Wednesday, January 28, 2009

CRS Report on Health Continuation Coverage Under COBRA

The Congressional Research Service has issued a report detailing health insurance coverage under COBRA. The report provides a detailed, but easily accessible, explanation of your rights to continued health insurance coverage.

Report here

Tuesday, January 27, 2009

A Progressivity Index for Social Security Retirement Benefits

The definition of a progressive tax structure is one that imposes proportionately greater taxes on the rich than the poor. A progressive government benefit program is one that benefits the poor to a proportionately greater extent than the rich. The Social Security Administration has now released a Progressivity Index for the Social Security retirement benefit program.

The progressivity index compares the distribution of the present value of lifetime benefits to the distribution of the present value of lifetime taxes. ...Results indicate that Social Security is modestly progressive on a lifetime basis; currently, the program lies approximately halfway between paying a benefit directly proportional to lifetime taxable earnings and paying a flat dollar benefit to each retiree.

Although the program’s progressivity has declined in recent decades, it is projected to remain roughly constant in the future, according to the index. Overall, the paper extends previous research by introducing a comprehensive, easy-to-understand summary measure that can evaluate Social Security’s progressivity among current and future retirees or as a result of policy changes.

Read more

Saturday, January 24, 2009

Warranties and Disclaimers in the Digital Age

Robert A. Hillman and Ibrahim Barakat examine Warranties and Disclaimers in the Digital Age. They find that many software vendors expressly warrant the quality of their software on a website, but then disclaim the warranty in the End User License Agreement that most users ignore. They suggest ways that lawmakers may address this issue.

Hard Times Likely to Increase Number of Uninsured Motorists

From the Insurance Research Council: Economic Downturn May Push Percentage of Uninsured Motorists to All-Time High

MALVERN, Pa.—Approximately one in six drivers across the United States may be driving uninsured by 2010, according to a recent study from Insurance Research Council (IRC). Although the estimated percentage of uninsured motorists decreased nationally, from 14.9 percent in 2003 to 13.8 percent in 2007, the recent economic downturn is expected to trigger a sharp rise in the uninsured motorist rate.

Read more

Thursday, January 22, 2009

Yield Curve Predicts Low Probability of Recession

In the current issue of Economic Trends published by the Federal Reserve Bank of Cleveland, Joseph G. Haubrich and Kent Cherny examine recent changes in the yield curve.

...[The] slope of the yield curve, has achieved some notoriety as a simple forecaster of economic growth. The rule of thumb is that an inverted yield curve (short rates above long rates) indicates a recession in about a year. Yield curve inversions have preceded each of the last seven recessions (as defined by the NBER), the current recession being a case in point.

The probability of recession coming out of the yield curve is very low and may seem strange in the midst of recent financial news, but one aspect of those concerns has been a flight to quality, which lowers Treasury yields.

Read more

Here is a more lively presentation on the yield curve.
stockonline2, February 09, 2009

A dynamic review of the action of the yield curve alongside the S&P Index. Captured from

Insurance Information Institute’s 2009 Financial Fact Book Now Online

2009 Financial Services Fact Book

From the Web site:

Each year the Financial Services Fact Book, a partnership between the Insurance Information Institute and The Financial Services Roundtable, expands to reflect developments shaping the financial services sectors. This year’s book highlights a host of new trends, from baby boomer demographics to the general mobility of the U.S. population.

Among the new charts in this our sixth edition:

State migration flows
Top baby boomer destination states
Income by region and age group
Investments in separately managed accounts
(401)k rollover rates
Health care financing
Health savings accounts, characteristics of owners
Top global asset managers
Asset manager mergers and acquisitions
Online auto insurance purchases
Insurance direct marketing

Tuesday, January 20, 2009

Does Retirement Kill You?

Think your only reason for living is your job? It's OK to take an early retirement. An empirical study by Norma B. Coe and Maarten Lindeboom indicates that early retirement does not have a negative impact on your health.

Norma B. Coe
Maarten Lindeboom

The effect that health has on the retirement decision has long been studied. We examine the reverse relationship, whether retirement has a direct impact on later-life health. To identify the causal relationship, we use early retirement window offers to instrument for retirement. We find no negative effects of early retirement on men’s health, and if anything, a temporary increase in self-reported health and improvements in health of highly educated workers. While this is consistent with previous literature using Social Security ages as instruments, we also find that anticipation of retirement might be important, and bias the previous estimates downwards.

