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.
Jennifer Meacham, October 14, 2008
If you're going to join the millions of boomer entrepreneurs leaving 401(k)s to go into business for themselves, then get started on the right foot. Don't cancel your retirement plan. Instead, roll it over. Once you've put that money into an IRA, experts say you can indeed invest it back into a business. And that business, by all accounts, can be your own. In short, if you're thinking of dipping into a retirement plan to fund your dream (outside of the way proposed by Sen. Obama), at least save yourself early-withdrawal penalties and current year income taxes. When times are tight, every thousand dollars saved is a thousand dollars earned.
Tom Murphy, October 8, 2008
More than once recently, I've heard people say something like this: "I don't care if stocks go down. Those jerks on Wall Street deserve it." Well, if what happened on Wall Street stayed on Wall Street, I'd agree. But the truth is that most Americans own stocks, even if they don't know they do. A city janitor might own them through a pension plan, and there was testimony in Washington that pension funds have lost $2 trillion recently. Other workers might hold mutual funds through a 401(k) that buys and sells stocks on their behalf. The average 401(k) was only $58,000 last year. Now it may be closer to $39,000. All in all, nobody is going to feel the impact of a stock market crash more directly than people over 50 who don't have time to earn another fortune before they retire. And there isn't likely to be a $700 billion bailout for them.
Jennifer Meacham, September 28, 2008
In the midst of bailout talks to "rescue" America's over-exuberant lending and financial institutions with $700 billion, the House has passed a second, more reasonable plan to help the actual citizens of America deal with rising inflation, lost health-insurance coverage and unemployment. It's a mere $61 billion to fund the plan and the White House, gets this, says it will veto the plan because "would cost too much." Indeed, past bailouts for big business cost the US no more than $125 billion in the case of the 1989 S&L debacle and no more than $250 million in loan guarantees in the case of Lockheed Aircraft Corp.'s 1971 bankruptcy bailout. Do I think that the government should bail out Wall Street and the financial services sector? Absolutely not! How many more industries will feel that now is the time to get free money by claiming insolvency if money, without checks and balances, is indiscriminately distributed to every institution with open hands? It is the free market that got us here. Let the free market decide who's going to take the hit and who's going to scoop in and take any profits that remain.
Cecily O'Connor, September 19, 2008
It seems like there is a new concern every day on Wall Street. So it's times like these that I have to remind myself I am an individual investor, not a broker. When I read headlines or listen to interviews on TV that raise my anxiety, I know I need to take a step back - even through the government's bailout of Fannie Mae, Freddie Mac and AIG confirms clearly that the financial headaches continue on Wall Street. I hope that words like "bear market," "financial crisis" and "recession" are only part of the short term, and will have little effect on my portfolio 20 years from now. And instead of admonishing myself because I could have sold that stock, should have invested in another fund, or would have done things differently, I'm going to keep my cool. And I'm also going to shut off the TV.
Tom Murphy, September 12, 2008
Many societies - the US isn't usually among them - look to their elders for guidance. After all, they've been through more than most of us, including financial crises like the one that we're in right now. How can a 20-year-old know if times are really hard unless he's been through some downturns? So it is with real interest that we see most Americans over 60 believe this is the most difficult economic era they've ever seen. Let's see, a person who is 60 was born in 1938 - the tail end of the Depression. So it goes back at least that far. There's been war, recessions, boom times and stagnation during that time. There's been higher unemployment, and higher inflation. But, all in all, 53 percent of our elders tell us this is the worst. Should this be such a shock, considering that 1 in 5 senior citizens now lives in poverty, according to the government's own definition of poverty? New York city puts the number at 1 in 3. Things have been getting worse for seniors for many years, and the worst may be yet to come as 78 million boomers charge towards retirement. So, mind your elders.
Tom Murphy, September 6, 2008
The political conventions have come and gone along with the predictable promises of tax cuts and future economic growth. If only it were that easy. Boomers have spent their whole working lives paying taxes, Social Security deductions, mortgages and the bills for other family members - old and young. Now, as the oldest boomers start to retire, home values are faltering, threatening to wipe out their equity. The jobless rate is at a five-year high. Stocks are tanking on the dire outlook for the economy. And Social Security is in the political line of fire, especially from the Republican side. Clearly, something has to change, and the candidates know it. But it's the public who will decide what, and who will get to change it.
