Redwood Age: Money Matters

Tom Murphy,  August 2, 2011


The default debate has ended for now (thankgawd), but a central question remains. And until it is answered, the economy will sit on shifting sand. That question is whether it is better to stimulate growth through increased government spending or cut taxes to try to stimulate growth in the private sector.  Let's start with the latter. We've had tax cuts - deep ones - since the middle of the Bush Administration. They did nothing to forestall the recession and, some would argue, may have contributed to it. Obama had a chance to end them in December, but yielded to shrill conservatives in the Republican Party, including many of the same voices who acted so childishly during the debt debate.  So tax cuts haven't worked. Has stimulus spending?  Well, not the Bush plan. His $700 billion in bailout funds went mostly to banks and large corporations - effectively a tax rebate. They managed to spend large parts of it on executive bonuses without any of the trickle-down promised by Bush.  Then Obama pushed through a $700 billion plan that focused mostly on projects to rebuild infrastructure. The result? A modest lowering in the jobless rate, rising consumer confidence, and sluggish growth in the nation's GDP.  Now that the money is gone, consumer confidence has fallen and job growth has slowed. The economy has almost completely stopped growing. Now conservatives are calling for more tax cuts, and Democrats are calling for higher taxes on the rich to support job growth.  Which side of that question do you support?


Tom Murphy,  July 15, 2011

I'm convinced that most of what we know, we learned from TV. That may be a sad statement on today's schools, but it's true. Just ask people what they think will happen if the US ever defaulted on its debt. Half the folks think China will start repossessing stuff.  (It's quite OK with me if they want Las Vegas. In fact, they can take the entire states of Nevada, Texas and parts of the South.)  But the more likely outcome would be like that poor sap on the Free Credit Report commercials, who sings about getting stung by his girlfriend's lousy credit.  That'd be us, as S&P and other private agencies cut our credit rating, making it harder to borrow money. And when it's harder to borrow - as any blue collar worker knows - it costs more. Like when I bought my first car and agreed to pay 19 percent interest. That would make it harder for the US to, oh, start a war like Iraq, which is one of the things that drove the US debt so high during the Bush administration. (I wish the Republicans had protested the debt ceiling then.) I don't buy cars on loans any more. I don't borrow money to buy much of anything.  If I can't pay for it in cash, I don't buy it.  Maybe Uncle Sam should try that for a while, before he ends up couch-surfing in Canada.


Pamela A. MacLean,  May 25, 2011

Image Banks get richer and we're becoming a nation of renters. How is that possible? The latest reports from the Federal Deposit Insurance Corp. (FDIC), which keeps track of the safety of banks, sayscommercial banks and savings institutions insured by the FDIC had a great first quarter. They had a profit of $29 billion just for the first three months of 2011. That's up nearly $12 billion or 66 percent from the same quarter last year. And it's the seventh consecutive quarter they have shown a year-over-year increase. Money banks set aside for losses on loans is going down and that has driven some of the improved earnings. But for a growing number of Americans renting is the only option. They either can't afford to own or don't want to risk buying a house. Since the housing meltdown, nearly 3 million households have become renters and the number is growing. If banks want to start making money long-term they can't continue to rely on lower losses to drive up their profits. They have to start loaning people money for homes. That's when the economy will finally turn around.


Pamela A. MacLean,  May 4, 2011

The experience of public employees demonstrating in Wisconsin in defense of collective bargaining rights and to prevent cuts to pensions struck a cord with plenty of people around the country, in and out of government.  In private companies, employees have lost pensions in exchange for riskier 401k's or seen sharp pension cuts from company underfunding.  For public employees, who still hold on to pensions, they are seen as greedy and overpaid.  But step back.  It was Wall Street executives and risk-taking pension fund managers who contributed to a blow-up in the economy and huge losses to pension funds.  That put pressure on local governments to come up with more tax dollars to pay the pension obligations.  Now the blame is turned on public employees, rather than those who made the bad pension investments. Maybe it's time for private and public employees to meet over common ground on what can and can't be covered in coming years, without tossing blame at public teachers, police and firefighters.  A few rule changes could include: caps on  future pensions, create managed 401k plans for new workers and eliminate rules that allow spiking pension amounts during the final years of employment through overtime and bonuses that count in final pension calculations.


Tom Murphy,  April 22, 2011

When the housing bubble burst, many people asked why the ratings agencies had remained so quiet about what seemed an obvious problem. Many journalists had written about it. Many politicians had voiced concern. Yet those private companies that rate the risk of bonds had continued to give high ratings for securities based on subprime mortgages that, at least in retrospect, should never have been written at all. Two years later, Standard & Poor's is singing a slightly different tune by placing a "negative outlook" on US government debt. Sure, US government bonds still carry the world's highest rating of AAA, but the agency is warning it just doesn't have a lot of confidence in the ability of the Republicans and Democrats to cut the country's debt level enough. It's something like seeing a friend with tens of thousands of dollars in debt on a credit card and saying, "I don't think you're going to be able to pay that down fast enough by making a minimal monthly payment.  You've got to find another way to bring that down before the interest rates crush you."  S&P has a point, and everyone knows it. Stocks tumbled on the news, which is likely to fuel further finger-pointing along the Potomac.  And it's time to do something about it.  The Republicans want to cut services to old people and the poor while extending tax cuts to those making more than $250,000 a year. The Democrats want to end the Bush-era tax cuts to the wealthy, a class that currently pays far less tax than it did 20 or 30 years ago. Or, as S&P suggests, Congress could continue to fiddle while we drift headlong into the next financial crisis.


Tom Murphy,  February 15, 2011

This is a classic no-brainer. States, cities and the federal government are whacking away at programs and jobs due to falling revenue. Medical benefits for the poor and elderly are being cut. Hard-working middle class families can't make ends meet, even if both parents are working. Home values continue to fall across the US, and more homeowners are being evicted from the American dream. The economy has grown only in response to direct stimulus from the government, which added to the deficit. So, as he has for the past two years, the president has again noted it is unfair to extend tax cuts to the rich. Enacted in the Bush administration, they did nothing to soften the most brutal recession since the Great Depression. They should have ended with 2010, but became part of a political bargain with Republicans to grant extensions on unemployment benefits. Enough is enough. The president wants those tax cuts to expire by 2012 and anyone with a lick of sense can see that's overdue. That said, you can expect the GOP to oppose it.


