Thursday, December 31, 2009

WSJ Video on Disappearing Estate Tax

This video from the Wall Street Journal discusses the consequences of the lapse in the estate tax in 2010. Can choosing when to die be an estate planning tool?


On Jan. 1, the one-year halt to the estate tax begins. And never before has so much money hinged on the time of death, WSJ's Laura Saunders reports in a News Hub extra.

Read Alert by Wilmer Hale

Update on Real Estate Settlement Procedures Act Takes Effect Jan. 1

New rules governing disclosures on settlement cost for home loans take effect in the new year.

HUD is requiring that loan originators provide borrowers with a standard Good Faith Estimate that clearly discloses key loan terms and closing costs and that closing agents provide borrowers with a new HUD-1 settlement statement. New RESPA regulations were published November 17, 2008 and are scheduled to take full effect on January 1, 2010. The "New RESPA Rule FAQs" were comprised from industry questions and are posted to facilitate implementation of these new requirements.

Read more.

Tuesday, December 29, 2009

Luxury Goods Make You Selfish or The More You Have, The More You Want

The Devil Wears Prada? Effects of Exposure to Luxury Goods on Cognition and Decision Making

November 25, 2009

Paper Released:
November 2009

Roy Y.J. Chua and Xi Zou

Executive Summary:

Gandhi once wrote that "a certain degree of physical harmony and comfort is necessary, but above a certain level it becomes a hindrance instead of a help." This observation raises interesting questions for psychologists regarding the effects of luxury. What psychological consequences do luxury goods have on people? In this paper, the authors argue that luxury goods can activate the concept of self-interest and affect subsequent cognition. The argument involves two key premises: Luxury is intrinsically linked to self-interest, and exposure to luxury can activate related mental representations affecting cognition and decision-making. Two experiments showed that exposure to luxury led people to think more about themselves than others. Key concepts include:

  • Luxury does not necessarily induce people to be "nasty" toward others but rather causes them to be less concerned about or considerate toward others.
  • Experiment 1 showed that when primed with luxury, people are more likely to endorse self-interested business decisions (profit maximization), even at the expense of others.
  • Experiment 2 further demonstrated that exposure to luxury is likely to activate self-interest but not the tendency to harm others.
  • Exposure to luxury goods may activate a social norm that it is appropriate to pursue interests beyond a basic comfort level, even at the expense of others. It may be this activated social norm that affects people's judgment and decision-making.
  • Alternatively, exposure to luxury may directly increase people's personal desire, causing them to focus on their own benefits such as prioritizing profits over social responsibilities.

Read more.

Center for Housing Policy Finds Housing Affordability Declining

From the Executive Summary

A close look at the data shows that rather than improving, housing affordability actually worsened slightly between 2005 and 2008. The share of U.S. households spending more than half of their monthly income for housing (including utilities) increased from 14 percent in 2005 to 15 percent in 2008. The same pattern held for the working households that are the principal subject of this report; the share of working households spending more than half their income on housing increased from 20 to 21 percent over the three-year period. Part of the blame for worsening housing affordability can be attributed to home utility costs – which rose by nearly 23 percent, or more than double the rate of overall inflation, but broader housing market trends during these three years also influenced owner and renter costs.

Read more.

2009 National Financial Capability Study

FINRA has published the initial results from a comprehensive survey of how Americans manage their finances. Additional data will be forthcoming.

The National Financial Capability Study established a baseline measure of the ability of Americans to manage their money, benchmarking four key indicators of financial capability and evaluating how these indicators vary with underlying demographic, behavioral, attitudinal and financial literacy characteristics.

Read more.

Tuesday, December 22, 2009

Congress Extends COBRA Subsidy

From National Underwriter

President Obama has signed H.R. 3326, a defense appropriations bill with a provision that will let involuntarily terminated workers seek the temporary 65% federal health benefits continuation subsidy up until Feb. 28, 2010. The Consolidated Omnibus Budget Reconciliation Act benefits continuation subsidy provision also will extend the period when terminated workers can get the subsidy to 15 months.

Read more.

FAQs For Employees About COBRA Continuation Health Coverage

Tuesday, December 8, 2009

IRS Announces 2010 Standard Mileage Rates

IR-2009-111, Dec. 3, 2009

WASHINGTON — The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 50 cents per mile for business miles driven
  • 16.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Revenue Procedure 2009-54 contains additional details regarding the standard mileage rates.

EBRI Releases Brief on Target Date Funds

Investment Behavior of Target-Date Fund Users Having Other Funds in 401(k) Plan Accounts

WHY TARGET-DATE FUNDS ARE IMPORTANT: Target-date funds (TDFs) are designed to simplify retirement plan asset allocation as an “all-in-one” investment option, which automatically rebalances the account to a mix of asset classes that are more conservative as the investor ages. Because of recent legislative and regulatory inducements, they are rapidly growing as an investment in 401(k) retirement plans, and about 7 percent of all 401(k) assets are currently invested in TDFs.

MIXED TDF USERS: As TDFs grow, a new class of 401(k) investor is emerging: “mixed” target-date fund users who hold the funds in combination with other non-TDF funds in the plan menu.

LACK OF UNDERSTANDING OF TDFS: This study shows that some mixed TDF investors apparently fail to understand either the purpose or the benefit of a TDF designed as an “all-in-one” portfolio solution. However, holding TDFs with other funds could lead to an unexpected result of ending up with a potentially inferior portfolio in terms of risk/return tradeoff from more assets allocated to some sectors than the designers of the target date funds had planned.

December 2009, Vol. 30, No. 12
Paperback, 16 pp.
PDF, 707 kb
Employee Benefit Research Institute, 2009

Social Security Claiming Guide

The Social Security Claiming Guide is available from the Center for Retirement Research at Boston College. It contains simple and clear information you should have before deciding when to begin your Social Security retirement.

At what age should you begin claiming Social Security benefits? If you’re approaching retirement, it’s the most important financial decision you’ll likely make. The Social Security Claiming Guide sorts through all the options near-retirees need to consider. Presented in an easy-to-read, colorful format, the Claiming Guide shows you where to begin, spells out how much you can get, and answers frequently asked questions about how the claiming process works.

Download an electronic copy of the Social Security Claiming Guide. Single copies of the Social Security Claiming Guide can be made for personal use without additional permission.

Read more.

Student Debt for the Class of 2008

The Project on Student Debt has updated data for the class of 2008 by state and educational institution. Link here.

Kaiser Examines 2010 Medicare Advantage Plans

Medicare Advantage 2010 Data Spotlight: Plan Availability and Premiums

This data spotlight examines changes in the availability and premiums of private Medicare Advantage options for Medicare beneficiaries in 2010 as the annual open enrollment period begins. 

Read more.

Americans Accumulate Substantial Retirement Assets in IRAs

From the Investment Company Institute:

IRA Ownership Widespread Across U.S. Population

Washington, DC, November 23, 2009 - Americans are accumulating significant resources in individual retirement accounts (IRAs) through rollovers from employer-sponsored retirement plans and contributions, according to a new report published today by the Investment Company Institute. At year-end 2008, IRAs accounted for one-quarter of all U.S. retirement wealth and 8.5 percent of total U.S. household financial assets.

