from $5,596 per person in 2000 to $7,268 per person in 2019.

But not all states spend equally. As of 2017, Florida, Georgia, and Arizona spent about $5,800 per person on state and local governments, but New York spent more than $11,700 per person.

See more detail discussion on state spending here: In charts, how big blue states outspend red states.

Student loan relief

House progressives had originally pushed for $30,000 in across-the-board student loan forgiveness. 

The released version of the bill reduced the forgiveness, but still provided meaningful student loan student relief, including the following:
  • $10,000 in federal student loan forgiveness;
  • $10,000 in private student loan forgiveness;
  • An extension of the CARES Act suspension of payments, interest, and collections on government-held federal student loans through September of 2021, and an expansion of those protections to include commercially-held FFEL-program federal student loans as well as Perkins loans.
  • A fix to Public Service Loan Forgiveness that would allow payments made on previously-consolidated federal student loans to potentially count towards the 120 qualifying monthly payments required for the program.
Senate leadership has already described the HEROES Act as “dead on arrival,” before the final version even passed. The Senate is not likely to return to Washington until sometime in June, so no quick action will be taken. The President has also indicated that he opposes the House bill. However, the Democratic House leadership views the passage of this bill as an important negotiating step in crafting a final stimulus bill that can win over sufficient votes in both chambers of Congress to become law.

The bill touches every aspect of Federal law and American life

The bill also modifies or expands a wide range of other programs and policies, including those regarding
  • Medicare and Medicaid,
  • health insurance,
  • broadband service,
  • medical product supplies,
  • immigration,
  • student loans and financial aid,
  • the federal workforce,
  • prisons,
  • veterans benefits,
  • consumer protection requirements,
  • the U.S. Postal Service,
  • federal elections,
  • aviation and railroad workers, and
  • pension and retirement plans.

However, being signed into law is not entirely the mission of the HEROES Act.
"Instead, its passage was meant for Democrats to demonstrate their priorities and signal what they will fight for in a later bipartisan bill that could pass in June," Business Insider's Kimberly Leonard reported.

Monday, May 11, 2020

Don't make these mistakes

00:01:20 - Mistake #1: Not investing at all 00:04:05 - Mistake #2: Not having an emergency fund 00:07:18 - Mistake #3: Waiting too long to get in 00:09:46 - Mistake #4: Investing too much money at once 00:11:05 - Mistake #5: Not investing enough to cover future financial needs 00:14:25 - Mistake #6: Not considering taxes 00:16:55 - Mistake #7: Not being honest with yourself about how hands-on you want to be

Saturday, May 9, 2020

What the unemployment report shows -- the real impact

While most major news -- and financial -- outlets are reporting the basic unemployment rate of 14.7%, a more encompassing measure that includes those not looking for work as well as those holding part-time jobs for economic reasons also hit an all-time high of 22.8%. That reading may be a more accurate picture of the current jobs situation as millions of workers are being paid to stay home and thus not willing or able to look for new jobs. Its previous worst level was 17.2% in April 2010.

The jump in the “real” unemployment rate reflected a plunge in the labor participation rate to 60.7%, its lowest level since 1973.

In all, the rolls of the unemployed surged to 23.1 million, a jump of 15.9 million over March as governments across the country placed stringent restrictions on what businesses could be open. Multiple states are beginning to relax those rules, but about 60% of the economy remains under stay-at-home orders.

However, it’s not clear if the April numbers fully accounted for those classified as unemployed. In a note accompanying the tally released Friday, the Bureau of Labor Statistics said those people not at work because they were sick should have been counted as unemployed, though it “is apparent that not all such workers were so classified.”

Beyond Covid-19: Important Issues to Consider

Jordan Peterson warns against government power:

Adam Schiff should resign:

Just so you know: Adam Schiff, as a representative in the U.S. House, represents West Hollywood, Burbank, parts of Pasadena, Glendale, the Verdugo Hills communities of Sunland and Tujunga, as well as parts of central Los Angeles including Hollywood, the Hollywood Hills, Echo Park, Silver Lake, and Los Feliz.