Tom Murphy,  January 20, 2011

Economically speaking, probably nothing will affect the lives and livelihoods of Americans more during over the next 30 years than the dramatic rise of China. Since the government there opened the country to the West four decades ago, China's economy has grown to a size that is second only to the US, with a gross domestic product estimated at $10.1 billion last year compared to $14.6 billion for the US, according to the International Monetary Fund. And many people, including China's own economists, say China may actually be larger. While the US has struggled to grow even 1 or 2 percent in recent years, China's economy has surged at 9-10 percent annually with no signs of stopping. Almost everyone agrees that China will overtake the US in economic muscle within 20 years. It already holds hundreds of billions of dollars in US government bonds and has become the biggest lender to the US.  In effect, China has funded the wars in Afghanistan and Iraq - a debt that will be repaid by our children. While China is buying US planes today, it will be making its own jetliners tomorrow, and selling those around the world in competition with the US.  Of course, labor is very cheap in China compared to the US, a reality that attracts US businesses to build plants there instead of Indiana or Arizona. The US is urging China to raise the value of its currency, which would allow its citizens to buy more goods from other countries - like the US. That would also make it tougher for US residents to buy more things from China. Understandably, China doesn't want to do that, and the US can't make it. One day, we may even see the Chinese Yuan replace the greenback as the base currency in global markets. All of this will have a dramatic impact on the quality of life in the US, much of the rise of the US in the 20th century meant that its culture dominated the world, up until now.


Pamela A. MacLean,  January 6, 2011

While most Americans struggle to make house payments or find affordable health insurance that will cover their kids, the new Republican Speaker John Boehner is looking for ways to cut costs in his own house - the House of Representatives. Boehner, on his first day as the new speaker, said he wants a 5 percent cut in the lawmakers' budget, about $75,000 each for the 435 members. This is a good start.  I mean, the House already spends $190,000 a year on bottled water. Bottled water went the way of the four buck coffee for lots of struggling families. Boehner wants to cut operating costs, things like travel and staff salaries. This may be a small potato chips fight compared with the battle looming over health care and jobs. But if the Republicans and Democrats can agree on saving money in their own backyard maybe we can look forward to some recognition of the budget tightening we all do in these tough times.


Pamela A. MacLean,  December 22, 2010

Now that we know the "break" in the big tax break debate of 2010 goes to the wealthiest Americans. Goldman Sachs Chief Executive Officer Lloyd C. Blankfein and his top deputies will score $111 million in stock in January as part of a delayed payoff of the record-setting 2007 bonuses. The bonus payments were pushed back from 2009.  Republicans insisted that the tax cuts be extended to the wealthiest Americans and the Obama Administration said it was the best deal they could cut. The argument being is that keeping the status quo on tax cuts will somehow spur a laggard economy that the tax cuts have not spurred so far. So can we expect Mr. Blankfein and friends to start spending more and boost the economy with their preserved tax savings? 


Pamela A. MacLean,  August 20, 2010

Years ago I found a scrap of paper my father kept as a young man that chronicled the jobs he had held during the Great Depression. He was just 17 during the 1929 stock market crash and just starting his working career. The record of his efforts to land jobs showed sporadic jobs and one stretch of more than two years without work. Today's joblessness may not be as widespread as the 1930s but the stories of many out-of-work boomers is that they can't even get interviews. They hear polite euphemisms for "you're too old." The latest jobless numbers don't make things sound better. Jobless claims were up to 500,000 during the second-week in August, the highest since November.  The slowed economic recovery calls for strong stomachs and steady nerves for many families. Perhaps the best thing to recall about my father's scrap of paper was that it was a bad patch in an otherwise long working career, and he did come out of it with a job.


Pamela A. MacLean,  June 27, 2010

The problem with legal reforms to address social policy concerns is that the reform will try to contain all human behaviors into neat square boxes when humans operate outside the boxes. This may be the case for Arizona's controversial immigration reforms because it aimed to address public concern about Hispanic immigrants streaming across the state's border with Mexico. The law allows police to check identity and citizenship status of anyone the officer may suspect is not a legal resident. Many African immigrants have been resettled in the Phoenix area as refugees from strife-torn areas of Africa or have claims for asylum. While they may not be US citizens, they are not here illegally either. But at a time of reduced services and demands for identification by police, the lack of access to language training, transportation or other resources to help transition to the US may hurt the entire African community in the area - estimated at nearly 20,000 people. Illegal immigration is a complex problem demanding sophisticated solutions. Let's hope the lawmakers in Arizona and other border states keep the needs of the entire immigrant community in mind.


Pamela A. MacLean,  June 19, 2010

Is the "little pink pill" to increase women's sexual desire inventing a "disease" just as easily solved by soft music and candles? An FDA Advisory Panel nixed a request by the drugmaker Boehringer Ingleheim to recommend approval of the pill intended to make women want to have sex. The problem with the "female Viagra" is its side effects, according to the advisory panel, which include dizziness, nausea and tiredness. And there is no evidence it actually increases sexual desire. This raises the age-old question; what do women want? And more importantly, is female sexual desire, or lack of it, really a physical problem that can be treated with pharmaceuticals? The tough truth about some diseases, like diabetes, obesity and heart disease is that people can cure them by exercise and eating right. Maybe the tough truth about sexual desire in women is that what's really needed is better communication between partners, soft lights and a little more Barry White.


Tom Murphy,  June 9, 2010

One in six Americans is underemployed or just plain jobless. And that doesn't count those who've given up looking. That's bad enough. But for older Americans, it's worse. The prospects of reentering the workforce at that age are far lower than for younger workers. There aren't as many jobs at the high-end of the experience scale, and even if employers hold no bias against age - which is doubtful - competition from younger, well-educated workers is fierce.  Many companies have laid off older workers or encouraged them to leave, offering buyouts in one hand and a threat of layoffs in the other. Recently, Congress failed to extend COBRA support that was paying part of the health insurance bill for older workers, delivering another blow to people who've put the best year into building the economy. All that said, it's modest relief to hear the Civil Rights Commission will look into age discrimination in the workplace. It's a step, but real action is needed quickly to avert even bigger problems.