The report, The Evolving Role of IRAs in U.S. Retirement Planning, found that changes in law and the evolution of employer-sponsored retirement plans have elevated the importance of IRAs for many U.S. households. IRA ownership was widespread across many different demographic dimensions, including age, income, and educational attainment, with 40.5 percent of U.S. households owning some type of IRA.

Read more

Wednesday, December 2, 2009

US News Lists America’s Best Health Plans

U.S. News Media Group and NCQA Release 2009-10 Rankings of America’s Best Health Insurance Plans
Source: U.S. News Media Group and the National Committee for Quality Assurance (NCQA)

U.S. News Media Group and the National Committee for Quality Assurance (NCQA) today released the fifth annual edition of America’s Best Health Insurance Plans on Published at the start of open-enrollment season, when Americans nationwide prepare to select their health coverage, the 2009-10 Best Health Insurance Plans guide provides consumers with comprehensive rankings and important detailed information for over 600 commercial, Medicare, and Medicaid health plans.

The full rankings of America’s Best Health Insurance Plans are online today at The highest-scoring 50 commercial plans, 25 Medicare plans, and 25 Medicaid plans, as well as the “Honor Roll” plans at the top of the rankings, will be featured in the December issue of U.S. News, available on newsstands on Tuesday, December 1, 2009.

Riding Public Transit Saves Individuals $9,190 Annually

Please note that the savings calculated by the APTA includes the cost of ownership and operations.

Yearly Transit Savings over $250 Higher Than This Time Last Year

WASHINGTON, DC – Individuals who ride public transportation can save on average $9,190 annually based on the November 9, 2009 national average gas price and the national unreserved monthly parking rate.  Over the last year, an individual riding public transportation would have saved an additional $255 due to the 41 cent increase of gasoline per gallon since November 2008.

Read more.

The PNC Christmas Price Index

From the PNC media release:


Cost of "The Twelve Days of Christmas" Song Items Reflect Consumer Inflation Trends; Interactive Web Site Provides Teachers and Students with Insights on U.S. Economy

PITTSBURGH, Nov. 30, 2009 — Thanks to the weak economy in 2009 the PNC Christmas Price Index increased by a modest 1.8 percent compared to last year in the whimsical economic analysis by PNC Wealth Management based on the prices of gifts in the holiday classic, "The Twelve Days of Christmas."

According to the 26th annual survey, the price tag for the PNC CPI is $21,465.56 in 2009, just $385.46 more than last year. It is the smallest increase since 2002, when the index fell 7.6 percent.

The PNC CPI exceeds the U.S. government’s Consumer Price Index, the widely used measure of inflation calculated by the Bureau of Labor Statistics, which is down 1.5 percent this year.

Among the 12 gifts in the Index, three items fell measurably from last year while five increased in cost and four remained steady.

As part of its annual tradition, PNC Wealth Management also tabulates the “True Cost of Christmas,” which is the total cost of items gifted by a True Love who repeats all of the song’s verses. This holiday season, very generous True Loves will receive a bargain and pay $87,402.81 for all 364 gifts, a mere 0.9 percent increase compared to last year.

The sharp rise in gold prices proved to be the main contributor to the dramatic 42.9 percent jump to $499.95 for the Five Gold Rings. Typically when the value of the dollar decreases, as it has in the last year, investors buy more gold driving up prices.

The cost of the Seven Swans-a-Swimming, which generally provide the biggest swings from year to year in the PNC CPI, fell this year by 6.3 percent to $5,200 following last year’s eye-opening 33.3 percent rise. As the most volatile item in the Index, the swans are removed to determine the underlying inflation or core PNC CPI, which pushed the rate up 4.8 percent this year.

View the video.

Friday, November 27, 2009

Classic Thanksgiving Dinner Cost Declines for 2009

WASHINGTON, D.C., November 12, 2009 – Menu items for a classic Thanksgiving dinner including turkey, stuffing, cranberries, pumpkin pie and all the basic trimmings dropped 4 percent in price this year, according to the American Farm Bureau Federation.

Read more.

Federal Reserve announces final rules prohibiting institutions from charging fees for overdrafts on ATM and one-time debit card transactions

The Federal Reserve Board announced final rules that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.

Before opting in, the consumer must be provided a notice that explains the financial institution's overdraft services, including the fees associated with the service, and the consumer's choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act.

Read more.

U.S. News Media Group and NCQA Release 2009-10 Rankings of America’s Best Health Insurance Plans

Washington, D.C. – November 12, 2009 – U.S. News Media Group and the National Committee for Quality Assurance (NCQA) today released the fifth annual edition of America’s Best Health Insurance Plans on Published at the start of open-enrollment season, when Americans nationwide prepare to select their health coverage, the 2009-10 Best Health Insurance Plans guide provides consumers with comprehensive rankings and important detailed information for over 600 commercial, Medicare, and Medicaid health plans.

Read more

DOL Posts Unemployment Estimation Tool

Unemployment Benefit Estimation Tool

To help unemployed workers keep their homes, the Department of Labor has developed this tool to help mortgage companies quantify income from unemployment benefits for eligible individuals. More information on the tool and how it can be used can be found at: A New Tool to Project Availablility of Unemployment Benefits

Thursday, November 19, 2009

FED Cracks Down on Gift Card Abuses

Release Date: November 16, 2009

For immediate release

The Federal Reserve Board on Monday announced proposed rules that would restrict the fees and expiration dates that may apply to gift cards. The rules would protect consumers from certain unexpected costs and would require that gift card terms and conditions be clearly stated.

The proposed rules would prohibit dormancy, inactivity, and service fees on gift cards unless: (1) there has been at least one year of inactivity on the certificate or card; (2) no more than one such fee is charged per month; and (3) the consumer is given clear and conspicuous disclosures about the fees. Expiration dates for funds underlying gift cards must be at least five years after the date of issuance, or five years after the date when funds were last loaded.

The Board's proposed rules generally cover retail gift cards, which can be used to buy goods or services at a single merchant or affiliated group of merchants, and network-branded gift cards, which are redeemable at any merchant that accepts the card brand.

The proposed rules are issued under Regulation E (Electronic Fund Transfers) to implement the gift card provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009.

The Board's notice is attached. Comments on the proposal must be submitted within 30 days after publication in the Federal Register, which is expected shortly.

Federal Register notice (308 KB PDF)

Highlights document (13 KB PDF)

2009 Banking and Consumer Regulatory Policy

Tuesday, November 3, 2009

How Did We Spend the Stimulus?

The chart below, from the Bureau of Labor Statistics, illustrates how various households spent the stimulus payment. Almost half reported used the payment to pay off debt.

Full Story Here.


Use of 2008 Economic Stimulus Payments (tax rebates), by composition of consumer unit, June 2008–March 2009

Roth Conversion in 2010 and Beyond

This article by Richard Kaplan clearly explains the benefits and cost of converting a traditional IRA to a Roth IRA. It is highly recommended.

To Roth or Not to Roth: Analyzing the Conversion Opportunity for 2010 and Beyond

Richard L. Kaplan
University of Illinois College of Law
Bureau of National Affairs Daily Tax Report, Vol. 9, No. 181, September 22, 2009
University of Illinois Law & Economics Research Paper No. LE09-026

Beginning in 2010, all taxpayers will be able to convert their existing Individual Retirement Accounts (IRA) to Roth IRAs, without regard to their level of income or marital status. In effect, taxpayers will be able to lock in current income tax rates on account values that have been eroded by recent investment market declines. This article analyzes who should take advantage of this opportunity, using the barest minimum of arithmetic (and no calculus).

