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‘It is daunting to think about what the consequences will be.’ With no new stimulus deal, much of America’s temporary financial safety net is set to expire Dec. 31

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The prospect of another stimulus package before Election Day is uncertain, even as the White House and Democratic leaders kept talking Wednesday.

What is certain for now, however, is that many Americans who are struggling financially will soon see their temporary financial safety net end unless lawmakers intervene.

A wide range of financial assistance programs designed to help people stay in their homes, stay current on their student loans, keep their lights on and meet other financial obligations during the pandemic-induced economic downturn are scheduled to end on or before Dec. 31.

“It is daunting to think about what the consequences will be for families, individuals, businesses, our economy when the COVID-19 protections and financial assistance are no longer available,” said Jack Gillis, executive director of the Consumer Federation of America, a research, service and advocacy organization promoting consumer interests.

If no deal materializes soon, a stimulus package — or at least some aspects — could conceivably pass in the lame duck session after Election Day and extend some of the deadlines.

But for now, here are the looming expiration dates people are looking at when it comes to protections on past-due rent, unemployment benefits, utility bills, student loan payments and more.

Eviction moratoriums for renters

The U.S. Centers for Disease Control and Prevention issued a nationwide eviction moratorium in September. Health officials argued that people losing their homes could exacerbate the coronavirus pandemic, as displaced renters could be forced to move into more crowded living conditions with family or shelters.

Those protections only last through the end of the year. The CDC’s order ends on Dec. 31, meaning that starting in January of next year, landlords can resume evicting tenants.

The CDC recently clarified that landlords can take their tenants to court over missing rent payments in the meantime. In these cases, a judge could evict a tenant, but under the CDC order they would be allowed to remain in their home until the end of the year, at which point sheriff’s deputies could be ordered to escort them out.

The CDC’s eviction moratorium doesn’t offer blanket protection to all tenants. Renters have to notify their landlords proactively with a signed document to be covered by the order. And property owners have continued to evict tenants who did not take this step.

Renters who live in properties with federally-backed mortgages have additional protections if the property’s owner receives forbearance. The Federal Housing Finance Agency has barred landlords from evicting tenants for nonpayment of rent while in forbearance on Freddie Mac
FMCC,
-1.31%

  and Fannie Mae
FNMA,
-0.99%

 loans.

Both Fannie and Freddie have portals where renters can search to see if their property is covered by these protections. Here is Fannie Mae’s portal and this is Freddie Mac’s portal.

Some states and localities across the country have issued their own moratoriums on evictions since March. Under the CDC’s order, those moratoriums take precedence over the national one if they are more proactive. Many of these eviction bans have already expired, but in some states they will remain in place into next year.

California’s moratorium, for instance, lasts until the beginning of February, while New Jersey has prohibited evictions until two months after the state declares that its health emergency is over. Colorado recently enacted a 30-day eviction moratorium.

Mortgage forbearance and foreclosure moratoriums for homeowners

Under the $2.2 trillion CARES act passed in March, homeowners with federally-backed mortgages — which includes loans backed by Fannie Mae, Freddie Mac, the FHA, the Department of Veterans Affairs and the U.S. Department of Agriculture — can request up to a year’s worth of forbearance on their home loan.

The legislation required mortgage servicers to provide an initial forbearance period of 180 days, at the end of which borrowers could request an extension of 180 days. The bill did not require that borrowers show proof of financial hardship to qualify.

Because many homeowners initially requested forbearance back in the spring, their initial forbearance periods will end soon. If they still cannot afford to make their monthly payments, they need to request an extension from their loan servicer. Otherwise, the servicer will move to set up a repayment plan.

Homeowners should know they aren’t expected or required to make all of their missed payments at once. They can work with their servicer to set a suitable repayment plan, which could include an adjusted interest rate or longer loan term.

In August, the Federal Housing Finance Agency and the Federal Housing Administration both extended their moratoriums on foreclosures until the end of the year. These protections apply to any homeowners with federally-backed mortgages.