Tom Murphy,  May 27, 2010

It's still the economy, stupid. Or call it the stupid economy. Whatever it is, it's got people angry - and not just the boomers who've seen their home values plummet and life savings riding a roller-coast. The Dow Jones Industrial Average - the standard measure of the economy's health - is almost exactly where it was five years ago. Consumers who must cope with inflation have actually lost money if they've just had cash in the risky market all those years, but have had to deal with a range of emotions as the market rose, plummeted, rose and now is wavering amid a tepid recovery. Someone has got to take the blame, and the easy targets are the politicians. But it strikes me as optimistic to think you can turn this around by voting in another bunch of politicians. My take is we have to make some fundamental realizations that what we're doing as a society isn't working - particularly with regards to education, healthcare and financial planning. History is often the best teacher. What did we do before we all starting thinking of ourselves as financial whiz kids?


Tom Murphy,  April 17, 2010

There's nothing wrong with hedging a bet. We all do that, and wisely so. But there's a problem when a big financial firm like Goldman Sachs publicly touts the value of investing in mortgage-backed securities while quietly betting that the very same securities will plunge in value. That's what the big bank is accused of doing in an SEC lawsuit. The smoking gun appears to be an email from a boastful broker who called himself "Fabulous Fab" who was behind the scheme. All this comes up just a week after Goldman said in a letter to investors that it would never do such a thing. This kind of thing may go on all the time, but it's hard to spot unless someone is dumb enough to describe it in an email. Even then, finding that email is like searching for a needle in a stack of cyber-hay. What can be done? The Obama Administration is pushing for major financial reforms that would dramatically tighten regulations on bankers. The only people who could be against that are rich bankers, the politicians they control and the weak-minded saps who can be lured into thinking of that as big government.


Pamela A. MacLean,  March 8, 2010

Nothing beats that sunny, nearly-Spring day when you finish your taxes and ship them off - with the possible exception of the day a refund check arrives, should you get one. Mine are about to head off in the mail but a few last-minute things need rechecking to avoid the most typical of bonehead mistakes. You may not think you'll do this, but trust me, millions of people do some silly thing that thwarts a refund and gets them a nerve-wracking letter from the IRS. First, double check that Social Security number, or both numbers if filing married. More people leave them off or transpose numbers than you would believe. Make sure you've listed all bank account, brokerage or other income, no matter how small on the return. Banks and brokers are required to file copies with the IRS and the agency matches them eventually. You may end up with a bill two years from now with a fine and interest that has been racked up all the while. And once you've finished, don't forget to sign the darn thing. If filing jointly, you BOTH have to sign. Once you've checked over the basics, put it in the mail, eFile or drop it off personally. Then go enjoy the Spring.


Tom Murphy,  February 3, 2010

It seems like everyone in Washington has a different idea of what health reform should look like, so I thought I may as well weigh in. First, let's make it "benefit" reform because, frankly, health isn't the only problem. A lot of people call in sick when they have to care for kids or aging parents. General fitness is a problem that drives up health costs. And fighting in courts over legal claims is another problem. Doesn't it just make a lot of sense to build benefit plans around the needs of real people? Wouldn't workers be more focused if they didn't have to sneak in phone calls to assisted living centers or run out early to their kids soccer games?  If employers encouraged physical fitness - say, through a cheap cycling-commute program - wouldn't health costs drop? Do we really need to battle over health claims in a court room, or can we adopt "no fault" rules that have worked in most traffic claims? As Cecily O'Connor's recent story found, workers are more productive and happier when they don't have to bend the rules. And employers don't need an act of Congress to change their own rules. To quote our friends in the sneaker world: "Just do it."


P.A. MacLean,  December 9, 2009

It should come as no surprise to marketers that boomers love technology and want iPhones, iPods and Blackberries. The catch phrase of the 1980s "I want my MTV," helped launch music videos into popular culture.  Those '80s teenagers now are boomers already flocking to a welter of new technologies.  And they will be outspending their younger counterparts for the latest gadgets and gizmos, from GPS-enabled running shoes to keep track of fitness efforts or the latest applications relevant to their own lifestyles.  We like the tools that make life simpler and functional.  We may not be looking for the latest game, but we will be looking for cool tools that free us from routine tasks, track money and keep us connected to family and friends.  This can only be good news for the broader economy, giving the recession a swift kick in the behind in the next couple years. 


P.A. MacLean,  October 30, 2009

It's pretty sad when the best source of news is a comedy show, but there I was, watching Joe Biden tell John Stewart more about the economy than I'd read on the page of Barron's and The Wall Street Journal. He was characteristically blunt, saying things are bad. Unemployment is high and consumers are frustrated. He talked about the pain a parent feels when he has to tell a kid that he has to move away to find work. And the vice president said there may be no upturn in employment until the spring of 2010 - a more honest assessment than I've heard anywhere else. He pointed out that economic growth had reached as high as 6 percent in past recessions before we saw job growth. All that bodes ill for the holiday shopping season. It bodes ill for construction workers, who saw an unexpected drop in new home construction last month. It bodes ill for manufacturers, because there aren't many people buying what they make. And it bodes ill for the US, which has borrowed enormous sums of money from China to fight wars and to bail out banks. Meanwhile, those banks are paying multimillion-dollar bonuses to some executives, and the very rich in our nation are getting even richer in a booming stock market. Something is dangerously out of balance. And a world out of balance is not sustainable.


P.A. MacLean,  October 30, 2009

Whether Financial Industry Regulatory Authority, known as FINRA, is focused on retirement scams, or alleged abuse by individual brokers, its chairman Rick Ketchum says what’s really needed is one central repository to track potential market manipulation. Market fragmentation, away from the old days of the New York exchange hosting and tracking most trades, has made it tougher to spot insider trading, front-running, abusive short sales and a variety of shenanigans. He cites the database of Intermarket Surveillance Group, with members of 23 self-regulatory groups in five countries, as a good start that should be expanded. The idea of a single place to track market movements in seconds rather than days is a good one, but it doesn’t get at a niggling problem Congress and regulators have failed to address. How do you deal with “captive” regulatory agencies that see regulators leave for high-paying jobs in the very industry they monitor? The failure to spot the Bernie Madoff Ponzi scheme pointed up this problem quite well. Evidence of misconduct is one thing. Taking action against scofflaws is quite another.