Download paper

WSJ: Considering Downside Risk

Saturday, October 31, 2009

Kaiser Provides Issue Brief on COBRA Subsidy for the Unemployed

Updated Issue Brief Examines the COBRA Subsidy and Health Insurance for the Unemployed
With the nation's unemployment rate rising to its highest levels in decades as a result of the recession, many families have lost their employer-sponsored health coverage or are at risk of doing so. In an effort to help people maintain coverage after a layoff, the stimulus legislation known as the American Recovery and Reinvestment Act of 2009 provides temporary subsidies to some workers so that they can maintain their previous employer-sponsored coverage through COBRA after losing their job. The Foundation's KCMU has an updated issue brief that examines the COBRA provisions of the legislation and answers key questions about how the subsidy works and who might benefit. It also explains how the provisions interact with other laws and programs designed to help people obtain and maintain health coverage, and it discusses other coverage options for the unemployed. In late 2009, subsidies began to expire for those who were among the first to apply for the assistance, forcing them to pay the full cost of their insurance or look elsewhere for help. The issue brief is available online.

Thursday, October 29, 2009

Survey of Unfair and Deceptive Credit Card Practices by Pew Charitable Trust

Still Waiting: ‘Unfair or Deceptive’ Credit Card Practices Continue as Americans Wait for New Reforms to Take Effect
Source: Pew Health Group, Safe Credit Cards Project

This report present the findings of the latest review of consumer credit card product by the Pew Health Group’s Safe Credit Cards Project. We show the interest rates, fees and penalty provisions for credit cards offered by the largest 12 bank issuers based on application disclosures gathered in July of 2009.Where possible, we show how these features have changed since our December 2008 survey or where new trends may be emerging. Also, for the first time, we include an analysis of cards from the largest 12 credit unions. Throughout the report, we provide comparisons between bank card and credit union card data.

Read more.

SEC Launches

Agency's First-Ever Web Site Devoted Exclusively to Investor Education


Washington, D.C., Oct. 22, 2009 — The Securities and Exchange Commission today launched its first-ever Web site devoted exclusively to investor education, providing investors with in-depth information and "top tips" on how to invest wisely, plan for the future, and avoid being scammed.

By visiting, investors can access information in a user-friendly format that is specifically tailored to their needs. The site includes sections specifically for those just getting started investing, for those saving for a child's education, and for those planning for retirement. It also has a detailed "Seniors Care Package" section for senior citizens and caretakers.

Wednesday, October 21, 2009

2010 Annual Fuel Economy Guide Now Available

WASHINGTON, DC – The U.S. Environmental Protection Agency and the Department of Energy today unveiled the 2010 Fuel Economy Guide, which gives consumers important information about estimated fuel costs and mileage standards for model year 2010 vehicles.

Read more.

College Costs Again Outpace Inflation

The College Board reports that, “Published tuition and fees at public four-year colleges and universities rose at an average annual rate of 4.9% per year beyond general inflation from 1999-2000 to 2009-10, more rapidly than in either of the previous two decades.”

Read Trends in College Pricing.

Sunday, October 18, 2009

Saturday, October 17, 2009

Capital One Sued for Excessive Charges

From Law.Com

An Atlanta attorney has sued one of the nation's largest credit card distributors on behalf of a potential class of credit card holders in a complaint that reflects the public frustration with credit card lender practices that have already prompted some congressional reforms.

The suit claims that Capital One -- known for its commercials that feature barbarians garbed in animal skins demanding, "What's in your wallet?" -- doubled, tripled or quadrupled cardholders' annual interest rates without cause and applied the new rates retroactively to existing balances. The cardholders, according to the suit, could avoid the new interest rates only by closing their account

Read more.

Friday, October 16, 2009

Health Reform Will Increase the Cost of Health Insurance Coverage

“There ain’t no such thing as a free lunch,” is often stated by economists. This report from America’s Health Insurance Plans/PricewaterhouseCoopers entitled Potential Impact of Health Reform on the Cost of Private Health Insurance Coverage finds that requiring health insurers to take on high risk insured with preexisting conditions will raise premiums.

Key Findings

  • Health reform could have a significant impact on the cost of private health insurance
  • There are four provisions included in the Senate Finance Committee proposal that could increase private health insurance premiums above the levels projected under current law:
           o Insurance market reforms coupled with a weak coverage requirement,
           o A new tax on high-cost health care plans,
           o Cost-shifting as a result of cuts to Medicare, and
           o New taxes on several health care sectors.
  • The overall impact of these provisions will be to increase the cost of private insurance coverage for individuals, families, and businesses above what these costs would be in the absence of reform.
  • On average, the cost of private health insurance coverage will increase:
         o 26 percent between 2009 and 2013 under the current system and by 40 percent during this same period if these four provisions are implemented.
         o 50 percent between 2009 and 2016 under the current system and by 73 percent during this same period if these four provisions are implemented.
          o 79 percent between 2009 and 2019 under the current system and by 111 percent during this same period if these four provisions are implemented.

Read report.

The Financial Risk of Life Settlements

BANKS RUNNING WILD: THE SUBVERSION OF INSURANCE BY “LIFE SETTLEMENTS” AND CREDIT DEFAULT SWAPS by Marshall Aauerback and L. Randall Wray compares the negative impact on financial markets of life settlements with the recent experience from marketing credit default swaps.

Instead of making bets on the “death” of securities, this one will allow “investors” to gamble on the death of human beings. As the New York Times recently highlighted, the banks “plan to market ‘life settlements,’ buying life insurance policies that ill and elderly people sell for cash—$400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to ‘securitize’ these policies, packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die” (Anderson 2009). In effect, just as the sale of a CDS creates a vested interest in financial calamity, here the act of securitizing life insurance policies creates huge financial incentives in favor of personal calamity. In essence, the sooner you die, the bigger the payoff for the investor. And the corollary also applies, as the Times article notes: “If people live longer than expected, investors could get poor returns or even lose money.”

Read more.

Ernst & Young: Pricing of Payday Loans is Fair and Reasonable

Young might have thought that Payday loans are unfair and unreasonable. Not so, says Ernst & Young. E&Y finds that the cost of making these loans is high, no collateral and high risk.


Read Press Release.

Full Report.

2010 Annual Fuel Economy Guide Now Available

Source: U.S. Department of Energy

The U.S. Environmental Protection Agency and the Department of Energy today unveiled the 2010 Fuel Economy Guide, which gives consumers important information about estimated fuel costs and mileage standards for model year 2010 vehicles.

Fuel-efficient models come in all types and sizes, so consumers can save thousands of dollars over a vehicle’s lifetime without sacrificing performance. Model year 2010 fuel economy leaders include a wide range of hybrid models, from compact cars to sport-utility vehicles.

Each vehicle listing in the Fuel Economy Guide provides an estimated annual fuel cost. The estimate is calculated based on the vehicle’s miles per gallon (mpg) rating and national estimates for annual mileage and fuel prices. The online version of the guide allows consumers to input their local gasoline prices and typical driving habits to receive a personalized fuel cost estimate.