Jennifer Meacham, August 26, 2008
California Attorney General Jerry Brown - yeah, that Jerry Brown - completed a three-year investigation of Citibank and found the bank "stole" $14 million in credits from 53,000 struggling credit card customers - living, bankrupt and/or dead. This news - "Bank Robs Customers!" - has many strange implications. First, it raises the question of whether other credit card companies are doing the same. Second, it begs the question of how dead and bankrupt people had credits in their accounts. The percent must be tiny. Third, it's a reminder to check in on your own credit card accounts. If you've been late on a payment, make sure your account shows any credits you received during that time. You may be due a refund. Fourth, check on the credit card accounts of your loved ones who can't check for themselves. If they can no longer manage an account, then it's time to close it. Late fees and subsequent over-limit fees add up quickly. There's no sense giving the credit card companies any more than they already take.
Jennifer Meacham, August 14, 2008
I've been watching my "necessary evils" stock portfolio climb in recent months. American-made cigarettes, beer, and liquor are on the upswing. I credit it to two things: people need a sense of "drink-after-work" stability, especially when times are tight. People are buying fewer imported beers, picking up domestic brews instead. The move to domestics not only helps the economy but also the environment, thanks to decreased shipping and transport emissions. Meanwhile, the frugal living mentality is sweeping the nation. I just reviewed the book Practically Posh: The Smart Girl's Guide to a Glam Life, which espouses this principle: live frugally, and still live the life you want. First on the author's list of refrigerator stock-up items? A nice, chilled bottle of bubbly. After all, you never know when you might need to celebrate.
Jennifer Meacham, August 5, 2008
Sometimes it takes a state the size of California to set off nationwide change. Let's hope its plan to automate IRA enrollment gets the same reception. California's plan would create state-managed Individual Retirement Arrangements for the millions of workers without access to employer plans - 78 million workers fit into that category nationwide. Just like a 401(k), these plans would be portable - transferable from one job to the next. And just like the California Public Employees Retirement System, the assets in these portable IRAs would likely grow faster than the average mutual fund and certainly faster than the 2 percent interest on most savings plans. It's not a done deal yet; California's state legislators are still debating it. But this is certain: Now is the right time to help America's working class, from the dry cleaner down the street to the part-time bagger at the grocery store to anyone on the entrepreneurial track.
Tom Murphy, July 25, 2008
The government has a way of making things sound better than they are. Today's example is the good news for millions of workers that the federal minimum wage climbed to $6.55 an hour. For those of us who entered the workforce back in the '70s, when the minimum was $1.65, that sounds nice. It totals $13,624 a year for 52 forty-hour weeks. Of course, a single person earning that would have to pay $1,653 in federal tax, plus any local income taxes. And then there are deductions for Social Security, DSI, etc. If workers end up with $10,500, they lucky. They're also JUST above the federal poverty line, which is $10,200. So they won't be eligible for many programs designed to help the poor - thanks to the increased minimum wage. This affects people of all ages, and most especially retired folks who can't make it on Social Security. For example, a recent survey found that a single retired person in California needs $21,011 just to meet the basic costs of living. New York City just determined that one-third of its seniors are poor, even though the federal poverty line would tell you the number was about one in five. The government can try to make this sound better, but who's fooled? Certainly not a senior struggling to buy groceries on a minimum wage.
Jennifer Meacham, July 17, 2008
Yes, oil prices are volatile, but wait til you see next winter's heating bill. "Brace yourself for an expected sharp rise in prices," the Oregon Public Utility Commission warned its customers. Utility customers around the country are getting similar warnings. In New England, where oil's the main heating fuel, it may cost $5,000 to fill a 1,000-gallon tank for the winter. Here in Portland, NW Natural says to expect prices for natural gas to be 35-40 percent higher. Cascade Natural Gas says prices may rise 20 percent, and Avista Utilities warns of a 10-15 percent hike. My own bill already, which was about $300 a month last winter, could be closer to $400 this winter. How can people cope? First, sign up for programs that averages out payments so your summer payments are higher but your winter payment will then be lower. Second, get that long-put-off energy audit. Offered for free or at low cost in most areas, an audit is when a real, live energy consultant comes to your house to figure out what's hurting your home heating costs. By following the recommendations, you may spend a chunk now to get your house fully insulated and draft-free, but you'll save a lot in the months and years to come. Plus, all of these home improvements can be deducted from your taxes when you sell the home, and several come with credits for your 2008 taxes. Third, follow the home heating/cooling tips from the Department of Energy. If this isn't enough, public utilities offer heating fuels at a discount to those who need one. So don't wait until winter to deal with this. You may be left out in the cold.