Tom Murphy,  October 4, 2009

People usually feel good when the stock market is booming, and not just because their holdings are worth more. For decades, stocks have been a forward-looking indicator of the way business is heading.  And through the 20th century, that has usually translated into good times for workers - the middle class. Those consumers account for about two-thirds of the US economy, so if they're happy, that usually bodes well for business. If business did well, consumers got jobs and spent money, so business did even better, and so on. But that happy cycle may be broken now due to globalization. Now business can do well by firing workers in the US and hiring workers, cheaper, overseas. Their profits go up, their stock goes up, but their US consumers have less money, so they spend less. This seems to be happening. Major stock indexes rose more than 50 percent from their lows, but US unemployment is soaring - and just before the start of the holiday sales season. This is trouble. If you want to know how the US economy will fare in the year ahead, ask the consumers on whom it rests. They're facing the highest unemployment rates since 1983. As a result, factory orders are falling. That all tells me that consumer confidence has become the best forward-looking indicator of our troubled economy.


Jennifer Meacham,  September 19, 2009


I have tinting on the back windows of my car, and love the anonymity from the back seat. But tinted windows inside a home? Who knew. Turns out that Angie's List -- the members-only contractor's ranking site -- has a new section for window tinting companies that apply products said to reduce glare, reduce heat and reduce energy costs. There even are clear "tints" that do the trick. Here's the clincher for me: Not only can it help keep my house cooler in the summer and warmer in the winter, but I won't have to replace my historic, wood bungalow windows to do it! Turns out the government's Recovery Act stimulus energy tax credit applies to this stuff as well. If you're interested too, feel free to check out this article with more details: "Window tinting to save money?"


Jennifer Meacham,  September 5, 2009

Flipping though a recent BusinessWeek, a strange title draws my focus: "The Incredible Shrinking Boomer Economy." Oh, really? Of course, everyone from luxury car makers to hoteliers face lower sales in this recession. Unemployment is at a quarter-century high. Disposable income has fallen and the national savings is up. But while actual spending is down for every demographic, economists expect boomers to spend one out of every two consumer dollars in 2010 for the first time ever. So the boomers' share of the overall economy is expanding, not shrinking. Boomers in general have learned from experience that consumption does have its place. It's time to get the debt paid down (or consider taking on little debt at all), work a few years more and enjoy just what you have. But  please don't blame the boomers for the shrinkng economy; they're spending more than their fair share.


Tom Murphy,  August 25, 2009

It's just oh-so heartening to see all those smiley faces being plastered all over that ugly economic backdrop. We see the stock market bears on a tear. We hear the Fed making happy sounds. We even hear echoes from around the world of optimistic words spoken here. So it is with a bit of trepidation that we point out foreclosures are rising, oil prices are bubbling up again, the unemployment rate is at a quarter-century peak and, good god, cash-strapped parents are putting back to school supplies on lay-away at Kmart. (They really must expect imminent economic improvements.) The cash-for-clunkers program was fun, but now that everyone who needed a new car has one, is anyone going to be buying cars without another taxpayer-funded $4,500 deposit? Economists are hoping consumers are ready to start spending freely again. I'm personally doubtful they will, at least until they know whether they can earn enough to feed their families and stay warm this winter. And with the flu on the way, it would be nice if they didn't have to worry so much about health insurance, either.


Jennifer Meacham,  August 5, 2009

Poverty and retirement. Two words no one likes to hear together. Yet millions of elders are facing just that. On the flip side, some are jumping into it voluntarily. The spokesperson for the Corporation for National and Community Service - the federal agency that oversees AmeriCorps, SeniorCorps and other service programs - tells me that applications for its poverty-level positions in 2009 are triple what they were in the same period of 2008. A major component of that growth, he said, are boomer applicants looking to reenter the workforce or needing a way to absorb health costs. Indeed, though AmeriCorps' 100-percent-coverage health plan doesn't cover pre-existing conditions, its $5 co-pay for doctor's visits and $25 co-pay for non-accident ER visits is welcome relief to those living day to day. Meanwhile, one of the AmeriCorps workers I interviewed is performing a job that could help us all if played out in communities across the U.S. She's a gleaner - someone who picks excess farm/garden fruits and vegetables and hauls it to the local food bank for distribution. In my walk just around my own neighborhood I see unpicked plums, pears, apples, walnuts and more littering the sidewalks and largely ignored. Combating the hunger-effects of poverty from the ground up can be as easy as asking the property owners to gather the fruit and offering up what you don't eat for free - whether at a food bank or at the curb. Our hungry neighbors - and our own health - will thank us.


Jennifer Meacham,  July 25, 2009

With the number of centenarians jumping from an estimated few thousand in 1950 to more than 340,000 worldwide today, it's a real possibility you'll live to be 100. Indeed, Associated Press writer Hope Yen reports that AARP is trying out a 10-month pilot project in Albert Lea, Minn., where the ultimate goal is that every participant lives for two years longer. Hard to measure... but worth a shot. The question is this: Say you were to live to 100, or even two years more? Could you support yourself with your current resources through those years. I certainly can't, but I'm getting there. Insurance will pay me if I'm sick, so I'm covered there. My retirement account is growing steadily, with automated deposits plus carefully picked investments, to eventually give me a non-working salary sometime after age 59 1/2. There are plenty of other variables, including the thought that, given my family history, it's highly unlikely I'll live to 100. But I can always try.


Jennifer Meacham,  July 5, 2009

With unemployment at a 26-year high of 9.5 percent, all is not lost. The number of newly laid-off workers filing for unemployment insurance has actually been dropping since early April. Granted, that's partly due to fewer jobs from which to lay people off. Meanwhile, companies such as 1,500-employee Nyorecon are making company-wide pay cuts, and the self-employed like Dallas-based PR rep Amy Power are cutting retainers to save the customers still on the books. But business keeps plugging on. As for boomers, the Partnership for Retirement Education and Planning reports that our salvation will be in lifeboats such as disability insurance to protect against the unexpected. (You can calculate your odds for disability here.) Indeed, one-third of boomers who had injuries in 2008 were hurt at work, according to a National Institute for Occupational Safety and Health study. However, 38 percent of them did not file for workers' compensation. I would venture to guess that disability insurance claims may follow the same track. Is your lifeboat ready? (You can check with this tool: Is There a Gap in Your Disability Plan?) Once your lifeboat is in place, be prepared to use it by finding out the criteria that classifies you for disability. In some policies, disability pay kicks in with as little as losing 10 percent of your sight. You may already qualify.