Friday, May 8, 2020

Why you should return to work, even if unemployment pays more

The Motley Fool -- At issue is the $600 weekly supplement to state unemployment checks, enacted by the CARES Act. In many states, that extra $600 doubles or even triples unemployment payouts. Consider Alabama, which previously had a maximum weekly unemployment benefit of $275. The additional $600 increases that maximum to $875, which would be an income increase to anyone who was formerly making less than $45,000 a year. Even in Massachusetts, where benefits are the highest in the country, the extra $600 equates to a "raise" of 73%.

A big unemployment benefit versus a smaller paycheck? That's not an easy choice to make in normal times, when there isn't a contagious virus lurking outside your home. Certainly, remaining unemployed does satisfy some immediate needs. On the simplest level, you don't have to go outside and you can still pay your bills. But there are longer-term benefits -- for you, your employer, and the economy -- associated with making the tough choice to go back to work. Here are four of them.

You may regret staying home later

The $600 supplement is a temporary benefit that expires on July 31, 2020. Starting on August 1, your benefit will return to the normal amount allowed by your state. That's probably somewhere in the range of 40% to 45% of your previous working income.

If you do choose to sit tight at home until July, you won't be the only one hitting the job market this summer. The Economic Policy Institute predicts a nationwide unemployment rate of 15.6% in July of this year. To put that in perspective, the highest unemployment rate experienced during the Great Recession was 10% in October 2009.

Passing on an opportunity to work today could leave you in dire straits later, when your employment benefit drops and jobs are hard to come by.

You may lose benefits like health insurance

You earn more at your job than just the paycheck. Though we don't usually quantify them, healthcare and retirement benefits are worth a pretty penny. According to the Bureau of Labor Statistics, benefit costs on average account for nearly 30% of an employee's total compensation.

Health insurance will be an expensive benefit to replace. Premiums for replacement coverage will be well more than what was being deducted from your paycheck, since employers usually pass on only a portion of those costs. You'd have to extend your health insurance through COBRA, which is notoriously expensive, or purchase a plan on the healthcare marketplace under a special enrollment period.

The loss of retirement plan benefits, such as a 401(k), may not be as impactful in the short term. But it could be very expensive later on. Your savings progress will stall out, unless you are disciplined enough to keep setting money aside without those payroll deductions. Longer-term, that will cost you thousands in missed contributions and lost earnings.

You may disqualify yourself from unemployment

Normally, you are supposed to accept suitable job offers while you're receiving unemployment. You can't reasonably argue that an offer to resume a job you already had isn't suitable. But there's still a gray area. Under provisions in the CARES Act, you do qualify for unemployment if you turn down a job for a coronavirus-related reason. You might need to care for your children or a sick spouse at home, for example. In the absence of those reasons, it goes against the spirit of unemployment to decline a viable job offer.

You may put your employer in a tight spot

Under the Paycheck Protection Program (PPP), established by the CARES Act, small businesses can apply for enough money to fund eight weeks of their payroll costs. They can also use the money to pay for certain overhead expenses, including mortgage payments, rent, and utilities. These are loaned funds that will be forgiven, as long as employers meet certain requirements:
PPP recipients must keep employees on the payroll or quickly bring back employees that have been furloughed or let go.

At least 75% of the forgiven amount must be used for payroll.

If the employer's salaries and wages decrease or the funds are used for other purposes, the employer will lose eligibility for loan forgiveness and have to repay some or all of the PPP funds. By declining an offer to return to work, you will make it more difficult for your employer to qualify for loan forgiveness. At a minimum, your employer may try to replace you quickly and you won't have the option to come back to your job later. Worst-case scenario, your employer can't replace its employees, doesn't qualify for loan forgiveness, and can't generate the revenue needed to repay those funds.

More than the money

You're right to wonder why you should return to work for less than you can make staying at home. It's a tricky question, for sure, especially if you have young kids or the job doesn't offer much in the way of benefits. Here's some food for thought. While there's no way to predict how the economy will respond in the next three or six months, it's highly likely that the employment picture will be unpleasant for the rest of the year. If going back to work now insulates you from a dreary job market later, it may just be worth it -- assuming you take the appropriate steps to stay safe and healthy.