2009 Economic Report of the President Released

2009 Economic Report of the President
Some interesting graphs from the new edition

The Economic Report of the President is an annual report written by the Chairman of the Council of Economic Advisors. It overviews the nation's economic progress using text and extensive data appendices. The Economic Report of the President is transmitted to Congress no later than ten days after the submission of the Budget of the United States Government. Supplementary reports can be issued to the Congress which contain additional and/or revised recommendations. Documents are available in ASCII text and Adobe Portable Document Format (PDF), with many of the tables also available for separate viewing and downloading as spreadsheets in xls and comma delimited formats.

Foreclosures Are Increasing


IRVINE, Calif. – Jan. 15, 2009 – RealtyTrac® (, the leading online marketplace for foreclosure properties, today released its 2008 U.S. Foreclosure Market Report™, which shows a total of 3,157,806 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 2,330,483 U.S. properties during the year, an 81 percent increase in total properties from 2007 and a 225 percent increase in total properties from 2006. The report also shows that 1.84 percent of all U.S. housing units (one in 54) received at least one foreclosure filing during the year, up from 1.03 percent in 2007.

Read more

AARP on How Older Adults are Coping With Rising Health Care Costs

Health Care Costs and Financing Impact of the Economy on Health Behaviors
Research Report, Teresa A. Keenan, Ph.D., AARP Knowledge Management
November 2008

About one in five midlife and older adults have had their health negatively affected by the current economic downturn, and about one in six are not confident about being able to afford medical care next year, according to this October 2008 survey of adults age 45 and older.

EBRI Report on Account Based Health Plans

Availability, Contributions, Account Balances, and Rollovers in Account-Based Health Plans

This report presents findings from the 2008 EBRI Consumer Engagement in Health Care Survey, as well as earlier surveys, examining the availability of HRA and HSA-eligible plans (so-called consumer-driven health plans). It also looks at employer and individual contribution behavior, time enrolled in such plans, account balances, and rollover behavior.

Monday, January 19, 2009

IRS Web Site "Understanding Taxes"

The IRS has a Web site with lesson plans and student tutorials on "Understanding Taxes." However, anyone who wants a better understanding of our tax code will benefit from the materials on this site. Particularly helpful are the interactive Student Tutorials on topics ranging from claiming exemptions to tax credits.

Sunday, January 18, 2009

Managing Your Medical Debt

Kaiser Health News has information and tips on managing your medical debt. Their first tip is:

Promptly review your bills. Make sure you're not being billed twice for the same thing or paying a charge that should be covered by insurance. Billing errors are common, and patients are often stuck with charges that are not their responsibility.

Read more

Paying for College and Managing Your Student Loans

A nice resource that discusses strategies for managing your college savings and paying off your college loans can be found at Mapping Your Future. The site is sponsored by student loan guaranty agencies.

Expenditure Patterns of Young Adults

A recent BLS report by Geoffrey Paulin, "Expenditure patterns of young single adults: two recent generations compared," indicates that there has been little change in welfare and spending patterns between the current generation and their parents.

Differences in spending patterns for young, never-married adults in 2004–05 and their counterparts in 1984–85 may reflect differences in demographics; however, whether the changes indicate an increase or decrease in economic status remains unclear

Thursday, January 15, 2009

Low Income Households Can Get Help With Energy Bills

The mission of the Low Income Home Energy Assistance Program (LIHEAP) is to assist low income households, particularly those with the lowest incomes that pay a high proportion of household income for home energy, primarily in meeting their immediate home energy needs.

LIHEAP is a Federally funded block grant program that is implemented at the State, Tribal, and Insular Area levels. Grantees serve from low income households who seek assistance for their home energy bills. LIHEAP has been operating since 1982 and its purpose is: "to assist low-income households, particularly those with the lowest incomes, that pay a high proportion of household income for home energy, primarily in meeting their immediate home energy needs. "The program encourages priority be given to those with the " highest home energy needs", meaning low income households with a high energy burden and/or the presence of a "vulnerable" individual in the household, such as a young child, disabled person, or frail older individual.

You must apply for help through your state agency. State contacts can be found at this U.S. Department of Health and Human Services Web site

Law.Com Launches Madoff Watch

There are a lot of lessons to be learned from the Madoff scandal. You keep track of the evolving story at Madoff Watch.