Jennifer Meacham,  June 25, 2009

Until now, IRA accountholders could purchase real estate within their IRA that eventually they could take as a distribution - and live in, vacation in or pass along to family members. New rules from the IRS, released quietly within the past few weeks, prohibit that use. But while the IRS is cracking down on IRA real estate purchases for future use, its changes also put a stamp of approval on paying yourself as property manager. The fee just must be "reasonable." Property management firms typically charge between 3 percent and 5 percent of the properties' gross income. Salaried managers with multiple properties make between $35,000 and $75,000 for their services. If you own property within your IRA, your IRA custodial firm could be cutting that check to you. (The Institute of Real Estate Managers charges $175 for its guide to Certified Property Manager salaries). For those pinching pennies, it's time to stop thinking of your IRA as a way to fund that future dream property. Instead, start thinking of whether it may be financially prudent to use it to help you fund your now - and get a long-term rental in the process.


Jennifer Meacham,  June 17, 2009

If you're one of nearly 20 percent of the American population aged 65 or older, or one of 44 million caregivers for those in the older age bracket, or someone receiving IRA payments as a beneficiary this could be good news or bad news - you decide. As part of the "Worker, Retiree, and Employer Recovery Act of 2008" signed into law by President Bush on Dec. 23, 2008, the usual IRA distribution schedule has been waived. Owners of traditional IRAs, who usually must start taking IRA distributions by April 1 of the year after they turn age 70½, don't have to take that withdrawal in 2009. We know that a growing number of Americans are spending thousands each year to help care for their parents. We also know that the economy has been taking a toll on daregivers. There is some relief with federal programs helping caregivers navigate Medicare, with a break for those 70 1/2 and older, but as we all know, medical expenses make up only a part of the costs of sustaining life in retirement. So while this waiver is good news for those whose IRA values were hit by the falling markets, who now ideally can take the year to regain some of those losses before being required to sell or transfer out those assets, it's the opposite side of the coin for those who actually need their IRA distributions to live on. They'll have to cut their losses in yet another case of the rich getting richer and the poor staying there.


Jennifer Meacham,  June 9, 2009 headquarters was temporarily without its beloved editor in chief, Tom Murphy, but we'll be all the richer for it. He just served a fellowship through the National Press Foundation in Washington. The general topic: Retirement Issues in the 21st Century. It's the third year a RedwoodAge contributor has won the same fellowship. I participated in 2007, and RA Senior Writer Cecily O'Connor completed it in 2008. But this year the topic areas are so much edgier.  As Murphy reports back, he brings a picture of the shifting coverage in financial reporting. Instead of focusing on annuities and long-term-care insurance trends and how to spend your nest egg, he's reporting about how people are just trying to get by. According to Murphy's latest report, the greatest obstacle to retirement now is poverty - found most prevalently in America's non-white populations. His findings mirror reports I've produced out of Portland, Ore., where one in four Hispanics live below the poverty line. We welcome Tom back, along with the newly accumulated insight he brings.


Jennifer Meacham,  June 2, 2009

With news of Boomers sacrificing 401(k) and IRA contributions to pay for their children's education comes this note from a kind reader: "I don't like 401(k) plans or IRA plans," he writes. "I'm past the penalty age for early withdrawal but many people are not. If they need their money it costs them to get it. In today's economy, more and more people are needing to withdraw their money and will not be able to repay it. There's something not right about that.  We're living in scary times and feeding the family will come before worrying about the penalty of early withdrawal." I'll respond here: I concede that, in this and many other cases, the early-withdrawal penalty does indeed equate to a 10 percent additional tax on those who arguably need the money most. (Those with newly-opened SIMPLE plans pay 15 percent more.) The concept of the penalty is a good one - to encourage long-term participation so taxpayers do actually save for retirement instead of tapping their 401(k) or IRA for incidentals. We all know how quickly an account can dwindle as soon as that happens. However, if there are changes to be made in regards to 401(k)s and the current stimulus packages, I would indeed take a look at governmental restructuring of 401(k)s and Traditional IRAs so that - like Roth IRAs - contributions can be withdrawn without penalty after five years in the account. This could provide a simple way to boost consumer spending power (a key economic indicator) while funneling the 10 percent savings directly to the consumer's pocketbook (saving the I.R.S. a heck of a lot in stimulus-check stamps).


Jennifer Meacham,  May 19, 2009

Economists are waiting with baited breath to see how retail earnings will impact stock prices. Big retailers will start announcing their results this week. I  don't quite know what to expect. Will there be crafty maneuvering of expenses to make the retailers appear more profitable than they actually are? It's an age-old strategy in companies with shareholders - companies legally can get pretty creative with accounting to raise or lower profits to try to keep their own stock prices steady. The interesting thing here is that these retailer reports are being heralded as the be-all-to-end-all for deciding whether we're in a deepening recession or a rebound. I think we may just see some even more interesting accounting from retailers this year as a result. After all, the retail chains have a vested interest in making sure consumers want to spend. How better to boost consumer confidence than to make them believe that their neighbors are again spending freely. You can bet I'll be reading the quarterly reports' fine print.


Jennifer Meacham,  May 13, 2009

As boomers leave their higher-stress careers, they're trading down on salary but still managing to find gigs with health coverage. We know that's good news for our long-term bottom line. Still, like most age groups these days, they're having to get by on less. For those already getting Social Security, there's a new $250 stimulus just for you (checks are going out now, and should arrive prior to June 4). It's not much. However, it's incremental savings like this that helped a few hundred Women In Red pay off $4 million in credit card, house and other debt in two years. Indeed, saving just $40 a month gives boomers $60,000 to play with in their 80s, according to MSN Money's Savings Calculator. However, too many have let the fear of tight finances keep them from putting their remaining cash into good interest-bearing accounts. Savings plans like Wachovia's Way to Save, with 5 percent interest and a 5 percent match up to $300 after the first year, provide little excuse for not putting that next $250 to use for the long haul.