Read report.

Wednesday, October 14, 2009

Overdraft Fees Up Sharply

The Center for Responsible Lending reports that overdraft fees have risen 35% over the last two years.

Summary Findings:

  • Finding 1: Over 50 million Americans overdrew their checking account at least once over a
    12-month period, with 27 million accountholders incurring five or more overdraft
    or non-sufficient funds (NSF) fees.
  • Finding 2: Banks and credit unions collected nearly $24 billion in overdraft fees in 2008.
  • Finding 3: Overdraft fee income for banks and credit unions rose 35 percent from
    2006 to 2008.

Full Report

Riding Public Transit Saves Individuals $9,062 Annually

This is the conclusion in a recent study published by the American Public Transportation Association. The study uses car costs published by AAA. However, the dramatic savings result from including both the variable and fixed cost of car ownership. It assumes the family can survive with one less car.

See report.

Thursday, October 8, 2009

Special Sales Tax Deduction for Car Purchases Available through End of 2009

R-2009-88, Oct. 7, 2009

Vehicle Tax Deduction YouTube Video in English, Spanish and ASL and audios for podcast in English and Spanish

WASHINGTON — With 2010 models arriving in dealer showrooms, the Internal Revenue Service reminds taxpayers that purchasing a new car, light truck, motor home or motorcycle could qualify them for a special deduction for the state and local sales and excise taxes on their 2009 tax returns.

Purchases made before Jan. 1, 2010, will qualify for this deduction under the American Recovery & Reinvestment Act of 2009 (ARRA).

The deduction is limited to the sales and excise taxes and similar fees paid on up to $49,500 of the purchase price of a new vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.

Taxpayers who make qualifying new vehicle purchases this year can estimate the deduction with the help of Worksheet 10 in IRSPublication 919, How Do I Adjust My Withholding? Lines 10a to 10k of the worksheet show how to take into account purchases above the $49,500 limit, as well as the reduced deductions for taxpayers at higher income levels.

The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.

For those that have questions about the deduction for sales tax and other fees, these questions and answers might help. A videovideo on the IRS channel and audio podcasts in  English and Spanish are also available to help taxpayers take full advantage of the deduction.

Related Items:

Wednesday, September 30, 2009

How to Die Before You Money Runs Out

This new Issue Brief from the Center for Retirement Research at Boston College, Making Your Nest Egg Last a Lifetime by Anthony Web, examines strategies for making your retirement savings last your lifetime.

Media attention on retirement security generally focuses on the need to save enough to enjoy a comfortable retirement.  However, accumulating a nest egg is no longer the only significant challenge – the other is managing one’s nest egg in retirement.  In contrast to previous birth cohorts who often received a lifetime income from a defined benefit pension plan, in today’s 401(k) world retirees must choose how to convert their accumulated savings into a monthly paycheck.

One straightforward solution to the drawdown challenge is an immediate annuity, which turns a lump sum of income into a lifelong payment stream.  However, for various reasons, such annuities have not proven broadly popular.  Therefore, this brief examines several alternatives.  All such strategies involve a trade-off between maximizing consumption and minimizing the risk of running out of money.  Calculating the optimal strategy is really hard – maybe impossible.  But, despite the complexity of the problem, some strategies are clearly superior to others..

This paper examines three strategies: 1) spend the income, conserve the capital; 2) spend down over their estimated life expectancy; and 3) spend a fixed percent of their initial nest egg in each year. After examining all three strategies, the author concludes that households approaching retirement should annuitize a sufficient amount of their wealth to satisfy minimum living standards.


Read more.

Friday, September 25, 2009

FDIC Issues Foreclosure Prevention Toolkit

In  response to the many foreclosure scams that have been uncovered. The FDIC has issued a toolkit that homeowners who are in fear of foreclosure.

Homeowners who currently have, or expect to have, difficulty making their payments should contact their loan servicer or reputable counseling agency as soon as possible to discuss options. Troubled borrowers should be careful in dealing with organizations that encourage borrowers to cease making payments or walk away from their home while also promising to repair their credit. If it sounds too good to be true, it may well be a scam that will damage the borrower's credit and cost more in the long run. Working directly with the servicer or legitimate non-profit organizations is the best approach for troubled borrowers.

Read more.

Thursday, September 17, 2009

90 Percent Rate Their Health Insurance Good to Excellent

Given the news you might think that most insured are dissatisfied with their health insurance. Not so, according to a recent survey by the Kaiser Family Foundation. Many with insurance, however, are worried about the increasing cost of the insurance and future illnesses will be covered.

Read Report: Americans' Satisfaction with Insurance Coverage

Recovery Education Tax Credit

From IRS New Release

The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.

For more information, see Publication 970, Tax Benefits for Education.

Questions and Answers

If you still have questions about the American Opportunity Credit, these questions and answers might help.

Related Items

A Bounce Back for Retirement Savings

The Urban Institute examines the recent uptick in financial markets and the positive impact on retirement savings.

The stock market lost 56 percent of its value between September 30, 2007, and March 9, 2009. These losses reduced the retirement savings of American households. Recently, however, a good portion of these losses has been reversed. Equities gained 53 percent between March 9, 2009 and August 31, 2009.

Read more.

KFF Employer Health Benefits 2009 Annual Survey

The Kaiser Family Foundation has posted their 2009 annual survey of employer health plans.

Premiums for employer-sponsored health insurance rose to $13,375 annually for family coverage this year—with employees on average paying $3,515 and employers paying $9,860, according to the benchmark 2009 Employer Health Benefits Survey released today by the Kaiser Family Foundation and the Health Research & Educational Trust (HRET).

Read more.

2009 State-by-State Review of Closing Costs

Bankrate.Com has posted the 2009 review of closing costs. The highest cost state was Texas, with NYC second. The ranking is based on a $200,000 mortgage, 20 percent down and good credit.

Read more.

Forced Arbitration Is Ubiquitous, New Public Citizen Study Finds

Public Citizen is highly critical of industries that impose contractual obligations forcing consumers into binding arbitration. They contend that arbitrators often favor businesses over consumers.

Read more.

Seniors in Medicare Advantage Receive Higher Quality Care, New Reports Show

This is the conclusion in a study conducted by American Health Insurance Plan. The study compares Medicare Advantage Plans and fee-for-service plans in California and Nevada.

Read more.

New Vehicle Tax Deduction for 2009

IRS News Release

Nine Facts about the New Vehicle Sales and Excise Tax Deduction

Taxpayers who buy new motor vehicles this year may be entitled to a special tax deduction for the sales or excise taxes on those purchases when they file their 2009 federal tax returns next year. This tax break is part of the American Recovery and Reinvestment Act of 2009.

Taxpayers in states that do not have state sales taxes may be entitled to deduct other fees or taxes imposed by the state or local government.

Here are nine important facts the IRS wants you to know about the deduction.