Bernard Madoff's alleged $50 billion Ponzi scheme has rocked the financial world, sparking a range of legal proceedings. Keep up with's coverage and the latest filings in civil, criminal and bankruptcy actions in our frequently updated Madoff Watch special section.

Tuesday, January 13, 2009

Tax Guides for Seniors

IRS publications are available to help you prepare 2008 tax returns for seniors.

Publication 554, Tax Guide for Seniors
Publication 915, Social Security and Equivalent Railroad Retirement Benefits

Affording COBRA Premium on Unemployment Benefits

If you lose your job, you can extend your health insurance coverage under COBRA. You will, however, have to pay for the extended coverage. Families USA compares the average cost of extended coverage with the average unemployment benefit. As expected and indicated in the accompanying table from the study, "Squeezed! Caught between Unemployment Benefts And Health Care Costs," the comparative cost is high. Families need to prepare for unexpected contingencies like this with a three to six month emergency fund.

Saturday, January 10, 2009

EBRI Issues Report on Lum-Sum 401K Distributions at Job Change

Lump-Sum Distributions at Job Change from the Employee Benefit Research Institute documents rollover decisions by terminating employees. Rolling over the savings into another tax qualified account has become an increasingly common decision. However, the decision varies by age and the size of the account.

The data show that an increasing percentage of employment-based retirement plan participants are rolling over all of their lump-sum distributions on job change, and fewer are spending any of their distributions on consumption. However, the data also show that approximately 60 percent of those who took a lump-sum payment did not roll all of it into tax-qualified savings, although not all of those distributions were spent exclusively on consumption but instead were used for home purchases, starting a business, or paying down debt. This behavior varied significantly across participants’ ages at the time of the distribution and the amount of the distribution, with older individuals (up to age 65) and those with higher balances more likely to roll over their assets. This suggests that some individuals, particularly younger ones, do not understand or value the fact that a small amount of savings can make a significant impact on retirement assets due to compound interest. By cashing out even small amounts, younger participants are sacrificing a potentially important asset for their retirement.

See a related report by Patrick Purcell, Pension Issues: Lump Sum Distributions and Retirement Income Security, CRS 7-5700.

Friday, January 9, 2009

One in Four Wives Earn More Than Their Husbands

The percent of wives earning more than their husbands has risen from 17.8 percent in 1987 to more than 1 in 4 since 2002.

See Women in the Labor Force: A Databook (2008 Edition)

Thursday, January 8, 2009

Social Security Launches Online Retirement Benefit Application

No need to drive to the Social Security Office or stand in line. You can now apply for benefits online in a process that should take you no more than 30 minutes.

Go Here

First-Time Homebuyer Credit is Now Available

IRS Press Release

First-Time Homebuyer credit

First-time homebuyers should begin planning now to take advantage of a new tax credit. Available for a limited time, the credit:

  • Applies to home purchases after April 8, 2008, and before July 1, 2009.
  • Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
  • Is fully refundable, meaning that the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax that they owe.

The credit operates much like an interest-free loan because it must be repaid in equal installments over a 15-year period. Taxpayers will claim the credit on new IRS Form 5405, First-Time Homebuyer Credit.

Only the purchase of a main home located in the United States qualifies. Vacation homes and rental property are not eligible. For a home that you construct, the purchase date is the first date you occupy the home.

Taxpayers who owned a main home at any time during the three years prior to the date of purchase are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.

If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. If you make an eligible purchase in 2009, you can choose to claim the credit on either your original or amended 2008 return, or on your 2009 return.

The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return. In most cases, the maximum credit will be available for homes costing $75,000 or more. The credit normally must be repaid over a 15-year period starting the second year after the year the credit is claimed.

The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income. In general, for a married couple filing a joint return the phase-out begins at $150,000 and is completely phased out at $170,000. For other taxpayers, the phase-out range is between $75,000 and $95,000.

Not everyone will qualify for the credit. There are other rules that may impact your eligibility and decision to claim the First-Time Homebuyer Credit. Get all the information at

1040 Central
First-Time Homebuyer Credit Information Center

First-Time Home Buyers Have Several Options to Maximize New Tax Credit.

See also Bank Rate: 4 ways stimulus helps homeowners, buyers

Will You Owe Taxes on a Short Sale of Your Home?

