Friday, August 31, 2012

The Best U.S. Cities for Retiring On $100 a Day

by Mandi Woodruff

There's no getting around the changing landscape of retirement in America. 

Today's younger workers will likely be stuck in the 9-to-5 grind well into their 70s, while their older counterparts face rising levels of unemployment and nest eggs that have been shrink-rayed by a floundering economy.

It's an outlook AARP The Magazine took well into consideration as it approached its annual list of the "10 Best Places To Retire." This year, you'll only find places where today's retirees can live comfortably on $100 per day

"Everybody is struggling in this economy still and we decided we really wanted to find places that were very affordable," editorial projects manager, Gabrielle Redfor, told Business Insider.  

Their budget: 

Gross after-tax income: $25,375 
Monthly income: $2,281
Mortgage: $720 per month on a $192,00 home

Once they figured out the affordability factor, AARP rated towns on their overall 'livability" as well––the factors like culture, hiking trails, climate, health care, and cost of living that all retirees typically consider. 

"We wanted to make sure we weren't sending people to communities that had a lot of foreclosure where it might be cheap, but there's nothing else there," Redfor said. "You really have to go and spend some time in a city before you know whether or not you want to move there. It's a big deal. It takes a lot of energy. You want to do your homework." 

Flickr via kishka_kingOmaha, Nebraska
Median home price: $123,500

Sunny days per year: 220

 Midwestern, high-tech

 Millionaires with a conscience abound thanks to civic-minded executives, private donations fund parks, arts, and sports.

Mingle with the natives:
 At Mr. Toad’s, in the heart of the Old Market area

Best daytime spot:
 Seniors pay $12.50 at the Henry Doorly Zoo

Flickr via nickfoustPittsburgh, Pennsylvania
Median home price: $106,500

Sunny days per year:

 Green not grimy, the city’s 88 distinct neighborhoods create a European atmosphere

 Pittsburgh is home to a stable, diverse economy—since 2008, only Austin and Houston have added jobs faster

Where to mingle: 
Frick Park, in the city. In the summer, check out the Bowling Green.

Best daytime spot: 
PNC Park, home of the Pirates, ranked as the No. 1 baseball field in the country by ESPN. Score bleacher seats from $14

Local flavor:
 Eggs and kielbasa for breakfast at DeLuca’s in the Strip district

Bonus perk:
 The view as you emerge from the Fort Pitt Tunnel.

Flickr via gilmorecGainesville, Florida
Median home price: $125,500

Sunny days per year:

 Hippie meets world traveler

 The country’s sixth largest college—The University of Florida—fuels a economy more durable than most Southern cities.

Where to mingle: 
The Swamp, aka UF’s Ben Hill Griffin Stadium, where it's free to run and workout all you want.

Best daytime spot:
 $9 tickets for seniors at the Florida Museum of Natural History's Butterfly Rain Forest Exhibit. 

Local flavor: 
A Cuban sandwich ($8.95) at Emiliano’s CafĂ©, a pioneer in the pan-Latin food movement

Bonus perk:
 The dense urban canopy, where Northern hardwoods meet  Southern tropics.

Flickr via mr512San Antonio, Texas
Apart from its famous river walk and the city's sleek new bike share program, here's what else this Texan town has going for it: 

Median home price: $135,000

Sunny days per year:

Best daytime haunt:
 El Mercado, which the city claims is the biggest Mexican marketplace outside Mexico, in Old Market Square. 

Flickr via dyleGrand Junction, Colorado
Median home price: $159,800

Sunny days per year:

 Contemporary and Western mix

 Two-thirds of the county land is public, making recreation a bargain; a recent 20 percent drop in housing prices

Where to mingle: 
The Rockslide Brewery downtown

Local flavor: 
Local vineyards get plenty of press, but make sure you snack on the region’s impressive strawberries, sweet cherries, and peaches.

Bonus perk: 
The views of the Grand Valley

www.theliveryec.comEau Claire, Wisconsin
Median home price: $121,100

Sunny days per year:

 Family-friendly but progressive

Local flavor:
 The Cheese Curds ($7) made from the region’s famed cheddar at the Livery, a converted stable downtown.

Flickr via familymwrLas Cruces, New Mexico
Median home price: $148,000

Sunny days per year:

 A melting pot where Old Mexico meets the Wild West 

Local flavor:
 De La Vega’s Pecan Grill & Bar's stuffed green chiles ($9)

Flickr via furryscalymanSpokane, Washington
Median home price: $145,000

Sunny days per year:

 Lush green beauty meets smart urban planning

Impress friends and family with:
 Its stunning Riverfront Park and historic downtown

Flickr via rittysdigiezMorgantown, West Virginia
Median home price: $168,900

Sunny days per year:

 The college town's Appalachian roots are just as strong as its local economy

Local flavor:
 Mario’s Fish Bowl. Originally a candy store, the restaurant has been serving up beer in fishbowl-size glasses for more than 60 years. 