    • 1. State and local sales and excise taxes paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible.
    • 2. Qualified motor vehicles generally include new cars, light trucks, motor homes and motorcycles.
    • 3. To qualify for the deduction, the new cars, light trucks and motorcycles must weigh 8,500 pounds or less. Motor homes are not subject to the weight limit.
    • 4. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
    • 5. Taxpayers who purchase new motor vehicles in states that do not have state sales taxes may be entitled to deduct other fees or taxes assessed on the purchase of those vehicles. Fees or taxes that qualify must be based on the vehicles’ sales price or as a per unit fee. These states include Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.
    • 6. Taxpayers who purchase qualified motor vehicles may claim the deduction when they file their 2009 tax return in 2010.
    • 7. The deduction may not be taken on 2008 tax returns.
    • 8. This deduction can be taken regardless of whether the buyers itemize their deductions or choose the standard deduction.Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.
    • 9. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

For more information on this and other key tax provisions of the Recovery Act visit the official IRS Website at



Wednesday, September 16, 2009

CRS Updates "Older Workers: Employment and Retirement Trends,"

Older Workers: Employment and Retirement Trends
Patrick Purcell
Specialist in Income Security
September 16, 2009

Excerpts from Summary

As the members of the “baby boom” generation—people born between 1946 and 1964—
approach retirement, the demographic profile of the U.S. workforce will undergo a substantial
shift as a large number of older workers will be joined by relatively few new entrants to the labor
force. According to the Census Bureau, there will be 204 million Americans aged 25 or older in
2010. By 2030, this number will increase by 23% to more than 251 million. Most of this growth
will occur among people aged 65 and older. The Census Bureau estimates that while the number
of people between the ages of 25 and 64 will increase by 15.5 million (9.4%) between 2010 and
2030, the number of people aged 65 and older is projected to grow by 31.7 million, or 79.2%.

As more workers reach retirement age, employers may try to induce some of them to remain on
the job, perhaps on a part-time basis. This is sometimes referred to as “phased retirement.”
Several approaches to phased retirement—job sharing, reduced work schedules, and rehiring
retired workers on a part-time or temporary basis—can be accommodated under current law. The
Pension Protection Act of 2006 (P.L. 109-280) allows pension plans to begin paying benefits to
workers who have not yet separated from their employers at the earlier of age 62 or the pension
plan’s normal retirement age, which in most plans is 65. Some employers would like to be able to
pay partial pension distributions to workers who have reached the pension plan’s early retirement
age, even if it is earlier than age 62. This would require a change in federal law.

Thursday, September 10, 2009

Starting Salaries for College Grads are Down

According to the National Association of Colleges and Employers, the starting salaries of college grads are down 1.2 percent this year and salary offers are down 20 percent. While expected, it recently runs counter to the usual annual increase in starting salaries.

Read the full report.

Tuesday, September 8, 2009

Top 10 Consumer Complaints

The list was complied by the National Association of Attorneys General:

  1. Debt Collection
  2. Auto Sales
  3. Home Repair/Construction
  4. Credit Cards (tie)
  5. Internet Goods and Services (tie)
  6. Predatory Lending/Mortgages
  7. Telemarketing/Do-Not-Call
  8. Auto Repair
  9. Auto Warranties (tie)
  10. Telecom/Slamming/Cramming (tie)

Read more.

Credit Card Satisfaction Declines and Rate and Fees Rise

That’s the finding from a new study by J.D.Power Associates.  From Press Release

WESTLAKE VILLAGE, Calif.: 1 September 2009 - Driven by a significant decrease in satisfaction with fees and rates, overall credit card customer satisfaction declines to a three-year low, according to the J.D. Power and Associates 2009 Credit Card Satisfaction StudySM released today.

The study finds that overall credit card customer satisfaction decreases to 703 on a 1,000-point scale-the lowest level since the study's inception in 2007. Overall satisfaction among credit card customers remains the lowest across the financial services industries in which J.D. Power and Associates conducts research, including insurance, banking and investment services.

Read more.

Tuesday, September 1, 2009

FDIC Videos on Deposit Insurance

The FDIC has several informative videos covering FDIC deposit insurance.


New Safeguards on Credit Cards

From the FDIC Consumer News

Credit Cards: New Law Protects Consumers from Surprise Fees, Rate Increases and Other Penalties
Some changes are effective now, most start next year

In May, Congress passed and President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 — the Credit CARD Act — the most sweeping statutory changes in card protections for consumers since the Truth in Lending Act was enacted in 1968. The new law is intended to help protect consumers from abusive fees, penalties, interest rate increases and other unwarranted changes in account terms.

Read more.

Students Go For Less Affordable Loans

The PEW Charitable Trust reports that the loan crisis has had a negative impact on the student loan market.

As Student Debt Rises, More Undergraduates Go Straight to Most Dangerous Loans

Berkeley, CA - 08/25/2009 - In 2007-08, nearly two-thirds (64 percent) of undergraduate students who borrowed private student loans did not take out all they could in safer, more affordable federal loans, according to an analysis (PDF) released today by the Project on Student Debt. In addition, the proportion of all undergraduates who took out private loans increased dramatically – from five percent in 2003-04 to 14 percent in 2007-08.

Read more.

Tuesday, August 25, 2009

A Global Comparison of Corporate Tax Systems

Price Waterhouse Coopers ranked 181 countries on a number of characteristics related to corporate taxes. Believe it or not, the U.S. ranked 46th on ease of payments. What we need now is a study on personal taxes.

From About the Study

Paying Taxes provides a comparison of the world’s tax systems from the point of view of a case study company. The aim is to provide insights and data, which will assist the process of tax reform and to gain a more in-depth understanding of the results. It is also important to look beyond the rankings to the underlying data. As well as the individual rankings on the ease of paying taxes around the world. The Paying Taxes study highlights how businesses are affected not only by corporate income taxes, but also by many other taxes. In addition, it shows how the procedural burden of tax compliance impacts companies.

See the full list of countries in an interactive table.

Top 10 Vehicles Bought With Clunker Trade-ins

Global Investor lists the top ten vehicles purchased by people trade in clunkers. The Toyota Corolla tops the list.

See Top 10 list.

Credit CARD Act Effective August 20

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (Credit CARD Act) imposes the following requirements on credit card issuers:

 Creditors must provide written notice to consumers 45 days before increasing an annual percentage rate on a credit card account or making a significant change to the terms of a credit card account.
 Creditors must inform consumers in the same notice of the right to cancel the credit card account before the increase or change goes into effect. If a consumer cancels an account, the creditor is generally prohibited from applying the increase or change to the account.
 Creditors generally must mail or deliver periodic statements for credit cards and other open-end consumer credit accounts at least 21 days before payment is due.

Whitehouse News Release

Housing Affordability Near Highest Level in 18 Years

According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), low interest rates and falling home prices are making home ownership more affordable.

The HOI showed that 72.3 percent of all new and existing homes sold in the second quarter of 2009 were affordable to families earning the national median income of $64,000, down only slightly from the record-high 72.5 percent during the previous quarter and up from 55.0 percent during the second quarter of 2008.

Go to report

Employer Sponsored Health Insurance Premiums Increase

This study by the Commonwealth Fund found that family health insurance premiums increased by 119 percent between 1999 and 2008 with an average premium of $12,298 in 2008.

From the abstract:

The rapid rise in health insurance premiums has severely strained U.S. families and employers in recent years. This analysis of federal data finds that if premiums for employer-sponsored insurance grow in each state at the projected national rate of increase, then the average premium for family coverage would rise from $12,298 (the 2008 average) to $23,842 by 2020—a 94 percent increase. However, if health system reforms were able to slow premium growth by 1 percentage point in all states, by 2020 employers and families together would save $2,571 per premium for family coverage, compared with projected trends. If growth could be slowed by 1.5 percentage points—a target recently agreed to by a major industry coalition—yearly savings would equal $3,759. The analysis presents state-by-state data on premium costs for 2003 and 2008, as well as projections, using various assumptions, for costs in 2015 and 2020.