Jennifer Meacham,  May 6, 2009

Nearly 20 percent of caregivers reported a decline in the quality of care their loved ones receive as a direct result of the recession, according to a national survey on caregiving. With money stretched thin, it's hard to keep up with assisted living costs averaging from $1,901 per month (North Dakota's state average) to $4.897 per month in Bridgeport, Conn. A much easier hit is a little bit of prevention, in the form of long-term care insurance to cover in-home care sometimes even by family members, nursing care and all care for those with cognitive impairments. Monthly rates for a long-term care policy. with $3,100 in monthly coverage, run $25 for a 55-year-old insured through the Knights of Columbus to $554.50 for a 79-year-old through Genworth Financial. (Kansas' Attorney General office has a comparison of the various rates and plans as a starting point.) That's a heck of a savings. If assisted care is in your care-giving future, consider the time spent researching this option "time well spent."


Jennifer Meacham,  April 28, 2009

Out of all the population groups, it was boomers who feel the most concern for rising prices, according to a recent Harris Poll. Sixty-one percent of those Boomers feared not having enough money for emergencies. Thirty-six percent feared not having enough even for basic necessities. As shocking as that sounds, boomers weren't - and aren't - alone. Reading into the study, at least 35 percent of all adults now wonder if they'll have a next meal, a home of their own or a doctor to call when that metaphorical "tomorrow" comes. The Harris Poll results echo those found in 2008 research from Hartford Financial Services Group. Contrast that to results from Hartford's 2007 study. The top concern that year was "Enjoying my life." Oh, how times have changed. 


Jennifer Meacham,  April 21, 2009

Recently out of a job and in need of health coverage? For those laid off after Sept. 1, 2008, and through the end of 2009, the stimulus package offers 65 percent off that expensive COBRA plan. That's good news for people like my friend Nana in Myrtle Beach. The discount knocked her family's COBRA premium from $1,000 per month - a cost she paid from her dwindling retirement fund - down to a much more manageable $350. For those who couldn't afford COBRA payments like that $1,000 per month and thus opted out, the even better news is that there's a second chance built into the stimulus. Check this story, "COBRA help for small biz workers," to check your eligibility. You have 60 days to get in on the offer. Meanwhile, here's hoping this plan foreshadows changes in the health care insurance system that will help all of us afford coverage down the road.


Jennifer Meacham,  April 13, 2009

New research shows that 55 percent of boomers would like access to financial planners through their employer retirement plans. Not surprising, given the growing uncertainty in picking growth investments suitable for supporting boomers in the "golden years." Another study indicates a further reason for direction in financial picks: our DNA. People with a high-risk version of the dopamine gene take on riskier investments about 25 percent more often than those with the gene's more moderate-risk common version. Indeed, genes account for roughly "30 percent of variation in risk-taking behavior," estimates the author of the study. It seems garnering a secure financial future is indeed a science, one employers would do well to fund.


Jennifer Meacham,  March 29, 2009

Despite $100 million in cuts announced March 20 and a stamp price hike to 44 cents come May 11, Postal Service executives are saying they'll lose $6 billion in 2010 if Congress fails to pass cuts of postal service retirement health care benefits and Saturday delivery. Reporters quickly uncovered that the postal service pays for its executives' housing, recently purchasing one a $1.2 million home. It's not as bad as it sounds, since the Postal Service sells the home afterward - losing a reported $58,000 on each one rather than the endless costs of high-price leases. However, insiders say there are other, greater problems, such as its "use-it-or-lose-it policy" on budget expenditures where this year's savings are cut from next year's budget. "We have every incentive to just spend without thought," one postal service employee tells me. "So why aren't the departments that save getting the bonuses?" Good question.


Jennifer Meacham,  March 24, 2009

The feds are buying bad mortgage loans from banks, planning to split a portion of the cost with private investors. This brings $500 billion in toxic mortgages up for grabs, with investors taking half of the profits. The bottom line question is this: Are these delinquent loans still collectible? Can the buyers get any money back from the consumers that got the loans in the first place, or sell the home for more than the mortgaged amount? This is the only way to profit on this deal, other than selling off the uncollectible loans at a higher price to other investors down the road (a laughable notion for anyone, except, say, the government). They could be a great deal for investors. They'll pay only 6 percent of the past-due value of the mortgages for the option to get the whole value of the mortgages when the homes sell. (Note that these notes can be purchased through investment fund managers who participate in the FDIC's new Legacy Securities Program; $25,000 minimum purchase required.) Meanwhile, the FDIC will give loans to eligible investors to cover their cost, charging a loan origination fee and paying back the investor's loan as consumers make payments.


Jennifer Meacham,  March 16, 2009

The pitch is blatant: " Are you sick and tired of watching your hard-earned retirement go up in flames on the stock market? Purchase gold, silver, platinum or palladium and hold your investments in an Individual Retirement Account" instead. That's the "advice" of a growing number of virtually unregulated IRA-holding and commodities-selling companies - most charging hefty fees for their services, and all setting desperate retirement account holders up for gold's inevitable bubble burst. The notion that gold at this point will preserve retirement account value is laughable; all you have to do is look at oil's current $48 price per barrel to see that those sucked into peak-priced commodities (like oil's late-2008 peak of $145) are destined to lose their shirt. So while IRAs can invest in bullion and certain gold or silver coins, the pitch is representative of the types of financial schemes - from "gift clubs" to advanced pyramids - making inroads during this recession. As my spry grandmother still reminds me: "Nothing ever comes free; at some point, someone will have to pay." For boomers faced with this new rash of financial schemes, it's time to ensure you won't be paying that price.


Jennifer Meacham,  March 9, 2009

It's no secret that stocks like Citigroup, Ford, and General Motors are having a hard time. The Dow Jones Industrial Average - the stalwart of high-priced stocks - sits below 7,000, half its high over 14,000 nearly two years ago. And at least one economist says the Dow could drop as far as 4,000 before the ride downhill is over. Is there a silver lining? Well, Ford's F150 pickups are selling at about half the price they were two years ago because it's no longer fashionable to drive a truck. Now, they're once again viewed as a necessity for workers, many of whom want smaller trucks. Is that good news?  Some pundits suggest that corporate instability, as played out on Wall Street, indicates a broken system that needs to be replaced. But with what? Perhaps we need a healthy dose of prudence, from CEO pay to practical plans for meeting the needs of America's new consumer: long-range thinkers pinching pennies now to plan for tomorrow. Convince consumers that we're all on the same path, and it's all down hill from there.