Flickr via maxpowerRoanoke, Va.
Median home price: $151,500

Sunny days per year: 

 A small city tucked inside the stunning Blue Ridge Mountains

Local flavor: 
The legendary Texas Tavern, a 24-hour fixture since 1930

READ MORE from AARP The Magazine

Thursday, August 30, 2012

Richest Reitrees Settle For Seattle Rain As Florida No.2

by Margaret Collins

The U.S.'s richest retirees are spurning Florida's sun in favor of Seattle's rain and the company of Steve Ballmer.

Hunts Point, Washington, a Seattle suburb with more than 150 days of rain a year and about 400 residents including theMicrosoft Corp. chief executive officer, had an average household retirement income of $200,431 in 2010. That puts the peninsula town at No. 1 in a Bloomberg Rankings list of 37 places with the wealthiest older residents.

“Most of the homes are on the water or near the water,”said Stan Humphries, chief economist at Seattle-based Zillow Inc. “It’s right across the bridge from Seattle, it’s near Microsoft, and of course it’s a very pretty place.”

Small, private spots such as Hunts Point that provide easy access to cities along with an island or country ambiance are among the favorite places for the nation’s wealthiest retirees, according to the ranking. Older residents of the top-ranked enclaves are flush for retirement, with incomes from pensions, savings and investments averaging more than six figures before Social Security. The list includes four cities in Florida, home to one of the world’s biggest retirement hubs.

Bloomberg’s list, based on U.S. Census Bureau data, ranks places with at least 100 residents, a retirement income averaging at least $75,000 and median home values of $500,000 or more.

Wednesday, August 29, 2012

Buying Beats Renting In Most U. S. Cities

Buying  a home in most major markets will end up being cheaper than renting one.

by Les Christie

For people who are willing to stay put for a few years, buying a home has become a much better deal than renting in almost every major housing market in the nation.

In more than 75% of the 200 metro areas analyzed by real estate listing web site Zillow, homeowners would reach a "breakeven point" - where owning the home makes better financial sense than renting it - in three years or less.

"Historic levels of affordability make buying a home a better decision than ever, especially considering rents have risen more than 5% over the past year," said Stan Humphries, chief economist for Zillow.

The survey was Zillow's first buy-versus-rent analysis, incorporating all homeownership costs, including down payments, closing costs, mortgage payments, property taxes, utilities and maintenance costs, and compared them to rental costs. It also took into account projected home price appreciation and rent increases, as well as tax deductions and inflation.

Zillow's findings support other reports that show that rising rents, record-low mortgage rates and falling home prices have made homeownership a more attractive option.

In some of the metro areas Zillow looked at, home buyers would break even in less than two years.
In Miami, for example, a homebuyer would only have to stay in their home for about 1.6 years for the purchase to pay off, Zillow said.

Homes in the metro area are selling for about 45% less than they were five years ago. Meanwhile, over the past three years, rents have climbed 20%, according to RentJungle.

Miami's metro area, along with Tampa, Fla., Memphis, Tenn., and several smaller cities, have the shortest break-even times of the markets Zillow analyzed.

Renters still have the upper hand in some cities. It would take home buyers in San Jose, Calif., 8.3 years to break even on their homes - the longest period of time of any of the metro areas Zillow surveyed. Other big cities where buying was not such a good a deal were Honolulu, at a six-year break-even point, and San Francisco at 5.9 years.

Buy vs. rent in 30 major cities
CityStateBreakeven time in years
New YorkN.Y.5.1
Los AngelesCalif.4.3
San FranciscoCalif.5.9
San DiegoCalif.3.6
St. LouisMo.2.5
Las VegasNev.1.7
San JoseCalif.8.3


Tuesday, August 28, 2012

Buy, Sell or Rent: Americans Rewrite the Dream

by Diana Olick

American homes have never been more affordable than they are today. Prices are down dramatically, mortgage rates are at record lows and desperate sellers are willing to make concessions.

Still about one third of Americans choose to rent, despite the fact that 85 percent say owning makes more sense financially than renting over the long term, according to a new Fannie Mae study.

Buying is cheaper than renting in most U.S. markets, according to another study from online real estate sale site Zillow. The upfront costs may be higher, but Zillow looked at what it calls the “breakeven horizon,” which is when the cost of owning (including down payment, taxes, fees) meets the cost of renting. While markets will vary neighborhood to neighborhood, the breakeven point in many markets, like Minneapolis, Baltimore, Denver, St. Louis, Chicago and Charlotte, is under three years.

The main barrier to homeownership for many, however, is the mortgage market.

The days of free-wheeling lending are over, and credit worthiness is now king. There are low down payment options, like the FHA, but too many potential buyers don’t meet the credit qualifications either for the great low rates or for the loan itself.

The other half of the equation is attitudes.