Thursday, May 7, 2020

Monday, May 4, 2020

Seven Rules of Money

Below are seven rules of money. I have collected videos for you to watch to learn the concepts. You may not like all of them. But watch them. And find your own. There is a lot of information out there. Most of it is OK; some of it not. This will help you achieve financial security or independence. First: You define what financial security means to you. Set your goals in writing. An Introduction to Goal Setting (49 minutes).  For lazy or attention deficit people: A Shorter Introduction (6 minutes).

Dave Ramsey ruined our life!

Pay yourself first

Saving alone will never make you rich

You must live below your means

You must have an emergency fund.

Use debt wisely

The more you learn, the more you earn

Money won't make you happy

Additional Resources

Investing Basics: ETFs

Friday, May 1, 2020

What's Better? A Roth or Traditional IRA?

Both traditional and Roth IRAs can be effective retirement savings tools, but eligibility limitations mean one or both may not be right for you. Here’s a guide to help you choose.

What’s the difference between a traditional and Roth IRA?

A traditional IRA is an individual retirement account that allows you to make contributions on a pre-tax basis (if your income is below a certain level) and pay no taxes until you withdraw the money. This makes a traditional IRA an attractive option for investors who expect to be in a lower tax bracket during retirement than they are now.

On the other hand, Roth IRA contributions are made with after-tax dollars. The benefit of a Roth IRA is that you can withdraw your contributions and earnings tax-free after age 59½, if you’ve had the account for at least five years, or you meet certain other conditions.² In addition, your after-tax contributions to the Roth account can be withdrawn at any time, tax- and penalty-free. However, if you make an early withdrawal of any earnings, you will have to pay taxes and penalties on them.

A Roth IRA could be a strategic option for investors who expect to be in a higher tax bracket during retirement than they are now. It can also offer some spending flexibility in retirement, since you can withdraw money without increasing your tax bill and you won’t have to take annual required minimum distributions (RMDs), unlike a traditional IRA.

How much can I contribute?

The maximum amount you can contribute across all your IRAs (traditional or Roth) in 2020 is $6,000. The catch-up contribution if you’re age 50 or older remains $1,000. However, there are some rules that affect IRA contributions and deductibility.

For example, there is no income limit for contributing to a traditional IRA, and your contribution is fully deductible if neither you nor your spouse was covered by a retirement plan at work during the tax year. However, if either of you was covered by a workplace retirement plan, deductibility phases out depending on your filing status and income.

Contribution deduction eligibility for traditional IRA

Filing status (2019 tax year)Fully deductible if income is:Partial deduction if income is:No deduction if income is:
Single≤ $64,000> $64,000 but < $74,000≥ $74,000
Married filing jointly, filer is covered≤ $103,000> $103,000 but < $123,000≥ $123,000
Married filing jointly, spouse is covered≤ $193,000> $193,000 but < $203,000≥ $203,000
Married filing separatelyNA< $10,000≥ $10,000

Filing status (2020 tax year)Fully deductible if income is:Partial deduction if income is:No deduction if income is:
Single≤ $65,000> $65,000 but < $75,000≥ $75,000
Married filing jointly, filer is covered≤ $104,000> $104,000 but < $124,000≥ $124,000
Married filing jointly, spouse is covered≤ $196,000> $196,000 but < $206,000≥ $206,000
Married filing separatelyNA< $10,000≥ $10,000
Source: Internal Revenue Service

Unlike with a traditional IRA, you can only contribute to a Roth IRA if your income meets certain limits.

Income eligibility for Roth IRA contributions

Filing status (2019 tax year)Full contribution allowed if income is:Partial contribution allowed if income is:No contribution allowed if income is:
Single< $122,000≥ $122,000 but < $137,000≥ $137,000
Married filing jointly< $193,000≥ $193,000 but < $203,000≥ $203,000
Married filing separatelyNA< $10,000≥ $10,000

Filing status (2020 tax year)Full contribution allowed if income is:Partial contribution allowed if income is:No contribution allowed if income is:
Single< $124,000≥ $124,000 but < $139,000≥ $139,000
Married filing jointly< $196,000≥ $196,000 but < $206,000≥ $206,000
Married filing separatelyNA< $10,000≥ $10,000
Source: Internal Revenue Service

There are a few other advantages to a Roth IRA worth considering. You aren’t subject to RMDs with a Roth IRA, and it can be a flexible source of retirement funding. For example, you can withdraw a large sum if you have a one-time expense or other needs in retirement without increasing your tax bill. Allocating a portion of your retirement savings to a Roth IRA can increase the flexibility you have to manage taxes in retirement.

