Connect with us

Company

‘This is sheer economic waste’: Our $1,200 stimulus ‘gift cards’ should have gone to people who need them. Why did we get them instead?

Published

on


Dear Moneyist,

My husband is 82 years old. I am 83. We are retired. We are neither Democrats nor Republicans.

Last year, about midsummer, we both received $1,200 stimulus payments. They were not in the form of checks, but rather they were in the form of gift cards to buy “stuff.” We have been retired since 2003. We planned our retirement during all of our working years.

We do not light our fireplace with $100 bills, but we are comfortable. We asked ourselves: “Why were we receiving stimulus checks?” This money should have gone to people who had suffered loss of income, and needed it to pay for essentials.

I spent the better part of three days trying to find out how to convert these gift cards to cash so that we could distribute the money to people or institutions where the money was needed. It was a tedious, complicated and convoluted process.

Eventually, I was able to convert these cards to funds deposited to our individual bank accounts. We distributed the funds to our church, which is hurting because the Bishop has closed all of the churches in the Diocese because of COVID-19, and plate collections have diminished.

The Moneyist: My wife has a degenerative neurological disease. My father-in-law wants to put her in a facility — and take over our finances

By now you are asking, “So what is the question.” Here it is: Why are these funds sent to people who did not suffer any loss of income? THIS IS SHEER ECONOMIC WASTE! There are obviously many people who have lost their jobs, being evicted from their homes, and unable to feed their families.

So how much more money would be available for these people who are GENUINELY IN DESPERATE NEED OF THESE FUNDS if the agency that is distributing this money would stop sending it to the people WHO DO NOT NEED IT and sending it to people who need it just to survive.

How many people in this country are receiving Social Security checks and surviving who are not financially affected by COVID-19, and who are also receiving these stimulus checks, especially as they were heretofore managing without them?

We know MANY people who have a very comfortable retirement just like us who received these stimulus payments. The courtesy of a reply would be greatly appreciated.

Comfortably Retired

The Moneyist:My husband is a felon and his work plummeted. He did not file a 2019 tax return. Will we get a second $600 stimulus and $1,400 check under a President Biden?

Want to read more? Follow Quentin Fottrell on Twitter and read more of his columns here.

Dear Comfortable,

Thank you for your letter, CAPITALS and all. I received another email from a reader recently, asking the same question in a different way, but it elicited a different response from me than your letter. Here’s why: He — like you — was one of those people who is living comfortably, but — unlike you — he wanted a stimulus because his colleague had one and he didn’t think it was fair, and lamented all the people he believed should NOT be receiving one. He was peering over his garden fence at those he believed were more fortunate; you are peering at those who are less fortunate.

And so KUDOS on you for decommissioning those gift cards and passing them onto your local church, so they can help people who are more in need than you. The problem you raise is twofold: The scale of this problem and the inability of this, or frankly any government, to establish the assets and savings of people to whom they are sending checks. And the speed with which they need to send money to those who are most in need without it falling into the wrong hands (hence, the debit cards). The government is trying to avert a broader, even more pronounced economic crisis.

Take heart that most people DO need these checks. It’s hard for presidents to prove you have helped to avert a Great Depression as some economists had feared last year. It is an Orwellian conundrum, but one that most leaders are usually happy to leave in their wake.

The Moneyist:I’m a single mom. I take my kids on trips. My mother says that’s crazy and I should be saving for a house. What do you think?

Health professionals have roundly criticized soon-to-be former President Donald Trump’s defiant refusal to wear a mask, and his decision to leave it up to the states to institute a patchwork of pandemic responses, among other criticisms, citing the fact that the U.S. now accounts for 20% of COVID-related deaths even though it has 4% of the world’s population. Still, there has NOT been a Great Depression, likely helped in part by his administration’s $1,200 and $600 stimulus checks.

Former President Barack Obama, who took office during the Great Recession, can also lay claim to such an unanswerable “did he or didn’t he avert a Great Depression” puzzle. He and Trump have that in common, at least. President-elect Biden would like Congress to roll out $1,400 checks because, he believes that BOLD action is required to keep millions of people in their homes and off the streets. Is it imperfect? Yes. Should people who don’t need the stimulus return it? Sure, why not.