Consumer confidence in housing is still in the basement, especially for younger Americans, who make up 46 percent of the rental market, according to Fannie Mae. Younger Americans not only have the highest unemployment rate, but they also don’t have the cash for today’s higher down payments, and in many cases they’ve seen their parents lose massive amounts of home equity. Fannie Mae’s survey found that attitudes played a much bigger role in the decision to buy for some, while demographics played higher for others, and home values, believe it or not, played a very small role:

Demographics such as income, age, marital status, and employment status are the primary drivers of current homeownership status and the own-rent intention for outright homeowners (those who don’t have a mortgage). However, attitudes are the key drivers of the own-rent intention for renters and homeowners with a mortgage – two groups that account for about 80 percent of housing units in the U.S. Surprisingly, we also found that exposure to default, perceived home value appreciation/depreciation, and self-reported underwater status make minimal incremental contributions to predicting the own-rent intention in the models.

While renters have historically been younger, lower wage-earners, nearly 20 percent of renters make between $50,000 and $100,000 a year in income, according to Fannie Mae. Nearly half of those who own a home without a mortgage are over the age of 65. But the renters keep coming, as aging baby boomers downsize and as younger cohorts choose not to fight the mortgage market.

“While we do agree that housing is bottoming, that doesn’t mean we’re coming back strongly,” says Oliver Chang, former head of housing strategy at Morgan Stanley, who just launched Sylvan Road Capital, a new real estate fund which intends to invest $1 billion in the single family rental market over the next two years. “It is still incredibly difficult to get mortgage credit. The lending environment, whether government-backed or private, is still unclear.”

Despite the recession, the household formation rate has been growing steadily, which means more demand for shelter. Rentals will likely absorb much of that demand, unless and until lending ramps up. It will take several years for many Americans to not only rebuild their credit scores and rebuild their faith in home ownership.


Monday, August 27, 2012

Tips for Maximizing Your Credit Score When It Counts Most

by Susan Johnston

When the 2012 Summer Olympics opened in London last month, thousands of athletes from around the world came to compete in pursuit of that elusive gold medal; their years of training, sweat, and hard work culminating in a few key moments of competition. Outside of these elite athletes, most of us will never feel the rush of completing a perfect dismount from the balance beam or finishing the 200-meter breaststroke ahead of an internationally ranked rival.

But that same hard work and tenacity could be applied to boosting our credit score in anticipation of a major life event. Adrian Nazari, founder and CEO of, which offers free credit-analyzing tools for consumers, sees parallels between Olympic athletes' preparations chasing a gold medal and consumers preparing their credit score to apply for a mortgage or a refinance. "They want to make sure that their credit score peaks when they want to make a big financial decision," he says. "If they don't have the right credit profile, that could cost thousands of dollars."

Here are seven strategies for improving your credit in anticipation of a loan application or refinance:

1. Start early. "Just like an Olympic athlete who dedicates himself to practice way ahead of the Olympics, consumers should start early," says Nazari. Credit report errors could take several months to clear up, so check your report well in advance of applying for a mortgage or car financing. If you spot mistakes like an incorrect balance or a missed payment that you actually paid on time, Nazari suggests contacting a credit bureau. "Say 'look, I made the payment on time' or 'my balance was reported wrong,'" he suggests. Collect any documentation that proves your case as backup.

Buying your FICO score from is also smart, according to Liz Weston, author of Your Credit Score and The 10 Commandments of Money, because that's the score that financial institutions actually use to determine creditworthiness.

2. Lower your credit utilization ratio. Credit utilization - that is, the ratio between your credit card balance and credit limit - is a major part of your credit score, so bringing down that ratio by lowering your balance can help boost your score. Thirty percent or less used to be a good standard, but Beverly Harzog, an independent credit card expert and consumer advocate, says to shoot for 10 percent if possible.

But don't be too quick to close old cards. "If you close a credit card account, you take away some of your credit limit, so that can make your utilization ratio go up," says Harzog. "If there's an annual fee and you want to close that card, put that off until you've got approved for a mortgage."

Requesting a credit increase could help lower your credit utilization, but if you have a high balance or other potential red flags, the credit card issuer may actually lower your limit. "If you've got a pretty clean slate and you're not in debt, you'd have a good argument to get an increase," says Harzog. "But if you're at the other end of the spectrum, don't try that. It could very likely make things worse."

3. Keep high balances off your card. Even if you pay off your credit card balance every month, large purchases can still haunt you due to timing issues. "The balance that's reported to credit bureaus is on a random day from before the end of that statement period," says Weston. "You could have paid the balance off before and it still wouldn't say zero." Leading up to a mortgage application, it may be wise to avoid large purchases--or to at least pay cash to keep them off your statement.

4. Don't make hard credit inquiries. Hard inquiries on your credit - such as applying for a retail credit card - can lower your score temporarily, so avoid those activities in anticipation of a mortgage or loan application. "At a department store, you're looking to get 10 percent off that, but to creditors, it looks like you're shopping for credit," says Nazari. "You could wind up paying a lot more in interest over time compared to the 10-percent discount you could get from the store." Soft inquiries - such as checking your own credit - do not impact your score.