Go to Paying the Price: How Health Insurance Premiums Are Eating Up Middle-Class Incomes

Sunday, August 16, 2009

HUD Posts FAQs on Real Estate Settlement Procedures Act

From HUD News Release

Under the new RESPA rules consumers will, for the first time ever, be able to use the Good Faith Estimate to easily compare their estimated loan offer with the one to which they actually agree. It will provide clear, transparent disclosure of loan information that consumers can use to shop for the best loan - resulting in lower interest rates and lower origination and settlement costs for borrowers. This will virtually eliminate the kinds of unfair junk fees that surprise so many borrowers at closing. In the end, this greater clarity and transparency will save consumers hundreds of dollars in total loan costs.

The FAQs can be found on the HUD website. Some of the topics covered include requirements and delivery of the Good Faith Estimate, the HUD-1 Settlement Statement and specific information about completion of the GFE and HUD-1 forms.

The new RESPA regulations were published November 17, 2008 and are scheduled to take full effect on January 1, 2010. On that date, HUD will require that loan originators provide borrowers with the new standard Good Faith Estimate and closing agents provide borrowers with the new HUD-1 settlement statement

Saturday, August 15, 2009

Consumers Union Says No To Prepaid Cards

With a prepaid card, you pay the issuer for a card that allows you to electronically pay for goods up to the value of the card. A prepaid card differs from a stored value card. With a prepaid card the funds used to pay for purchases are held by the card issuer. With a stored value card the funds used to pay for purchased are held in an external account owned by the card holder.

CU examines all of the charges that are typically levied on prepaid card from activation to dormancy charges. They conclude that you are better off using a traditional banking account.

Read more.

Thursday, August 13, 2009

Data on Rent-Price Ratio

The Lincoln Institute of Land Policy provides free data on housing rents, prices and taxes. The latest addition is data on the rent price ratio.

Go to the Lincoln Rent-Price Ratio

Rent-price graph: This chart graphs the ratio of the annual rent to price by quarter, starting in 1960:1. After 2000, the red line shows the rent-price ratio when house prices are extrapolated using the Federal Housing Finance Agency (FHFA)—formerly Office of Federal Housing Enterprise Oversight (OFHEO)—“purchase-only” price index. The blue line shows the path of the ratio when house prices are extrapolated using the Macromarkets LLC national house price index (formerly Case-Shiller-Weiss).


Copy of 2009_06_DLM_rents_prices

Wednesday, August 12, 2009

Charges for Out of Network Health Services

American Health Insurance Plans has posted a Value of Provider Networks Survey that lists the prices charged for a range of services relative to Medicare fee for several states. It is unclear whether the prices listed are list prices or the prices actually charged.

Go to survey.

Tuesday, August 11, 2009

Discover and American Express End Over the Credit Limit Fees

USA Today reports that these credit cards have ended over-the-limit fees. This has been an important source of revenue for some banks, but has also angered consumers. When the Card Act of 2009 becomes effective in a few months, card issuers will have to obtain the card holders permission before they can levy these fee. Consumers who do not agree will be denied credit for purchases that exceed credit limits.

Read USA article.

Deloitte Releases Annual Survey of 401k Plans

401(k) Annual Benchmarking Survey: 2009 Edition

Some major findings of the survey:

  • 17 percent of plan providers surveyed indicated an uptick in deferral rate changes, hardship withdrawals, loans, and other similar activities.
  • A third (38 percent) reported their employees decreased their deferral rates for 2009, with the majority (60 percent) holding steady at their current level of contribution.
  • 12 percent of employers surveyed indicated an upswing in opt-outs from auto-enrollment programs.
  • Almost one-fifth (19 percent, up 2 percentage points from last year) of plan sponsors believe “very few” of their employees will be financially prepared for retirement.
  • More than three-quarters (79 percent) of employers surveyed are still fairly confident that their plan is effective for recruiting talent, and 68 percent say it helps with retention.
Read survey.

Monday, August 10, 2009

Social Security Offers Debit Cards

Last year Social Security began issuing debit cards that are automatically updated with each month’s social security benefit. Your first choice should be direct deposit into your bank account. However, for those that do not have a convenient bank account the debit card can be the next best choice.


U.S. Treasury Introduces Direct Express® Debit Card for Social Security Payments

Personal Finance: Getting Social Security payment via debit card By Claudia Buck

FRB: 5 Tips for Dealing with a Home Equity Line Freeze or Reduction

From the Federal Reserve Board

Release Date: August 6, 2009

For immediate release

Homeowners in all regions of the United States are seeing their home equity lines of credit (HELOCs) frozen or reduced and wondering what they can do about it. The Federal Reserve's latest "5 Tips" guide explains consumers' rights and lenders' responsibilities when credit lines are reduced and provides information for those seeking to have a credit line reinstated.

"5 Tips for Dealing with a Home Equity Line Freeze or Reduction" explains that lenders can lawfully reduce or limit a consumer's line of credit regardless of whether the consumer has made timely payments. However, the lender must send a written notice of the action no later than three business days after the freeze or reduction goes into effect.  The notice must include information about any other changes to the HELOC.

The freeze or reduction notice should include specific reasons for the action.  The most common reasons for modifying the terms of a HELOC are a decline in the home's value, or a change in financial circumstances. Understanding why a lender froze a credit line may help a consumer take steps to have it reinstated to the original amount. For example, a lender may not know that significant home improvements have been made that increased the home's value. Or, if a household's financial circumstances have changed for the worse, consumers should look for ways to rebuild their credit rating.

Consumers are urged to protect their credit history by acting responsibly and contacting the lender immediately if they have questions or concerns about a credit line freeze or reduction. Lenders must reinstate credit privileges when the conditions causing the freeze or reduction no longer exist.

"5 Tips for Dealing with a Home Equity Line Freeze or Reduction" can be found at It is one of several publications the Federal Reserve Board provides to help consumers make informed decisions involving home equity lines of credit.

The website also contains links to a mortgage shopping worksheet and a  mortgage calculator.

Read more.

Friday, August 7, 2009

Understanding Inflation-Indexed Bond Markets

John Y. Campbell, Robert J. Shiller, and Luis M. Viceira discuss the history and characteristics on inflation-indexed bonds in this excellent paper. Copies can be freely downloaded from the Social Science Research Network.

"Understanding Inflation-Indexed Bond Markets"  Cowles Foundation Discussion Paper No. 1696


This paper explores the history of inflation-indexed bond markets in the US and the UK. It documents a massive decline in long-term real interest rates from the 1990's until 2008, followed by a sudden spike in these rates during the financial crisis of 2008. Breakeven inflation rates, calculated from inflation-indexed and nominal government bond yields, stabilized until the fall of 2008, when they showed dramatic declines. The paper asks to what extent short-term real interest rates, bond risks, and liquidity explain the trends before 2008 and the unusual developments in the fall of 2008. Low inflation-indexed yields and high short-term volatility of inflation-indexed bond returns do not invalidate the basic case for these bonds, that they provide a safe asset for long-term investors. Governments should expect inflation-indexed bonds to be a relatively cheap form of debt financing going forward, even though they have offered high returns over the past decade.