Jennifer Meacham,  March 4, 2009

Those worried about their finances aren't alone. And conditions aren't likely to improve until 2010, according to forecasters at the Association for Business Economics. There's concern about hyperinflation, which Investopedia defines as "a situation where the price increases are so out of control that the concept of inflation is meaningless." It happens when an economy a) is in depression territory, b) has a massive supply of new money and c) grows slower than its money supply. With GDP down at an annualized rate of 6.2 percent in the last quarter of 2008, the U.S. on the surface has all of the above. That aside, many experts say that you've already made it through the near-worst of it, so selling now may be shortsighted. But think about having a sit-down with your 401(k) plan documents and retirement account advisers. For those stocks in your portfolio that are not expected to rebound, now is the time to shuffle that money into other under-valued but promising investments.


Jennifer Meacham,  February 23, 2009

Investors sold $268 billion in securities and $251 billion in mutual funds over the most recent quarter measured by the Federal Reserve's Flow of Funds. Many are moving that money into Treasury debt and gold which are traditionally considered safer investments. However, with under-monitored treasury bailouts and peak prices on gold, the yield on Treasury debt has tanked and gold could very well be headed for the same speculative havoc reeked in the oil and real estate markets. At the same time, the Treasury Department is brazenly moving forward on production of six different gold coins this year. It's required by Congress to buy gold from American mines, but contrary to helping American workers, these mines are highly mechanized, highly dangerous, economically costly and largely polluting. The Treasury is paying some of the highest prices ever for the gold it's putting into these new coins, feeding the frenzy. My feeling? If you buy into gold or Treasury debt now, you're following he crowd. And if history is any indication, when masses of investors speculate, the market's due for a crash.


Jennifer Meacham,  February 16, 2009

I just found out that The United States Mint this year plans to release four new Lincoln penny designs. And I'm outraged. Sure, I understand the Lincoln symbolism, being that this is the bicenntial of Lincoln's birth. However, these mintings are yet another waste of federal tax dollars. First, it actually costs more to make a penny than the coin is worth (1.4 cents in 2006). Second, Congress has talked of phasing out the penny all together. So why are our federal tax dollars, in a time when the economy is already stretched, going to create four - count 'em, four - new pennies? Sure the U.S. Mint says the Presidential $1 Coin Act of 2005 allows the new mintings, but should the U.S. Department of the Treasury actually be taking that option in this time of financial distress. I say "No!" If I ever receive one of these coins as change, even though I'm a collector, I'd feel a moral obligation to recirculate it. That tax dollar, in the form of a new Lincoln penny, would then be partly on its way to actually getting its "money's worth."


Jennifer Meacham,  February 10, 2009

So, your purse is empty. Some experts warn against taking a loan from your 401(k) balance. However, other experts say there is a time and place for anything, if it's done right. The interest rate on a 401(k) loan is far superior to any other loan (you pay it directly to yourself, boosting your 401(k) balance in the process). The warning comes into play only if you can't pay back the loan every month as arranged, which is a challenge more borrowers are facing as they lose their jobs. You'd be charged an early-withdrawal penalty if you can't pay it back as scheduled, and then you'd be taxed on the loan amount as if it were income in the year you defaulted. So, a default not only wipes out any interest-rate savings but also boosts your taxable income in a year where funds may already be tight. After leaving your employer, rolling a 401(k) over to an IRA offers further funding options. So don't rule out 401(k) financing entirely because there are risks with defaulting. Just factor the risks and plan for the worse-case scenario, like you should with any investment or money decision, before deciding where you'll turn for a loan.


Jennifer Meacham,  February 3, 2009

Home Depot may be closing its Design Centers, but boomers are still busy remodeling their empty nests for retirement. HGTV even offers a tutorial for contractors that promises to explain how to design, build and remodel homes to meet the needs of aging baby boomer "while providing style and convenience."  Which remodeling projects will give boomers the most value for their money? A survey by Lowe's purports to say which projects are paying off. Its Project Payback Calculator - though not fool proof - could help determine how the remodeling projects you face might impact the long-term bottom line.


P.A. MacLean,  January 26, 2009


The Department of Veterans Affairs has been underreporting the costs of nursing home care it provides for veterans, according to a little noticed report by the Government Accounting Office, which looked at both mandatory and discretionary services. The fine print of the VA's long-term care strategy states it plans to keep its total nursing care workload stable and that is going to mean reduced service to vets getting discretionary nursing care from the VA. Keep in mind this discretionary care accounted for three-fourths of the VA's nursing home workload in fiscal 2007. And the VA spent about $4.1 billion in long-term care for vets. What does this mean?  When you look at sweeping numbers for the $825 billion economic stimulus plan. keep in mind the details that rarely make headlines. The VA may low-ball its cost estimates, requiring service cuts, at the very time demands have begun growing in a way that is likely to continue.


Tom Murphy,  January 20, 2009

There's no undoing the last eight years, but Obama has a chance to undo the last four, at least financially. All things considered, America is just about where it was four years ago in a purely fiscal sense. Home values and stock are both about at the same levels. The dollar and the price of oil are about back to where they were then. And opportunities about for those willing to take the risks that go with them. Not everything is the same. The federal deficit looks like it will be a record $1.19 trillion this year and the unemployment rate has jumped to 1992 levels, and is likely to rise more. The average boomer has lost 40-50 percent of their life savings. But that glass is now half full. With the right moves, we can get back to those record levels of 2008, thought it might take another four years to get back there.


Jennifer Meacham,  January 9, 2009

You may have heard that online retail sales dropped 3 percent to $25.5 billion this year during the Nov. 1 to Dec. 23 holiday shopping season. What's gone under-reported is that online spending in three categories hit all-time online sales records: Sports/Fitness, Video Games/Consoles/Accessories, and Apparel/Accessories. Online sales of electronics dipped 5 percent, but that was compared to a 26 percent drop in stores. Overall, online spending rose 7 percent for households earning more than $100,000, but fell for everyone else. I say it's not so much a case of the rich getting richer, but rather a case of those watching a tight bottom line putting the money where it should be when times are tough - in products they want, at a steal.