5. Make timely payments. Pay your bills on time to demonstrate your creditworthiness. According to Weston, "a single skipped payment can knock 110 points off your score." Also be vigilant about any bills that might wind up in collections. Weston says that medical bills in particular may slip through the cracks due to complicated insurance and hospital billing systems, so consumers may not know about the bill until they see it on their credit report.

"If you've gone to the hospital and haven't gotten a bill, call and ask about it," suggests Weston. "If you're calling the billing department of your medical provider and your insurance company, it's unlikely it will go to collections."

6. Stay in your current job if you can. Switching jobs right before you apply for a mortgage or refinance could be a red flag for lenders. "If you're currently employed and your plan is to change jobs, stick with your current employer," says Harzog. "Don't make any major lifestyle changes until you get approved. You want to look as stable and as risk-free as possible."

7. Don't stress over less than perfection. Olympic athletes strive for gold, but of course, silver and bronze are also impressive. Once you reach a certain level, increasing your credit score doesn't improve your interest rate. "If you're in the market for a mortgage and you're over 740, you're going to get the best rate," says Weston. "With other kinds of loans, you might need a 760 or above. There's no point in having a score of 850 or even a score over 800. You don't get any bonus points for being super high."


Sunday, August 26, 2012

Become A Millionaire Real Estate Mogul

millionaire real estate mogul

by Lisa Gibbs

Becoming a landlord has always been a well-worn path to millionaire status, with good reason: Not only does owning properties let you generate a second source of income, your tenants' checks will help you build equity in your investment.

The case for owning rental real estate is even more compelling now thanks to depressed prices, super-low interest rates, and the fact that the shortage of rental housing is the most acute it's been in five years, according to CoreLogic.

With median prices on existing homes at around $182,600, you won't get rich by owning one home. Based on modest estimates for appreciation and reasonable expectations for profits, it's likely to take three or more properties to produce the cumulative equity and rental earnings you need to get to the nominal sum of $1 million down the road. (Throughout this story, references to $1 million are to the nominal - not inflation-adjusted - figure.)

Part of a special report on How to reach $1 million, this story explains how investing in real estate can put you on the track to becoming a millionaire.

KEY MOVE: Expand your holdings to at least three properties


Maximize your market. Once you own a property or two in an area, adding a third nearby generally makes sense, says Chris Clothier, co-owner of Memphis Invest, which buys and manages rental homes for investors. "It's usually easier to manage," he says. You can also save on maintenance by using a single contractor.

If fielding late-night calls about water leaks doesn't grab you, grouping your properties will also let you find a single company to manage your properties (typically for about 8% to 10% of the rent plus commissions).
Of course, you'll want greater diversification if you're buying in a smaller town dominated by a single large employer.

Think duplex or triplex. That extra unit probably won't cost you much more, yet the extra rent can be significant.

Three years ago real estate agent Greg Markov bought a triplex in Phoenix for $70,000, or about $5,000 more than what he would have paid for a single-family home in the same neighborhood. With more units, Markov's maintenance costs are higher - he budgets $2,000 a year, vs. $1,000 for a one-family home. Yet the three units throw off $1,500 a month in rent, not $900.

Also, Fannie Mae rules state that you can finance up to four properties - which includes your primary residence - with just 20% down. Homes five through 10 will require at least 25% down and a higher credit score (720 vs. 620). Fannie, however, counts a duplex, triplex, or fourplex as a single property, so you can finance more units at beneficial terms.

Finance creatively. Take what the market is giving you. Buying with cash, for instance, will get you the best prices. So if you have, say, $150,000 saved up, try purchasing house No. 1 with savings. Then within six months, take out a Fannie Mae-backed loan on 80% - in that time frame Fannie will consider it a purchase loan, with better terms than a cash-out refinance. You can use that $120,000 to buy house No. 2.

Own your own company? The U.S. Small Business Administration offers 10% down low-cost real estate loans as long as the business occupies at least 51% of the space.

In 2010, Greg and Audrey Charlap of Hermosa Beach, Calif., obtained SBA financing for a $755,000 store/warehouse with three apartments upstairs. The rent checks cut the real estate tab for their business, baby-products retailer Pampered Tot, by 35%, Greg says.


Where to look. Begin your search near large employment centers or universities, where strong rental demand will ensure profitability.

How to price it. Your operating income - rents minus expenses, not including debt service - should be at least 1.25 times your principal and interest, says mortgage broker Kathleen Kramer.

How to dress it up. Don't scrimp on amenities. A few upgrades, such as granite countertops, will make your rental stand out and reduce vacancies.

How to vet tenants. For $10 to $30, services such as LexisNexis and will run credit and criminal background checks.


Saturday, August 25, 2012

Credit Card Pact No Deal for Consumers

By Jennifer Waters

The $7 billion settlement between Visa, MasterCard, some large banks and retailers, if approved, sends a strong message to consumers: Buck up and plan on paying for the privilege of using a credit card for any other payment method.