Impartial Review of Private Health Insurance Provisions of H.R. 3200

“As the fight in Washington over health care reform continues to dominate public attention and media coverage, most Americans are critical of the way news organizations are explaining key elements of the debate.”

Pew Research Center

If you are longing for an impartial analysis of the proposed legislation for restructuring private health insurance, you need to read this report from the Congressional Research Service. The following appears in the Overview.

Overview of H.R. 3200

This report summarizes the key provisions affecting private health insurance in America’s Affordable Health Choices Act of 2009, found in Division A, as ordered reported by House Committees on Ways and Means and on Education and Labor.1 Division A of H.R. 3200 focuses on reducing the number of uninsured, restructuring the private health insurance market, setting minimum standards for health benefits, providing financial assistance to certain individuals, and, in some cases, small employers. In general, H.R. 3200 would include the following:

  • Individuals would be required to maintain health insurance, and employers would be required to either provide insurance or pay into a fund, with penalties/taxes for noncompliance.
  • Several market reforms would be made, such as modified community rating and guaranteed issue and renewal.
  • Both the individual and employer mandates would be linked to acceptable health insurance coverage, which would meet required minimum standards and incorporate the market reforms included in the bill. Acceptable coverage would include
    • coverage under a qualified health benefits plan (QHBP), which could be offered either through the newly created Exchange or outside the Exchange through new employer plans;
    • grandfathered employment based plans;
    • grandfathered nongroup plans; and
    • other coverage, such as Medicare and Medicaid.
  • The Exchange would be established under a new independent federal agency (the Health Choices Administration), headed by a Commissioner. The Exchange would offer private plans alongside a public option.
  • Certain individuals with incomes below 400% of the federal poverty level could qualify for subsidies toward their premium costs and cost-sharing; these subsidies would be available only through the Exchange.
  • In the individual market (the nongroup market), a plan could be grandfathered indefinitely, but only if no changes were made to the terms and conditions of the plan, including benefits and cost-sharing, and premiums were only increased as allowed by statute.
  • This bill would not affect plans covering specific services, such as dental or vision care.
  • Most of these provisions would be effective beginning in 2013.

Read full report.

You can also check out the Kaiser Family Foundation: Side-by-Side Comparison of Major Health Care Reform Proposals

Thursday, August 6, 2009

Working Families With Children Are Most Likely to Have Health Insurance Coverage

The Employee Benefit Research Institute surveys employer provided health coverage. The latest report, Health Insurance Coverage of Individuals Ages 55–64,1994–2007, indicates that adults ages 55–64 and families with children were most likely to have health insurance coverage in 2007. As usual, young adults are in the group least likely to have coverage.

MOST LIKELY TO HAVE COVERAGE: EBRI estimates from the latest Current Population Survey data show adults ages 55–64 were one of two groups—the other was children—most likely to have health insurance coverage in 2007. That year, 12 percent of adults ages 55–64 were uninsured, compared with about 32 percent of adults ages 21–24, 26 percent of those ages 25–34, and 23.5 percent of all younger adults. There were 4 million adults ages 55–64 without health insurance in 2007, accounting for 9 percent of the 45 million individuals under age 65 who were uninsured.

The report also points out that those in the 55-64 age group are most likely to suffer from cutbacks in employer provided health care, especially health care that was voluntarily afforded retirees. This may delay the retirement of workers in this age group.

Read more.

Who is Responsible for a Deceased Relative's Debts?

FTC FYI: 07/31/2009

If your relative leaves unpaid debts when he or she dies, do you have to pay?

According to the Federal Trade Commission, the nation’s consumer protection agency, surviving relatives usually have no legal obligation to pay the debts of a family member who has died. Generally, that person’s estate is responsible for paying his or her debts. But if there isn’t enough in the estate to cover the debts, they typically go unpaid.

After a relative dies, debt collectors may contact family members and ask them to pay their loved ones’ debts. The rights of surviving relatives are covered by the Fair Debt Collection Practices Act, which the FTC enforces. The FTC has developed a new consumer alert about this issue titled Paying the Debts of a Deceased Relative: Who Is Responsible? To learn more, go to

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Office of Public Affairs

(FYI deceased debts)

The Cost of Raising a Child Updated

Every year Mark Lino updates Expenditures on Children by Families. The USDA has just published the figures for 2008.


WASHINGTON, Aug. 4, 2009 – The U.S. Department of Agriculture today released a new report, Expenditures on Children by Families, finding that a middle-income family with a child born in 2008 can expect to spend about $221,190 ($291,570 when adjusted for inflation) for food, shelter, and other necessities to raise that child over the next seventeen years.

Issued by USDA each year since 1960, the report is a valuable resource to courts and state governments in determining child support guidelines and foster care payments. For the year 2008, annual child-rearing expenses for a middle-income, two-parent family ranges from $11,610 to $13,480, depending on the age of the child.

Read more.

Cost of Renting Significantly Cheaper Than Buying

That’s the conclusion in this new study from the Center for Economic and Policy Research,  “The Gains from Right to Rent,” by Dean Baker and Hye Jin Rho (July 2009).

This paper calculates savings from renting compared with owning a house purchased in 2006 or 2007 in 16 major metropolitan areas. (The appendix includes calculations for 100 cities, including these 16.) The analysis calculates the savings both before- and after-tax, allowing readers to see the impact on ownership costs of the mortgage interest and property tax deductions.


Read more.

Also see: NMHC Quarterly Survey of Apartment Market Conditions

Tracking Jobs in Finance with FINS

From the New Release

Wall Street Journal Launches - Career Site for Financial Professionals

NEW YORK ( July 14, 2009) — The Wall Street Journal has launched a new career site - - a stand-alone, online resource specifically targeting financial professionals and the finance market. The site covers all major financial sectors with associated jobs and news, in-depth research on companies, and daily columns offering advice and career insight, with the credibility and authority of The Wall Street Journal.

Free to users, is a daily destination for both active job seekers and those in the finance industry who want to keep abreast of career-related dynamics in the market. Recruiters and employers have the ability to reach a targeted, high-quality audience through display ads, candidate search and job postings. is part of The Wall Street Journal Digital Network, which comprises the flagship,, and

2009 Consumer Action Handbook Now Available

From news release: July 2009

When the economy is uncertain, it’s even more important to watch every dime. To help you get the most bang for your buck, avoid credit problems, and resolve shopping hassles, order the 2009 edition of the free Consumer Action Handbook from the Federal Citizen Information Center.

Celebrating its 30th anniversary, this year’s Consumer Action Handbook continues to provide top-notch tips and advice for common consumer issues like buying a car, building good credit and protecting your privacy. Now you’ll also find expanded resources for military personnel, the latest facts on buying a home and even more contact information for major companies.

Has an airline ever damaged your luggage? Ever bought something online or by phone and it was nothing like they promised? Turn to the Consumer Action Handbook’s sample complaint letter. It shows you how to vent effectively about the situation and get the matter resolved. You can get the right address for the company in the Handbook’s “Consumer Contacts” section—featuring thousands of consumer contacts at businesses, federal agencies, state and local consumer offices, and national consumer organizations.