Jennifer Meacham,  December 25, 2008

The economy hasn't hit bottom yet, says Kirby Daley, senior strategist at Newedge Group. In his estimation, the economy's bottom won't come until six months after consumers start spending more. If that's the case, we have a long way to go because spending fell again last month and is likely to fall further. Daley, appearing on CNBC, said to check the federal flow of funds report for an "uptick in the annual rate of change of the aggregate net worth of the consumer." Indeed, the net worth category hasn't been this low since 2003. Meanwhile, the Department of Commerce's Bureau of Economic Analysis tabulates consumer spending's ups and downs. (Here's its October Report.) If you buy Daley's line, the economy should rebound after six months of positive numbers in the "Personal consumption expenditures" category, which hasn't been positive since June.


Jennifer Meacham,  December 19, 2008

As Treasury Bills hit the lowest yield ever and short-term Treasurys hovered near zero, one observer noted, "Things have gotten so bad that investors would rather get nothing than risk further losses." Meanwhile, after peaking at $147 a barrel in the spring, oil tumbled below $40 for first time since 2004. What a crazy mixed up time. Those investing in Treasurys are doing it as a feel-good measure,  knowing there will be government there, when all of this shuffling is over, to not only pay back investors but spearhead hoped-for economic growth. Meanwhile, the drop in oil prices will have "who knows what" impact as automakers shift to alternative fuels. Will stocks ever rebound? Will SUVs make a comeback? Oh, how the world turns.


Jennifer Meacham,  December 4, 2008

I did it. I bought my first stock online. I'm not depressed by the National Bureau of Economic Research's discovery that we are indeed in a "recession." Indeed, this proclamation is refreshing. It means that the shoppers and investors who are ready now will come out ahead in the long run. Now is the time for some of the best buys on Wall Street, like the one-time $35 stock I scored for $2.80. Now is also the time for some of the best deals on Main Street, from household energy-conservation upgrades for saving money long-term to real property purchases like the $1 properties on Detroit's Multiple Listing Services' database (open to certain service-industry workers). I know I'm being optimistic here. Certainly I understand that I could lose everything I just put into that newly acquired stock. But meanwhile, it feels good to let history do the talking. Those who were able to mobilize during the Great Depression, who had a little money to diversify, not only survived but thrived. How about you? What's your silver lining in this now-official recession?


Aaron Crowe,  December 2, 2008


As a lifelong newspaper journalist, I hate to see anyone in the news business lose their job. I know what it's like. Now, I read in the New York Times that TV news anchors are losing their jobs as companies consolidate. A Denver anchorman worries that viewers will no longer be able to grow old with the news anchors they watch on TV every night. While I don't think that's as sad as seeing your local newspaper slowly wither, I think it's a shame that some newscasters won't be around with their viewers for a lifetime. I grew up watching Dennis Richmond on Channel 2 in Oakland, Calif.  He retired on his own terms, but that's a rarity today. Experienced anchors not only have an authoritative voice and know a lot about the metro area they work in, but give a sense of continuity that is missing from local newscasts.


Tom Murphy,  November 20, 2008


Sure, prices are falling like a cold, autumn rain. But don't run out and by that new Escalade just yet. Consumer prices just took their biggest dip in the 61-year history of the CPI, but the plummeting cost of fuel accounted for most of that. Food prices rose 0.3 percent in October after rising at about double that rate the month before. If that keeps up, we could see food prices rising 5-6 percent over the course of a year. And that's not good news because the Federal Reserve is warning the economy won't do much of anything for the next year - the number-crunchers predicted something between a decline of 1 percent and an increase of 1 percent. That means you probably won't notice much of a change, if you're working. But the unemployment rate is on the climb and taxes are rising, so you probably will feel something. What's the smartest thing to do? Just what people ARE doing: sit on your wallet. Retail sales tumbled last month because the American public senses a really bad time is coming. There's more you can do: go over your investments - including any savings you have - with a professional and make sure you're in a safe position. You can keep yourself fit and eat healthy - it's the best way to keep medical costs lower. And you can keep up the good job you're doing on saving fuel. It may be cheaper now, but it isn't free and driving still hurts the environment.


Tom Murphy,  November 8, 2008

I love it when some big financial company tries to sell you some of their services, talking about how it'll "give you the freedom to live retirement on your terms."  Ah!  But then they go and spoil it by saying "Past performance is not an indication of future returns."  That basically means, "well, it might make you rich or it might leave you penniless, we have no freaking idea because nobody can predict that." Today, the whole world economy is in that boat. Everyone is looking for "the bottom" in the stock market so that they can jump in and benefit from "the recovery" which is what investors call "the rapture."  Of course, the bottom could be zero. And who says there'll be a recovery? If you have a 401(k), you probably never stopped buying stocks as the market declined, which will be a good thing <i>if</i> the market starts going back up during your lifetime. But now isn't the time to take a lot of cash and buy stock, unless you have a crystal ball that says "the bottom is now."  If you do have such a device, please share it. All of Wall Street - and there's actually a lot of pretty smart people there, despite all appearance to the contrary - and many world leaders would like to know what's going to happen. Both Bush and Obama are trying to figure it out and have come to different conclusions. And a quarter-million Americans who lost their jobs last month would like to know. If you don't have such a device, my suggestion is: do as the squirrels do - gather nuts and prepare for a long, hard winter.


Jennifer Meacham,  October 31, 2008

It doesn't surprise me a lot of people will start claiming Social Security as soon as they blow out 62 candles on their cake. What strikes me is how many are unaware they'll also take a slice of their spouse's check, and that they might be better off waiting a few years before claiming any benefits at all. The Social Security Administration says "a spouse receives one-half of the retired worker's full benefit unless the spouse begins collecting benefits before full retirement age." If the latter happens, then, oops, the spouse's benefits are reduced. So the millions starting at 62 will not only get 25 percent less on their own checks, they'll reduce their spouse's share to 37.5 percent of their payments, rather than 50 percent, if they had waited. Gee, thanks, honey.