“If you’re using an additional service when you shop you’ll be paying for that service,” said Anisha Sekar, vice president of credit and debit products for online financial-products reviewer NerdWallet. “Everyone who uses cash has been subsidizing credit-card holders for years.”

The antitrust settlement announced late Friday, which still needs to approved by a judge, calls for the card giants and large card-issuing banks to pay more than $7.25 billion in penalties and payment fees to retailers who claimed Visa and MasterCard had price-fixed interchange fees. Commonly referred to as “swipe charges,” interchange fees are charged on each credit-card transaction.

The agreement will allow retailers, for the first time since credit-card use has been in place, to slap a surcharge on consumers who pull out plastic rather than cash for their purchases. Visa and MasterCard have never allowed that for fear that it would thwart credit-card use. But retailers have increasingly complained about the rising fees on credit-card purchases, which surpassed items bought with cash and checks in 2003. The agreement does not lower or level those fees.

“The reforms achieved by this case and in this settlement will help shift the competitive balance from one formerly dominated by the banks (that) controlled the card networks to the side of merchants and consumers,” Craig Wildfang, the retailers’ top attorney from Robins, Kaplan, Miller & Ciresi law firm, said in a statement.

More than $6 billion will be for “alleged past damages,” according to a news release announcing the pact. Another $1.2 billion is a reprieve of sorts in which Visa and MasterCard will cut the costs it charges merchants to accept plastic for eight months. The agreement does not include debit-card purchases.

Though the settlement was widely reported as a victory to retailers, the National Retail Federation and the National Association of Convenience Stores said it falls short of solving the biggest culprit in the credit-card world: those swipe fees Visa and MasterCard charge on each transaction. The fees vary broadly, based on the merchant and which card is used, and are widely criticized by merchants for their opaqueness. They can range anywhere from less than 1% of the transaction to approaching 5% and tend to be higher for smaller merchants than larger, national retailers.

“The initial responses to the settlement are decidedly negative because it doesn’t even begin to solve the problem that swipe fees are set in a noncompetitive market,” said Mallory Duncan, the NRF’s general counsel. Merchants pay out some $30 billion annually in swipe fees, which Duncan considers hidden fees because many merchants don’t even know how they’re determined.

“Nothing in this proposed settlement requires that merchants be told how much the hidden fees are,” he said.

Whether retailers actually charge consumers more at the cash register when they pull out credit cards, or do as many gas stations do today—offer a discount for cash—will take months, even years, to play out.

“It’s coming to consumers’ attention that these costs exist and there’s increasing pressure on merchants to make a profit in a very tough economic environment,” Sekar said. “Consumers are no longer shielded to that reality.”

There’s still a possibility that the settlement will either be rejected by retailers or even the courts when a judge reviews it within the next year.

On Tuesday, the Retail Industry Leaders Association sent a please-make-a-law letter to Congress. “The U.S. electronic payments market is broken and it is in desperate need of reform,” said the letter, signed by Katherine Lugar, executive vice president of public affairs for the industry trade group.

“It’s a mess,” NACS attorney Doug Kantor said about the settlement. “There are lots of conditions on this.”

Some of those conditions can be anticompetitive and rather than enhance consumers choices, take some away, Kantor said.

Among them is one in which merchants will be forced to add charges to consumers using payment options like PayPal if they put surcharges on Visa or MasterCard transactions. PayPal’s rules don’t allow surcharges now.

“Merchants will either have to surcharge PayPal or drop PayPal,” Kantor said. “Those are very potent tools that Visa and MasterCard have against upstarts like PayPal if this deal goes through.

“This is not going to change any of the fundamental problems in the marketplace,” Kantor said.

“Consumers are the losers today and consumers will be the losers if this agreement goes through,” he said.


Friday, August 24, 2012

Water Is The New Gold, A Big Commodity Bet

by Paul B. Farrell

"Is water the gold of the 21st century?" asks Fortune.  Answer: Yes, water is the new gold for inventors this century.

In 2010 global water generated over a half trillion dollars of revenue. Global world population will explode from 7 billion today to 10 billion by 2050, predicts the United Nations. And over one billion “lack access to clean drinking water.”

Climate and weather patterns are changing natural water patterns. And industrial pollution is making water a scarce commodity. So the good news is that huge “opportunities exist for businesses that can figure out how to keep the pipes flowing.”

Yes, it’s a hot market. So, expand your vision for a minute. How many bottles of water do you drink a week? How much did you use for a shower? When you flushed a toilet? Wash your car? Cooking? Lattes? And my guess is your city water bill’s gone up in recent years.

So ask yourself: What happens in the next 40 years when another three billion people come into the world? Imagine adding 75 million people every year, six million a month, 200,000 every day, all demanding more and more water to drink, to shower, to cook, to everything. All guzzling down the New Gold that’s getting ever scarcer.