Under these orders, mortgage servicers are barred from pursuing new foreclosure actions against homeowners and evicting households. homeowners whose mortgages aren’t backed by the federal government can be foreclosed on or evicted.

It is not yet clear whether the federal agencies will extend these moratoriums into 2021; however both agencies have extended their bans on foreclosures multiple times.

Unemployment benefits for gig workers, independent contractors and other nontraditional workers

Before the CARES Act, self-employed workers, freelancers, gig workers and independent contractors were all ineligible for unemployment benefits. With the CARES Act, however, these workers became eligible for the $600 a week in federal unemployment benefits, which expired in July. They were also eligible for state unemployment benefits that were calculated based on the average weekly unemployment benefits in their state.

These state-level benefits, known as Pandemic Unemployment Assistance, expire Dec. 31. Come Jan. 1, more than 11 million Americans, including wedding photographers, Airbnb hosts and Uber
UBER,
-3.52%

  and Lyft
LYFT,
-3.10%

  drivers, will see their benefits reduced to zero.

“It’s a grim cut off for those counting on Pandemic Unemployment Assistance,” said Andrew Stettner, a senior fellow at the liberal-leaning Century Foundation.

The only way many of these Americans could still qualify for unemployment benefits is if they “have a history of W2 work,” Stettner said, meaning that they worked a “traditional” job where their employer reported their earnings to the government. That is also the main way of proving that you qualify for unemployment benefits.

There is an appetite on Capitol Hill for making sure these types of workers continue to receive some form of unemployment benefits, said Michele Evermore, a senior policy analyst at the National Employment Law Project, an advocacy organization focused on workers’ rights. “But financing it would be tricky,” she added.

Paid time off for employees coping with coronavirus and child care issues

A federal law enabling paid sick leave and expanded family and medical leave is expiring at the end of the year.

The Families First Coronavirus Response Act applies to people who have to stay away from their job because they have to quarantine. The law also applies to workers who need to stay home to take care of a loved one, like a child who’s suddenly stuck at home because of a school closure.

Pay amounts depend on whether the leave has to do with medical reasons or family care. For example, someone who is taking sick leave can receive up to $511 daily and $5,110 in total, according to the Department of Labor. A worker can also receive up to $2,000 in a two-week period for child care under one part of the law, and an additional $10,000 for another 10 weeks of leave under another part of the law. Small businesses with fewer than 50 employees can apply for exemption from the law if they can say granting leave will jeopardize business operations.

A range of state and local laws might also kick in for workers looking for paid time off, but experts note coverage under those statutes are not a given.

Protections against having utilities disconnected

At one point, 35 states implemented moratoriums blocking utilities from shutting down gas, water and electricity for non-payment. As of late October, 17 states and Washington D.C. still have moratoriums in force — but 13 of those moratoriums will expire at or before December 31.

Though many moratoriums are coming to a close, experts say cash-strapped consumers still have ways to avoid shut-downs. One way is apply for financial assistance to defray utility bills through the federally-funded Low Income Home Energy Assistance Program. Another way is to call the utility directly to see what sort of payment plan or deferral can be arranged.

“In general terms, if someone is in arrears or facing a shutoff, the first step is try to work out a payment plan with the utility,” Gillis said. “Paying something shows good faith. In the case of service provided by an [investor-owned utility], it could be useful to call and see what the state public utilities commission or public service commission has to say.”

Payment pauses on student loans

President Donald Trump extended the pause on payments and collections for some federal student loans through Dec. 31.

The pause, which was part of the CARES Act, was originally set to expire on Sept. 31, roughly one month before the presidential election. Advocates have worried the extension won’t be enough to provide borrowers with meaningful relief.

As of September, the economy had only recovered about 11.4 million of the 23 million jobs shed during the pandemic. Without a significant uptick in employment, it’s unlikely that borrowers will be in a much better position to repay their student loans in January than they were in October, advocates say.