Jennifer Meacham, July 12, 2008
About 45 percent of employees now cash out their 401(k) plans when they leave a job, according to HR consulting firm Hewitt Associates. That's an alarming statistic. We know that, in order to retire, most people must continue to grow their savings before retirement. So cashing out not only takes away 30-plus percent from penalties and current-year income taxes, it also takes away any hope of earnings from future plan growth. Oh, and there's no longer even a basic retirement account to tap into when the going gets tough. If you're tempted to cash out, there are other options. Once the funds are rolled over, you can take a 60-day loan once every year - as long as the money is put back within that timeframe. You can withdraw money without penalty for medical expenses, going back to school or a first-home purchase. You can do an "I'll scratch your back if you'll scratch mine" arrangement, where - if your IRA is with a custodial firm that allows self-direction into private notes (and a growing number do) - your IRA can make a loan to a non-family member who then makes an IRA loan to you. Both loans must be paid back with market-rate interest, to comply with the ERISA codes that regulate retirement account investing. But you'll still have your retirement account and your friend will still have theirs. And both of you can continue to see your retirement resources grow.
Jennifer Meacham, July 3, 2008
With shares of General Motors at their lowest level since September 1954, it's fair to ask if this means blue chip stocks are no longer a good long-term investment. Indeed, stocks in smaller companies tracked by the Russell 2000 Index have outpaced the S&P 500 Index by 80 percent over the past eight years. It certainly signals a reason for anyone who has let their retirement and investment accounts coast to reevaluate their picks. They wouldn't be alone. The stocks in the Dow Jones Industrial Average have changed many times since the term "blue chip" was coined by a Dow Jones reporter in the 1920s. Originally, there were just 12 companies, but it was expanded to 30. Of the original 12, only General Electric remains. So don't be surprised if GM disappears. Change is good, especially in your own portfolio.
Tom Murphy, June 29, 2008
Days like these are hard on any investors - even on the seasoned pros of Wall Street who stand clustered on the sidelines as the bear market rips away at recent gains. Most mom-and-pop investors wouldn't dare buy stock now. And yet, millions of Americans are doing exactly that through the regular payroll deductions in their 401(k)s. Some of them buy mutual funds where professional managers will exercise some degree of caution, but millions of others have programmed their retirement accounts to automatically buy index funds, bonds or favorite stocks. If you haven't taken a look at your 401(k) lately, you may want to do that now and adjust your strategy in light of these extraordinary times. It's a good idea to do that after consulting a retirement savings professional about your options. If for some reason you simply cannot do that, don't panic. Eventually - hopefully before you retire - the market is likely to recover and the investments you make now may turn out to be a bargain. Whatever you do, don't rush to sell your holdings when the market is down. That kind of desperate action rarely yields good results and should only be taken with the guidance of a trusted advisor.
Jennifer Meacham, June 7, 2008
An $11 jump in the price of oil prompted the second-biggest drop in the stock market this year.. Oil hit a whopping $139, and at least one analyst predicts continued rises to $150 per barrel. It's a good time to turn down your oil heat - if it's still on, lay off of the natural gas, and lay low on the driving. Meanwhile, stay the course on your retirement accounts stocks rather than selling when the price is low, experts say. Once oil hits its peak, there will be a market correction and stocks will likely make up lost ground.
Jennifer Meacham, June 5, 2008
It's safe to assume that the investments in your defined benefit plan are a determining factor in how well you can retire. What's surprising is both how much and when those investments have an impact on retirement. It turns out that 60 percent of retirement income comes from investment returns that are earned during - not prior - to retirement. Thirty percent comes from investment returns that are earned prior to exiting the workforce. And the final 10 percent comes from those initial contributions. This suggests two things: First, a down market now is reeking havoc not on those who are still saving, but on those that are already trying to live their gold years. Second, how much you have to live on after retirement is mathematically related to how much you put in. Put in $10,000 and you'll have $100,000 to retire on. Put in $100,000 and you'll have a million.