Thursday, August 23, 2012

Die Broke - on Purpose: An Unconventional Retirement Plan

morgue tag
by Selena Maranjian

This will probably come as a shocker to most people: Three economists from leading universities have found that "a substantial fraction of persons die with virtually no financial assets -- 46.1% with less than $10,000 -- and many of these households also have no housing wealth and rely almost entirely on Social Security benefits for support."

Got that? The findings, in a paper published by the National Bureau of Economic Research show that a huge portion of America is relying almost completely on Social Security, and that they die with hardly any money to their name.

Awful ... or Awesome?

Dying broke probably sounds just awful. But it doesn't have to be.

In fact, it should almost be a goal to which we all aspire. For many of us, a perfect financial life would be one in which we amassed exactly the amount of money we'd need in life, and in which we ran out of money the day we died.

After all, what's the sense of dying with lots of money in the bank? You can't take it with you.

The reality of those who do die broke isn't as neat and clean, though. The professors' data reflects millions of Americans not living perfect financial lives, but instead struggling to get by in retirement. They don't end up running out of assets on their last day, but long before it.

For a clearer picture of the situation, know that the average monthly Social Security benefit (as of early this year) is $1,230. That's $14,760 per year. Can you imagine yourself living on that – or, let's even up it a little, on, say, $20,000 or $25,000 per year?

Even if you can imagine it, would you want to live that way? Probably not.

Wednesday, August 22, 2012

US Poverty On Track To Reach Highest Level Since The 1960s

The ranks of America's poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and fraying government safety net.

Census figures for 2011 will be released this fall in the critical weeks ahead of the November elections.

The Associated Press surveyed more than a dozen economists, think tanks and academics, both nonpartisan and those with known liberal or conservative leanings, and found a broad consensus: The official poverty rate will rise from 15.1 percent in 2010, climbing as high as 15.7 percent. Several predicted a more modest gain, but even a 0.1 percentage point increase would put poverty at the highest since 1965.

Poverty is spreading at record levels across many groups, from underemployed workers and suburban families to the poorest poor. More discouraged workers are giving up on the job market, leaving them vulnerable as unemployment aid begins to run out. Suburbs are seeing increases in poverty, including in such political battlegrounds as Colorado, Florida and Nevada, where voters are coping with a new norm of living hand to mouth.

"I grew up going to Hawaii every summer. Now I'm here, applying for assistance because it's hard to make ends meet. It's very hard to adjust," said Laura Fritz, 27, of Wheat Ridge, Colo., describing her slide from rich to poor as she filled out aid forms at a county center. Since 2000, large swaths of Jefferson County just outside Denver have seen poverty nearly double.

Fritz says she grew up wealthy in the Denver suburb of Highlands Ranch, but fortunes turned after her parents lost a significant amount of money in the housing bust. Stuck in a half-million dollar house, her parents began living off food stamps and Fritz's college money evaporated. She tried joining the Army but was injured during basic training.

Now she's living on disability, with an infant daughter and a boyfriend, Garrett Goudeseune, 25, who can't find work as a landscaper. They are struggling to pay their $650 rent on his unemployment checks and don't know how they would get by without the extra help as they hope for the job market to improve.

In an election year dominated by discussion of the middle class, Fritz's case highlights a dim reality for the growing group in poverty. Millions could fall through the cracks as government aid from unemployment insurance, Medicaid, welfare and food stamps diminishes.

"The issues aren't just with public benefits. We have some deep problems in the economy," said Peter Edelman, director of the Georgetown Center on Poverty, Inequality and Public Policy.

He pointed to the recent recession but also longer-term changes in the economy such as globalization, automation, outsourcing, immigration, and less unionization that have pushed median household income lower. Even after strong economic growth in the 1990s, poverty never fell below a 1973 low of 11.1 percent. That low point came after President Lyndon Johnson's war on poverty, launched in 1964, created Medicaid, Medicare and other social welfare programs.

"I'm reluctant to say that we've gone back to where we were in the 1960s. The programs we enacted make a big difference. The problem is that the tidal wave of low-wage jobs is dragging us down and the wage problem is not going to go away anytime soon," Edelman said.

Stacey Mazer of the National Association of State Budget Officers said states will be watching for poverty increases when figures are released in September as they make decisions about the Medicaid expansion. Most states generally assume poverty levels will hold mostly steady and they will hesitate if the findings show otherwise. "It's a constant tension in the budget," she said.

The predictions for 2011 are based on separate AP interviews, supplemented with research on suburban poverty from Alan Berube of the Brookings Institution and an analysis of federal spending by the Congressional Research Service and Elise Gould of the Economic Policy Institute.

The analysts' estimates suggest that some 47 million people in the U.S., or 1 in 6, were poor last year. An increase of one-tenth of a percentage point to 15.2 percent would tie the 1983 rate, the highest since 1965. The highest level on record was 22.4 percent in 1959, when the government began calculating poverty figures.