When you sell your house for less then the remaining balance on the mortgage and the lender forgives the difference between the sale price and the amount your owe on the mortgage this is termed a "short sale." Normally forgiven debt like this is taxable as income. However, because of the current financial crisis an exception has been created for homeowners in the Mortgage Debt Relief Act of 2007.

An Offer In Compromise (OIC) Can Reduce Your Tax Liability

An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than full amount owed, may be a viable option for taxpayers experiencing economic difficulties. However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay are not necessarily accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new, second review of the information to determine if accepting an offer is appropriate.

IRS Begins Tax Season 2009

IRS Begins Tax Season 2009 with Steps to Help Financially Distressed Taxpayers; Promotes Credits, e-File Options

IR-2009-2, Jan. 6, 2009
WASHINGTON — The Internal Revenue Service today kicked off the 2009 tax filing season by announcing a number of new steps to help financially distressed taxpayers maximize their refunds and speed payments while providing additional help to people struggling to meet their tax obligations.

IRS Commissioner Doug Shulman encouraged taxpayers to take advantage of several new tax credits and deductions this filing season and announced a major enhancement to the Free File program that will allow nearly all taxpayers to e-file for free and accelerate their refunds. “With so many people facing financial difficulties, we want taxpayers to get all the tax credits they’re entitled to as quickly as they can,” Shulman said. “In addition, we are creating new protections to help people trying to meet their tax obligations. The IRS will do everything it can to help during these tough times.”

Read more

Wednesday, January 7, 2009

FTC Issues Third Interim Report on Results of Studies Required by FACT Act

The previous interim report to Congress (December 2006) reviewed the results of an initial pilot study designed for testing a potential methodology for a nationwide survey, and it proposed a second pilot study to address certain problems uncovered in the first study. In both pilot studies, randomly selected consumers reviewed their credit reports with an expert to identify potential errors, and then disputed potential errors that the expert believed could have a material effect on their credit standing. The current report explains the methodological improvements tested in this second pilot study. As a next step, in 2009 FTC staff plans to submit a proposal, subject to approval by the Office of Management and Budget, for a nationwide study assessing credit report accuracy

The second pilot study was comprised of 128 people who, after an in-depth review of their credit reports, determined whether they believed there were significant errors in their reports. ...88 people stated they found no errors and 40 people alleged one or more errors that they wanted to dispute, whether material or not. Of the latter group, there was a sub-group of 15 people who alleged material errors...

Read report

It's a Buyer's Market for Luxury Homes

The Institute for Luxury Home Market compiles data on the market for luxury homes. The data can be found in the ILHM National Luxury Market Report.

The ILHM Luxury Market Report is a snapshot of the national luxury market. Like the Case-Shiller Composite Index and other national indices, it is a bundle of data from markets around the country that give a simplified view and try to get at the question of what’s happening in the marketplace.

It's time to look for that luxury home in Vail or Aspen, the report indicates it's a cold buyer's market.

Use the IRS Directory Listing to Locate Draft Forms and Forms for Previous Years

The directory listing at provides an expert listing for locating IRS documents. Items that may not be easily available on the html pages can be found here. For example, drafts of forthcoming forms can be found in and forms for previous years can be found in

Tuesday, January 6, 2009

OFHEO Study Documents Difference Between HPI and S&P/Case Shiller Housing Price Index

"Recent Trends in Home Prices: Differences across Mortgage and Borrower Characteristics," by the Office of Federal Housing Enterprise Oversight (OFHEO) attempts to explain differences between the two indexes. It appears that borrowers characteristics are correlated with appreciation patterns. Homes with higher-risk mortgages generally have experienced greater price declines in recent periods.

In central California, for example, home prices for low-FICO homes declined 23.7 percent between the first quarters of 2007 and 2008. By contrast, prices fell 19.7 percent for high-FICO properties. In other areas of California, the difference in the depreciation rate was slightly greater; the value of high-FICO properties fell approximately 15.8 percent, while prices of low-FICO homes fell an estimated 22.4 percent.

See previous post Pick Your Home Price Index: Comparing the HPI with the Case-Schiller Index

Find a Credit Union with CULookup

CULookup sponsored by the National Association of Federal Credit Unions will help you locate a credit union in you neighborhood. The conditions for joining vary widely, but in most cases requiring no more than living in a specific community. Don't miss the entertaining series of videos on "The Difference Between Banks and Credit Unions."