You can withdraw contributions anytime for any reason without tax or penalty. However, just because you can doesn’t mean you should. The opportunity costs are high—taking money out of your Roth IRA means you may miss out on the potential for compounding gains. And when you can put in only $6,000 for 2020 plus an additional $1,000 catch-up contribution if you’re age 50 or older, it might be difficult to make up the amount you withdraw.

Finally, we can’t know with certainty future tax rates. Contributing part of your retirement savings dollars to a Roth IRA after paying taxes can add tax diversification to your retirement savings in the event Congress increases tax rates in the future or when you retire.
Other things to keep in mind

Account rollovers

If you change jobs, you have the option to convert a traditional 401(k) directly into a Roth IRA without having to roll it into a traditional IRA first. Just remember you must pay federal income tax on pretax contributions and earnings at the time of the rollover. Also, remember that you may have other options, including keeping your assets in your former employer’s plan, rolling over assets to your new employer’s plan, or taking a cash distribution (on which taxes and possible withdrawal penalties may apply).

Roth 401(k)

An increasing number of employers are offering Roth 401(k) options in addition to traditional 401(k)s. With a Roth 401(k), you can contribute a portion or all of your paycheck up to certain limits. You can also choose to have some of your paycheck go pretax into a traditional 401(k) and some post-tax into a Roth 401(k). Any employer match or contribution, however, must go into a traditional 401(k).

Unlike with a Roth IRA, contributions to a Roth 401(k) are not subject to earnings limits. This means that if you aren’t eligible to contribute to a Roth IRA because your income is too high, you may be able to contribute to a Roth 401(k). Distributions from a Roth 401(k) are subject to the same general tax rules as a Roth IRA, with the exception of an RMD requirement. You can avoid this by rolling over a Roth 401(k) balance into a Roth IRA before your RMD age. So if you’re eligible, don’t forget the Roth 401(k) option if a Roth makes sense for you.

Roth IRA conversions

If you’re ineligible for a Roth IRA, some investors maximize contributions to a traditional IRA so they can convert to a Roth IRA. However, there are some caveats.

You can’t pick and choose which portion of traditional IRA money is converted. The IRS looks at all traditional IRAs as one when it comes to distributions, including Roth conversions. Traditional IRA balances are aggregated so that the amount converted consists of a prorated portion of taxable and nontaxable money. So making nondeductible contributions to a traditional IRA with the goal of later converting to a Roth IRA would likely work if you have little or no existing deductible IRA balance to muddy the waters. Still, any earnings leading up to conversion would be subject to income tax, which, as always, is best paid with outside funds.

High earners not eligible to make Roth IRA contributions could make nondeductible contributions to a traditional IRA and then convert to a Roth (sometimes called a “backdoor Roth conversion”). The process is similar to any other Roth conversion, but typically takes place very soon after contributing funds to a traditional IRA. There is some debate among tax professionals whether this conversion conflicts with the intent of the Roth conversion law, which was updated in 2010. The IRS has not formally weighed in on this topic, so beware that there may be some risks to this strategy. If the IRS decides to question the conversion, you may owe a 6% tax or other taxes for overfunding your Roth. For some investors, a backdoor Roth conversion could be a viable way to obtain the benefits of tax-free growth, as long as they’re comfortable with the potential uncertainty and work with a certified public accountant (CPA) or tax professional.

The bottom line

Both traditional and Roth IRAs are great long-term savings tools, so educate yourself on the differences and make an informed decision that fits with your retirement goals. Remember that tax laws are subject to change, so keep up with the latest news from the IRS. Also, be sure to talk with your CPA or tax professional about whether a traditional or a Roth IRA—or both—makes sense for you.

Big Tech Censors Dissent Over Coronavirus Lockdowns

Top Five Consumer Cyber Security FAQs

By Equifax Business, technology, environmental and economic changes are a part of life, and they are coming faster all the time. All of thes...