That’s in part why many are urging policymakers to consider some form of student debt cancellation as part of a coronavirus relief package. Democratic presidential candidate Joe Biden has said that if he’s elected, he would immediately cancel $10,000 in student loans for borrowers. Congressional Democrats have gone even further; Senators Elizabeth Warren and Chuck Schumer have urged the next president to immediately cancel up to $50,000 in student debt.

Advocates have also urged for any coronavirus relief package to include more borrowers. Right now, at least $165 billion in federal student loans are excluded from the payment and collections pause, according to Mark Kantrowitz, the publisher of Savingforcollege.com.

They’re also warning of a wave of administrative and financial headaches once student loan payments resume. Borrowers have been victim to a host of errors during the payment and collections pause, including, in some cases, continuing to have their wages garnished during the pandemic and experiencing a ding on their credit score.

A break on payroll taxes

With stimulus talks at a stalemate in late summer, Trump signed an executive order allowing employers to temporarily stop deducting 6.2% from an employee’s paycheck for Social Security taxes. The deferral is in place from Sept. 1 to Dec. 31 and it applies to people making under $104,000 annually.

It’s up to employers to decide whether to arrange a deferral for their employees. But one expert noted that if a paycheck is larger now because it’s forgoing the tax, it’s going to be smaller starting next year. That’s because the worker’s 6.2% tax obligation will be back in effect — and they will also be paying the deferred taxes from September through December.

Favorable terms for 401(k) withdrawals

The tax code typically discourages people who tap their 401(k) plans early, assessing a 10% penalty on the withdrawals of anyone who’s under age 59 and one-half. But the CARES act put aside the early withdrawal penalty through Dec. 31. The same law allowed people facing hardship from the pandemic to withdraw up to $100,000 this year from their IRA or 401(k); if they pay back the amount in three years, the account holders can avoid paying income taxes on the retirement money they tapped this year.

Experts caution the interim tax consequences can be complicated, but those twists may be a small price for people who need the money now.

Leslie Albrecht contributed to this report.



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‘Greed is rearing its ugly head and killing brotherly love’: My husband and his brother are at war over an inheritance from a beloved neighbor. What can we do?

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Dear Quentin,

When my husband and his only (younger) brother were growing up, a childless neighbor was very kind to them and treated them as if they were her “nephews.” They even called her “Aunt Hilda.” They also treated her like family; my husband has visited her regularly over the years. But greed is rearing its ugly head and killing brotherly love.

When my husband was away in the army 30 years ago, Aunt Hilda gave a house and a piece of property to my husband’s brother when she decided to move to another state to care for her future mother-in-law, with the written legal condition that she had a lifelong ability to return and live in the house as well, should she want to or need to.

The brother decided he didn’t really like those terms, and after living in the house for a couple of years, used the “collateral” of the property to borrow money to buy a plot of land elsewhere and build another house. The “old” house has sat vacant for 20 years, but he does the minimum to keep it from disaster. She does not stay there because it is not maintained. He has stated that he doesn’t want to do anything that will encourage her to move back into the house.


‘At first, she discussed splitting her property 50/50, then she recalled that she had already given the brother the other house and land.’

Recently, the husband of Aunt Hilda died. She is 80, and decided that she wants to write a will to leave her money and property to my husband and his brother. At first, she discussed splitting her property 50/50, then she recalled that she had already given the brother the other house and land (current value is about $400,000, no small sum).

Now Aunt Hilda says since she has already given the younger brother the other house and the land, that should be taken into consideration. The brother is sending lengthy emails to my husband trying to convince him and Aunt Hilda that the previous “early inheritance” should not be taken into consideration “because it cost him so much trouble and work.”

It is of course up to Aunt Hilda how she wants to divide up the property, and whatever that is, everybody should respect her wishes. But if she asks the brothers how to do it fairly, what do you recommend? She is 80, but she might live another 15 years and any value assigned to the brother’s house today would likely change.