Monday, January 5, 2009

What is Your Longevity Risk (The Risk You Will Deplete Your Savings Before Death)?

The Congressional Research Service attempts to answer that questions in this recently issued report, "Converting Retirement Savings into Income: Annuities and Periodic Withdrawals."

An analysis conducted by CRS indicates that under specific conditions there is a 95% or greater probability that a man who retires at age 65 will not exhaust his retirement account before the earlier of death or age 95 if his initial withdrawal does not exceed 5% of the account balance and later withdrawals are the same in inflation-adjusted dollars. Under the same conditions, there is a 95% or greater probability that a woman who retires at age 65 will not exhaust her retirement account before the earlier of death or age 95 if her initial withdrawal does not exceed 4.5% of the account balance and later withdrawals are the same in inflation-adjusted dollars.

The report notes that immediate annuities represent only a small portion of retirement assets and suggest that the general lack of interest in immediate annuities may be due to the following factors:

  • Potential purchasers may have a sufficient amount of annuitized income from Social Security and defined benefit plan
  • The amount and non-transparency of fees charged by insurance companies
  • The lack of flexibility needed to deal with unexpected expenditures

Missed the Economic Stimulus Payment? You May Be Eligible for the Recovery Rebate Credit

Recovery Rebate Credit Information Center
The recovery rebate credit is a one-time benefit for people who didn't receive the full economic stimulus payment last year and whose circumstances may have changed, making them eligible now for some or all of the unpaid portion.

Generally, a credit adds to the amount of a tax refund or decreases the amount of taxes owed. Therefore, the amount you receive for the recovery rebate credit will be included as part of your refund, as shown on your tax return. Unlike the 2008 economic stimulus payment, it will not be issued as a separate check.

PBGC Publishes Pension Insurance Data Book 2007

WASHINGTON – The Pension Benefit Guaranty Corporation (PBGC) today released the Pension Insurance Data Book 2007, which offers information on statistical trends related to defined benefit retirement plans.

The 2007 Data Book features an article examining the characteristics of standard terminations, the most common procedure used to end PBGC-insured single-employer defined benefit plans.

Read more

It is noteworthy that firms representing the ten largest claims have accounted for 62 percent of all claims against PBGC from 1975 to 2007 and that terminations by firms in the Primary Metals and Air Transportation industries have accounted for almost 75 percent of PBGC’s claims.

The Top 10

1.United Airlines
2.Bethlehem Steel
3.US Airways
4.LTV Steel
5.Delta Air Lines
6.National Steel
7.Pan American Air
8.Trans World Airlines
9.Weirton Steel
10.Kaiser Aluminum

See also this discussion of the pension system by Bloomberg, January 13, 2009

Most Mutual Fund Shareholders Are From Moderate Income Households

The Investment Company Institute has released its survey of of mutual funds for 2008, "Ownership of Mutual Funds, Shareholder Sentiment, and Use of the Internet, 2008." Among the key findings is the following:

Most U.S. mutual fund shareholders had moderate household incomes and were in their peak earning and saving years. About three in five U.S. households owning mutual funds had incomes between $25,000 and $99,999, and about two-thirds were headed by individuals between the ages of 35 and 64 in 2008. About twice as many U.S. households owned mutual funds through tax-deferred accounts—employer-sponsored retirement plans, IRAs, and variable annuities—as owned funds outside such accounts.

Friday, January 2, 2009

Decline in Fannie Mae and Freddie Mac Loan Limits

The higher loan limits under the stimulas package end as of January 1 of this year. As of now the maximum loans Fannie Mae and Freddie Mac will buy or guaranty revert to previous limits. See WSJ, "Lower Fan-Fred Limit May Hurt High-Price Markets," and

Faculty Salaries at Post Secondary Institutions

The National Center for Educations Statistics publishes annual data on faculty in educational institutions. The latest information is contained in Employees in Postsecondary Institutions, Fall 2007, and Salaries of Full-Time Instructional Faculty 2007-08. If you are thinking of going on for that post-graduate degree and entering college teaching you might want to review current salaries. This document only includes aggregate data. Salaries can vary widely by discipline and department. Be sure to get additional information on your field of study.