Poverty is closely tied to joblessness. While the unemployment rate improved from 9.6 percent in 2010 to 8.9 percent in 2011, the employment-population ratio remained largely unchanged, meaning many discouraged workers simply stopped looking for work. Food stamp rolls, another indicator of poverty, also grew.

Demographers also say:

- Poverty will remain above the pre-recession level of 12.5 percent for many more years. Several predicted that peak poverty levels - 15 percent to 16 percent - will last at least until 2014, due to expiring unemployment benefits, a jobless rate persistently above 6 percent and weak wage growth.

- Suburban poverty, already at a record level of 11.8 percent, will increase again in 2011.

- Part-time or underemployed workers, who saw a record 15 percent poverty in 2010, will rise to a new high.

- Poverty among people 65 and older will remain at historically low levels, buoyed by Social Security cash payments.

- Child poverty will increase from its 22 percent level in 2010.

Analysts also believe that the poorest poor, defined as those at 50 percent or less of the poverty level, will remain near its peak level of 6.7 percent.

"I've always been the guy who could find a job. Now I'm not," said Dale Szymanski, 56, a Teamsters Union forklift operator and convention hand who lives outside Las Vegas in Clark County. In a state where unemployment ranks highest in the nation, the Las Vegas suburbs have seen a particularly rapid increase in poverty from 9.7 percent in 2007 to 14.7 percent.

Szymanski, who moved from Wisconsin in 2000, said he used to make a decent living of more than $40,000 a year but now doesn't work enough hours to qualify for union health care. He changed apartments several months ago and sold his aging 2001 Chrysler Sebring in April to pay expenses.

"You keep thinking it's going to turn around. But I'm stuck," he said.

The 2010 poverty level was $22,314 for a family of four, and $11,139 for an individual, based on an official government calculation that includes only cash income, before tax deductions. It excludes capital gains or accumulated wealth, such as home ownership, as well as noncash aid such as food stamps and tax credits, which were expanded substantially under President Barack Obama's stimulus package.

An additional 9 million people in 2010 would have been counted above the poverty line if food stamps and tax credits were taken into account.

Robert Rector, a senior research fellow at the conservative Heritage Foundation, believes the social safety net has worked and it's now time to cut back. He worries that advocates may use a rising poverty rate to justify additional spending on the poor, when in fact, he says, many live in decent-size homes, drive cars and own wide-screen TVs.

A new census measure accounts for noncash aid, but that supplemental poverty figure isn't expected to be released until after the November election. Since that measure is relatively new, the official rate remains the best gauge of year-to-year changes in poverty dating back to 1959.

Few people advocate cuts in anti-poverty programs. Roughly 79 percent of Americans think the gap between rich and poor has grown in the past two decades, according to a Public Religion Research Institute/RNS Religion News survey from November 2011. The same poll found that about 67 percent oppose "cutting federal funding for social programs that help the poor" to help reduce the budget deficit.

Outside of Medicaid, federal spending on major low-income assistance programs such as food stamps, disability aid and tax credits have been mostly flat at roughly 1.5 percent of the gross domestic product from 1975 to the 1990s. Spending spiked higher to 2.3 percent of GDP after Obama's stimulus program in 2009 temporarily expanded unemployment insurance and tax credits for the poor.

The U.S. safety net may soon offer little comfort to people such as Jose Gorrin, 52, who lives in the western Miami suburb of Hialeah Gardens. Arriving from Cuba in 1980, he was able to earn a decent living as a plumber for years, providing for his children and ex-wife. But things turned sour in 2007 and in the past two years he has barely worked, surviving on the occasional odd job.

His unemployment has run out, and he's too young to draw Social Security.

Holding a paper bag of still-warm bread he'd just bought for lunch, Gorrin said he hasn't decided whom he'll vote for in November, expressing little confidence the presidential candidates can solve the nation's economic problems. "They all promise to help when they're candidates," Gorrin said, adding, "I hope things turn around. I already left Cuba. I don't know where else I can go."


Tuesday, August 21, 2012

Ten Ways To Keep Making Money While You Sleep

sleeping, subway, Tokyo
by Emily Co

If you're interested in making money but don't want to take a second job, you should consider making passive income. It's basically money you earn consistently without doing much or even anything at all.

Of course, you do have to put in a lot of work in the beginning, but once you set up the passive income revenue stream, you can just sit back and enjoy the fruits of your labor without lifting a finger.