There is much more that could be added as to my brother-in law’s attempts to gain more than his brother, none of which reflects well on his character. My poor husband is heartsick over his brother’s greedy behavior, especially when he should be focusing on the welfare of Aunt Hilda — who just lost her husband — and grateful that she considers to leave them anything.

Should we intervene?

The Wife

Dear Wife,

Your brother-in-law is a lot of work and his inherited property is a lot of work. In that sense at least, as God made them, he matched them.

Your brother-in-law could be less self-centered and more compassionate, and it wouldn’t do any harm if he had one charitable bone in his body. But that is not who he is, and trying to wish him to be someone other than himself is an exhausting and ill-advised endeavor. Accept him for who and what he is, and you will both enjoy more peaceful nights as a result.


Remember, if one crazy person wants to have a fight with you, and you finally relent, there are two crazy people in that fight rather than one.

Your husband regards Aunt Hilda as a beloved relative and her estate as a gift, while his brother sees her estate as a lemon that can be squeezed time and again. What would I say to his brother? “The property required a lot of work over the years, and you have benefited from the property over the same amount of time. You chose to accept this inheritance early, and it has worked out very well for you.”

If he continued to make waves? I would feel compelled to tell him that it’s just plain unreasonable to constantly push for more. The love and care he lavished on his own property has been in direct proportion to the lack of care and duty bestowed upon Aunt Hilda’s home, and for all the years he enjoyed this property, she did not. You have to be prepared to stand up for what you believe is fair.

And remember, if one crazy person wants to have a fight with you, and you relent, there will be two crazy people in that fight rather than one. For that reason, advise Aunt Hilda to hire an estate attorney to draw up the papers fairly and squarely. Lawyers are paid well to deal with difficult personalities, and they have a duty to make sure their client’s wishes are upheld.

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com

The Moneyist: ‘Warren Buffett and Harry Potter couldn’t get those two retired early’: Our spendthrift neighbors said our adviser was ‘lousy.’ So how come WE retired early?

Hello there, MarketWatchers. Check out the Moneyist private Facebook
FB,
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 group where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.



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Opinion: Higher interest rates could mean more cash for seniors

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Here’s a common complaint I hear from seniors all the time: Interest rates are so low that it’s impossible to earn enough cash to supplement Social Security.

“Certificates of deposit don’t earn anything,” writes MarketWatch reader Camille: “Until the mid-2000s, you could easily earn 4% on a certificate of deposit (CD). Today, your money does not earn anything, which penalizes small savers and seniors.”

She’s right. Based on rates as I write this, if you put $500 into a one-year CD, you’d get back about $502.76 in 12 months. Wow! Two whole dollars and 76 cents! Probably enough for a loaf of bread or a gallon of gas, but not much else.

Low interest rates are a double-edged sword. If you’re borrowing money, it’s obviously good, but if you’re trying to make a few bucks, no. And this isn’t likely to change in any significant way, given the Federal Reserve’s recent announcement that it plans to keep its key “Fed Funds” rate low until the economy and jobs market picks up steam.

Since things like money-market funds and certificates of deposits are tied to the Fed, that’s tough news for anyone hoping to squeeze more out of their savings.

Meantime, those paltry returns stand in contrast to things that keep shooting up, like the cost of healthcare. I recently reported that drug prices, for example, are rising much faster than inflation, and much faster than the cost-of-living adjustment that seniors typically get from Social Security.

This one-two punch—more money going out and less coming in—is punishing seniors, pushing many closer to, if not into, poverty.

The need to earn more has nudged some seniors into the stock market, which in and of itself isn’t necessarily bad; financial advisers typically say that given the possibility of decades in retirement, even seniors should have some exposure to equities. But with stocks at nosebleed levels—the price-to-earnings ratio on the S&P 500
SPX,
+1.14%

 is up 80% from a year ago—caution abounds. As usual, I’ll emphasize that how much a retiree should have in stocks depends on factors like age, risk tolerance and so forth, and is best discussed with a trusted financial adviser.