The Consumer Action Handbook is also at your service online at Search the website to easily access and download all of the information in the printed edition, plus keep up with the latest consumer news and product recalls.

Download the Complete 2009 Handbook (180 pages; PDF) or Only Print the Chapters You Need (PDF)

Keep Track of Sales Tax Holidays

Your state may have special dates when particular purchases are exempt from the state’s sales tax. The Federation of Tax Administrators publishes the states, the dates and links to additional information on the states with tax holidays.

See: FTA: 2009 Sales Tax Holidays

Wednesday, August 5, 2009

Is Your Spouse a Tightwad?

The answer to this question might depend on whether you and your spouse share the same attitude toward spending. Rick, Scott, Deborah Small, and Eli Finkel, "Fatal (Fiscal) Attraction: Spendthrifts and Tightwads in Marriage." Using a questionnaire with a tightwad/spendthrift scale they find that, “people tend to marry spouses with opposing emotional reactions toward spending.”  As probably expected, the more unhappy you are with your own spending habits, the more likely you are attracted to a mate with the opposite characteristics. Moreover, this attraction does not seem to be conscious; most persons state that are searching for others with similar spending habits.

You might expect that these opposing spending habits cancel each other out and put the marriage on an even keel, leading to marital bliss. Although the evidence is not conclusive, the authors state that divergences in spending behaviors have a negative impact on relationship quality. Sometimes you don’t get what you want and  you don’t get what you need.

Are You a Tightwad?

The authors in this  paper, (Rick, Scott, Cynthia Cryder, and George Loewenstein (2008), "Tightwads and Spendthrifts," Journal of Consumer Research, 34 (6), 767-782.) examine the behavioral differences between tightwads and spendthrifts.  The authors suggest that many consumers do not consider opportunity cost when making purchases. Instead, spending may be controlled by the “pain of paying.” In the words of the authors:

Suppose, for example, that dining out at a nice restaurant tonight requires you to forgo dining out at an even nicer restaurant next month. People who experience an intense pain of paying may behave as if dining out tonight requires giving up several nicer dinners next month. That is, their affective reaction to spending may lead them to spend less than their more deliberative selves would prefer. We refer to such consumers as tightwads.

The authors speculate that spendthrifts do not experience a similar anxiety. They test their hypothesis by creating a tightwad/sprendthrift scale based on a questionnaire and conclude that the pain of paying powerfully influences spending behavior.

While we find strong relationships between ST-TW scores and credit card debt and savings, we find little relationship between ST-TW scores and income. This suggests that the differences in credit card debt and savings between spendthrifts and tightwads are more likely attributable to differences in spending habits than to differences in income.

The authors don’t explain why some consumers experience this pain while others do not. Is it nature or nurture? They do point out, however, that situational factors that mask the pain of paying, such as using a credit card. can reduce the pain of paying, turning tightwads into spendthrifts. Although not mentioned by the authors, the results do seem to support the commonplace advice of many credit counselors that you can better control your spending by tearing up those credit cards and using cash.

Sunday, July 26, 2009

Issue Brief on Should You Carry a Mortgage into Retirement?

The Center for Retirement Research at Boston College has posted a new issue brief by Anthony Webb on “Should You Carry a Mortgage into Retirement?”

This Issue in Brief considers whether households should use retirement or non-retirement wealth to pay down their mortgage.  It first shows that it is unlikely that many retired households will be able to earn a return on risk-free investments such as bank certificates of deposit, Treasury bills, and Treasury bonds that will exceed the cost of their mortgage.  Liquidity considerations aside, households holding such assets will generally be better off using them to pay down their mortgage.  It then considers and (for most households) rejects the argument that households should retain their mortgage because they can earn a higher expected return in stocks and other risky assets.  It concludes with practical advice for most households.

The author concludes the following:

[The] analysis indicates that retired households are, in theory, better off repaying their mortgage. In addition to this theoretical conclusion, there is also a very practical argument against borrowing to invest. If a household with a mortgage mismanages its investments, or over-estimates the rate at which it can decumulate those investments, it risks losing the house, its only remaining asset.

One argument that is sometimes cited in favor of not repaying the mortgage is that retaining a mortgage increases the household’s liquidity, and enables it to better cope with sudden unexpected expenses. But households that retain a mortgage need to consider what they would do if the bad event actually happened – i.e., how they would maintain their mortgage payments once their financial assets had been spent.

Read more.

Monday, July 20, 2009

New CRS Report on Defined Contribution Plans

Defined contribution retirement plans have increasingly replaced defined benefit plans. Patrick Purcell and John J. Topoleski report on the most recent growth of defined contribution plans.

401(k) Plans and Retirement Savings: Issues for Congress

Patrick Purcell
Specialist in Income Security

John J. Topoleski
Analyst in Income Security

July 14, 2009


Over the past 25 years, defined contribution plans – including 401(k) plans – have become the most prevalent form of employer-sponsored retirement plan in the United States. The majority of assets held in these plans are invested in stocks and stock mutual funds, and the decline in the major stock market indices in 2008 greatly reduced the value of many families’ retirement savings. The effect of stock market volatility on families’ retirement savings is just one issue of concern to Congress with respect to defined contribution retirement plans.

This report describes seven major policy issues with respect to defined contribution plans:

1. Access to employer-sponsored retirement plans In 2007, only 61% of employees in the private sector were offered a retirement plan of any kind at work. Fifty-five percent were offered a DC plan. Only 45% of workers at establishments with fewer than 100 employees were offered a retirement plan of any kind in 2007. Forty-two percent were offered a defined contribution plan.

2. Participation in employer-sponsored plans Between 20% and 25% of workers whose employer offers a defined contribution plan do not participate. Workers under age 35 are less likely than older workers to participate.

3. Contribution rates On average, participants in DC plans contributed 6% of pay to the plan in 2007. The median contribution by household heads who participated in a defined contribution plan in 2007 was $3,360. This was just 22% of the maximum allowable contribution of $15,500.

4. Investment choices At year-end 2007, 78% of all DC plan assets were invested in stocks and stock mutual funds. This ratio varied little by age, indicating that many workers nearing retirement were heavily invested in stocks and risked substantial losses in a market downturn like that in 2008. Investment education and target date funds could help workers make better investment decisions.

5. Fee disclosure Retirement plans contract with service providers to provide investment management, record-keeping, and other services. There can be many service providers, each charging a fee that is ultimately paid by participants in 401(k) plans. The arrangements through which service providers are compensated can be very complicated and fees are often not clearly disclosed.

6. Leakage from retirement savings Pre-retirement withdrawals from retirement accounts are sometimes called “leakages.” Current law represents a compromise between limiting leakages from retirement accounts and allowing people to have access to their retirement funds in times of great need. In general, borrowing from a 401(k) plan poses less risk to retirement security than a withdrawal. Pre-retirement withdrawals can have adverse long-term effects on retirement income.

7. Converting retirement savings into income Retirees face many financial risks, including living longer than they expected, investment losses, inflation, and possible expenses for medical care and long-term care. Annuities can protect retirees from some of these risks, but they have not proved to be popular as a source of retirement income. Developing strategies to help retirees convert assets into income will be a continuing challenge for Congress and other policymakers.