Here are some ideas:
  • Writing a book. Writing a book means you can earn money off of the sales once you've published it. You can always go the ebook option and self publish, or try to find a publishing house that will take you on.
  • Creating an app. Create a smartphone app and earn money every time someone downloads it. You never know what will go viral and how quickly you can make money if your app's a hit. In fact, the silly iFart app even generated $30,000 in just one day.
  • Starting a static blog. Spend some time building a website in an area that interests you and other people. Focus on topics that won't ever get dated ("how to" articles are pretty evergreen) that you know people will be searching for. Host ads on your site. Once you have some good content on your site, you can quit writing and make money off your old content.
  • Write articles online. You can make money if you get approved to be a writer for You'll get paid to write the articles in the first two years. After that, you'll be paid according to pageviews. Once you've put in the initial effort to write the article, you can just make money off of the views in years to come.
  • Create a YouTube video. Shoot a video for YouTube, and if your video becomes popular, you can run ads on it to make money. The amount you earn varies, but many people, such as Justin Bieber, have launched careers out of it, and popular YouTubers are making over six figures.
  • Take beautiful photos. If you've got an eye and passion for photography, sell your photos to sites like Shutterstock — a place where amateur photographers can sell their photos. You'll earn a commission that ranges anywhere from 25 cents to $75 or more for every image downloaded. There are other similar sites like iStockphoto and Shutterfly, so be sure to do your research and pick one that works best for you.
  • Draw and design graphics. The photo websites also accept illustrations and graphics. You will still earn money for each download.
  • Make a t-shirt. Design a t-shirt for Threadless, and if your design is popular among the site's community, the company will use your designs for the next Threadless shirts. If your design is picked, you'll get $2,000, a $500 threadless voucher (which you can redeem for $200 cash), and another $500 every time your t-shirt is reprinted. You can also design and sell t-shirts as well as other products on sites like Zazzle and Cafe Press.
  • Selling insurance. If you sell insurance, you will not only make money when you've closed a deal, but some companies will also give you an additional commission when your customer renews his insurance.
  • Stock dividends. One of the more common ways to earn passive income is investing in stocks that pay high dividends. Here's a list of some dividend-paying stocks with high rates.

Monday, August 20, 2012

Don't Run Out of Money in Retirement

by Eleanor Laise

This spend-down strategy based on RMD rules will help you cover retirement expenses with less risk.

Most retirees face the same conundrum: how to spend down assets without completely depleting them. One popular strategy is to apply the 4% rule -- withdraw 4% of your initial retirement balance and adjust the dollar amount annually to keep pace with inflation. Another rule of thumb is to spend only your portfolio's interest and dividends.

Some academics aren't fans of either strategy. A retiree who spends only his interest and dividends may load up on, say, bank stocks -- and that's "the tail wagging the dog," says Anthony Webb, research economist at the Center for Retirement Research at Boston College. Leaving the principal untouched may fit with a desire to leave money to heirs, but it could put a crimp in your lifestyle.

As for the popular 4% rule, it doesn't respond to actual investment returns, Webb says. Retirees drawing fixed dollar amounts from a sinking portfolio will soon run into trouble.

The RMD strategy. A third option may work better for many retirees: Base annual spending on the required minimum distribution rules that apply to traditional IRAs after you turn 70 1/2. Retirees of any age can use RMD calculations as a spending guidepost by simply dividing their total year-end portfolio balance by the life-expectancy factor listed for their age in IRS Publication 590.

In a recent study, Webb and coauthor Wei Sun, of China's Renmin University, found that the RMD strategy outperformed the spend-the-interest strategy and the 4% rule, given a typical retiree's asset allocation. Because the RMD approach calculates the annual withdrawal as a percentage of the remaining portfolio, it is calibrated to investment returns. And the withdrawal percentage increases with age.

The strategy isn't perfect. It may result in withdrawal rates that are too low, particularly early in retirement, causing retirees to leave behind money that they might have preferred to spend. But if we're entering an extended period of low returns, as many advisers predict, you may want to err on the side of conservative spending rates.

A hybrid approach. Although no simple rule is ideal, retirees may incorporate an RMD-inspired strategy into a broader plan for covering expenses. A 2010 Vanguard Group paper, for example, found benefits from combining an inflation-adjusted immediate annuity with an RMD approach. This strategy produced stable cash flows that grew at a faster rate than those produced by other rules of thumb.

Given the surprises that can crop up in retirement, any rules of thumb that appear to put spending plans on autopilot may be dangerous. The key is to reassess spending constantly and make adjustments as necessary, says Vanguard principal John Ameriks.


Sunday, August 19, 2012

Our Ridiculous Approach to Retirement

by Teresa Ghilarducci

I work on retirement policy, so friends often want to talk about their own retirement plans and prospects. While I am happy to have these conversations, my friends usually walk away feeling worse - for good reason.

Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle and higher income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day.

In my ad hoc retirement talks, I repeatedly hear about the “guy.” This is a for-profit investment adviser, often described as, “I have this guy who is pretty good, he always calls, doesn’t push me into investments.” When I ask how much the “guy” costs, or if the guy has fiduciary loyalty - to the client, not the firm - or if their investments do better than a standard low-fee benchmark, they inevitably don’t know. After hearing about their magical guy, I ask about their “number.”

To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security. If you have an income-producing partner and a paid-off house, you need less. This number is startling in light of the stone-cold fact that most people aged 50 to 64 have nothing or next to nothing in retirement accounts and thus will rely solely on Social Security.