What is NOT solvable here is the ability of the Trump OR Biden administrations to forensically analyze your finances in double-quick time before the bottom falls out of America’s financial future. What IS solvable is what people like you do when they receive checks they can do without. BRAVO.

Hello there, MarketWatchers. Check out the Moneyist private Facebook
FB,
+3.87%

 group, where we look for answers to life’s thorniest money issues. Readers write 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.

Quentin Fottrell is MarketWatch’s Moneyist columnist. You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. By emailing your questions, you agree to having them published anonymously on MarketWatch.





Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Company

Opinion: Higher interest rates could mean more cash for seniors

Published

on

By


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.



Source link

Continue Reading

Company

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

Published

on

By


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.



Source link

Continue Reading

Company

I’m 28, have zero debt, a 401(k), Roth IRA and $45K in the bank. My parents want me to save for a home. I want a Tesla Model 3. Who’s right?

Published

on

By


Dear Quentin,

I’ve been flip-flopping back and forth between buying a new car or putting a down payment on my first home. With my parents being very money-minded and keeping a careful eye on my finances (still), I’m caught in a predicament.

The original plan was to save up 20% to 30% for a down payment on a condo in the suburbs of Los Angeles and buy into the market within the two years or so, and right now I’m about 40% towards that goal.

However, with the Green Act possibly on the horizon again, the Model 3 has been a temptation, especially with all the extra bonus incentives my state offers, with a net final price of around $27,000. I’m not desperately in need of a new car, but this seems like a great way to save some money on a vehicle with smart features.


With the Green Act possibly on the horizon again, the Model 3 has been a temptation, especially with all the extra bonus incentives my state offers.

I am 28 years old with zero debt as of January 2021. Retirement wise, I am well on my way to maxing out 401(k) contributions this year, and I have already maxed out my Roth IRA contributions, and if everything stays the same, I’ll have about $60,000 in retirement by the end of the year.

In terms of liquid assets and investments, I’m sitting on about $45,000 as of right now. I currently save and/or invest 50% to 60% of my take-home pay, since I moved back home with my parents after being laid off last year, and started a new job remotely.

I don’t know if I should (a) purchase the car straight up and empty out my savings as I will probably have the time to save up the money again before a potential housing crash, (b) not purchase the car and keep saving for the down payment, (c) do both or (d) invest the money elsewhere.

As financial conservatives, my parents are strongly against me buying the car because it’s a depreciating asset, and they believe entering the market should be my priority, so they think that I should have the down payment waiting, to jump into the market whenever I see a good deal.

I believe I can buy the car and strap down, and save more aggressively to replenish the funds. Any advice for me?

Pressured by the Parents

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

Dear Pressured,

What the hell! Give into your impulse, splash out on the Tesla
TSLA,
-8.55%

Model 3. You will be empowered by the knowledge that you are using your spending power to get America back on its feet, while making a cool statement that you have finally arrived. Fully embrace the American dream of being smack-bang-wallop in the middle of the eco-warrior, Tesla-driving, tech-savvy zeitgeist. All any of us have is today, after all and global warming is coming for us all in the end.

Cruise the neighborhoods where you would like to buy a home in your 30s, 40s or 50s (it will all depend on how the property market fares between now and then). Take a good look at those homes, assuming they are not obscured by manicured hedges, and enjoy the view. Drive back to your parents’ house, honk the horn so they can marvel at Elon Musk’s bold vision for themselves, and then and only then ask them nicely if they would make space in their driveway for your Model 3.

I am kidding, of course. You have done everything right so far. Buy the house first and the $27,000 electric car later. You already have a destination in mind. Don’t allow an automobile, regardless of how cool you think it would be to drive, to deter you from that destination. Listen to your parents. They have seen more than you have. They are trying to set you on the road to financial freedom. And as nice as they are to drive and to be seen driving, you don’t need a Tesla to achieve that.

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,
-0.47%

 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.



Source link

Continue Reading

Trending