It’s often tempting when rates are super low like now to put cash into things with fat dividends, but “you have to be very careful,” cautions Andrew Mies, chief investment officer of 6 Meridian, a Wichita, Kansas-based wealth management firm. “Saying I’m going to go buy a high dividend-paying stock or MLP (master limited partnership, an investment vehicle common in capital-intensive businesses, like the energy sector) were disasters in 2020. Buying high-dividend stocks was one of the worst performing strategies you could have had last year, and some MLPs were down 30-40%.”

In other words, what’s the use of buying something that pays a dividend of 8%, 9% or more—only to see the stock itself plunge by a third? One market strategist, the late Barton Biggs of Morgan Stanley, once said “More money has been lost reaching for yield than at the point of a gun,” and he was right. Echoing that is none other than Warren Buffett, who has called reaching for yield “stupid,” but “very human.”

So what to do?

Mies urges something that many people have trouble with: Patience. That’s because rates, all of a sudden, appear to be moving higher, and if you can wait a bit, you just might be able to find safer investments that yield more than you might be able to get now.

He’s right. As of Friday, the yield on the 10-year Treasury bond stood at 1.34%, hardly robust, but up from 1.15% for the week. Two things to remember here: When bond rates go up, bond prices go down; higher bond yields can also make stocks less attractive on a relative basis as well.

Mies thinks rates will continue to climb. “I think you’re going to have a chance in the next 12 months to put money to work at higher interest rates.” Buying or selling are choices, but so is doing nothing, so “I do think that not getting aggressive right now is probably the most prudent action.”

And after rates go high enough, he thinks municipal bonds could become more attractive, corporate bonds could, Treasurys could. “There will be pockets of opportunity that pop up.”

You may want to consider what have long been considered so-called “widow and orphan” stocks: utilities. “Utilities have been trading as if the 10-year (Treasury) is significantly higher than it is. That could be a spot worth dipping your toe in.” Possibilities to consider—preferably in consultation with your financial adviser—include the Standard & Poor’s Utilities Select Sector Fund
XLU,
-1.17%

and iShares’ Global Utilities ETF
JXI,
-0.54%
.
XLU currently yields 3.3%, while JXI yields 2.78%, certainly more than those measly rates found in CDs or money-market funds.



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Opinion: Few 401(k) participants changed portfolio allocation when market tanked

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The rumor has been that 401(k) participants took little action when the stock market declined by more than 30% in February and March 2020. A Morningstar study provides some numbers to back up the lore.

The data come from a major record-keeper for defined-contribution plans. The starting point was snapshots for two dates: Dec. 31, 2019 and March 31, 2020. To be included in the analysis, the participant had to show up in both samples. That is, they had to be enrolled on or before Dec. 31, 2019 and still in the plan March 31, 2020. This construct ensures that observed changes reflect active decisions by participants as opposed to the sponsor replacing one fund with another. The final sample consisted of 635,116 participants across 509 plans.

The important finding is that only 5.6% of participants enrolled as of Dec. 31, 2019 changed their portfolio allocation during the first quarter of 2020. Participants who adjusted their portfolios changed their equity allocations. Most of these changes were relatively small, with an average equity reduction of about 10 percentage points. However, older participants who changed their accounts made larger changes than younger participants, particularly if they were invested more aggressively.

Much of the report goes on to look closely at the 5.6% who did move their money. For this exercise, the report identifies four types of participants: self-directing their accounts, using a target-date fund, defaulted into a managed account, and opted into a managed account. The pattern across participants shows that those with professionally managed solutions — target-date funds or managed accounts — were much less likely to change their allocation.

On balance, this report seems like good news. Buying high and selling low doesn’t end well.



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