Here are Sixtyandsingle posts from 2011 onward!!
BY Julia Anderson
Divorce is often a financial setback for a woman. Statistics prove it.
After a divorce, women have less household income. They must juggle a job and family responsibilities, if they have children under 18. Their pay for an equivalent amount of work may be lower. They may be qualified for lesser paying jobs. All these factors make it more difficult for women manage their finances, let alone save for the long-term, for retirement.
When I appeared recently with my friend, Juliet Laycoe, on her Facebook live program, we talked about how important getting a “good” divorce settlement is and how it sets up your financial future for years to come. Laycoe is a divorce attorney, book author (Divorce Wisdom) and social media host.
She asked me as a financial guru to discuss how best to manage the early stages of a divorce.
Bottom line: Divorce is hell: Your emotions swing from grief to anger. There’s stress and deep anxiety. The tendency is to want it over as quickly as possible. A good attorney will advise you to SLOW THINGS DOWN.
You may not be thinking straight under the stress of a divorce. It is best to take a deep breath, get outside counseling and look to the long-term.
My early in a divorce TIPS:
Reminder yourself that this divorce will have a big impact on your long-term financial future. Let your attorney advise you on a long-term strategy. If your spouse is initiating the divorce, you may have more leverage. Play it cool. Ask for half of any pension payout that eventually would come to your ex-husband. Ask for half of his 401(k). Don’t count on child support. Half of divorced women are not getting child support.
Look carefully ahead at your FUTURE household budget. What will your income be, once the divorce is final? Add up your household expenses. Then look at income. Can you cover your expenses? If not, what changes can you make? Start establishing your own credit with a credit card in your own name. Get your own checking account. Keep your job skills up to date, add new job skills.
Polish up your employment resume. You are going to have to work, manage kids, pay for groceries. Can you find a better paying, full-time job. A good resume is important. Network with your friends on how to write good one. Think of yourself as an independent contractor…. with employers. What do you bring to the job they want you to do?
Get counseling, not just financial counseling. A good counselor can bring clear thinking to your future, what you want and how to make it happen. In the beginning, I was going to pack a bag and just leave. My therapist helped me realize I was just running when I needed to stay put, take a deep breath, and negotiate from a position of strength, not injury. Staying put was a GREAT financial decision.
Make saving a part of your financial plan. If you get a lump sum settlement from your divorce put the money to work for the long-term in a self-directed IRA. Make sure you are taking advantage of your employer’s 401(k) tax-deferred savings plan with matching. Build an emergency fund, so you don’t have to turn to high-interest credit cards.
Keep the faith. It may feel like the deck of cards has been thrown in the air but not yet landed. They will. Over time your future will become more clear, new doors will open, your heart will heal or at least mend a bit. Don’t try to rush through this terrible time in your life just to get away from the bad feelings, the anxiety and anger. Let it spin out slowly.
Click here to a link to a Smart Money show with Juliet Laycoe as our guest.
BY JULIA ANDERSON
Nik Miles knows a thing or two about cars, the automotive industry and where it’s headed.
With electric vehicles grabbing headlines and some two-thirds of Americans now open to buying electric, we thought it was time to talk to Miles, a nationally known “car guy” and principle at ourautoexpert.com.
Smart Money co-host, Pat Boyle, and I covered the basics with Miles: -- How to buy an electric car, what’s out there and when to buy. Click here for the video on YouTube presented by TVCTV public television in Beaverton, Ore.
The landscape is changing so fast that it is hard for buyers, dealers, and reviewers like himself to keep up with new offerings, new technology and performance enhancements, he said.
Battery technology improvements are the big driver.
“We are seeing advances in battery ranges in the 250-mile range and are starting to see 300-mile ranges before recharging,” Miles said. “It’s crazy how fast the technology is going.”
Next year (2022), he expects there will be at least 100 electric vehicle brands and models on the market from lower-cost commuter cars to high-end luxury models tempting the rich.
Moving to electric
Ford Motor Co. now says that 40 percent of its vehicles will be electrified by 2030. Next year, Ford will start making an all-electric F-150 truck called the Ford F-150 Lightning. The company will start production in late 2022 of its first fully electric cargo van. You can order its Mustang Mach-E, right now. Priced at $42,895.
A Nissan Leaf sells right now for between $31,670 and $40,520. That’s before the possible $7,500 federal tax credit on the purchase. (See below) The Chevrolet Bolt EV is priced at $40,000.
Cadillac will be in production in late 2022 with the Cadillac LYRIQ, an electric luxury sedan. BMW will soon offer the BMWiX, a fully electric “sport activity vehicle.” Volvo said it will be all-electric by 2030.
Toyota, long in the hybrid business with its Prius, will be out with its first all-electric SUV soon. The company intends to sell 5.5 million electrified vehicles worldwide by 2025.
“Toyota is clearly the market leader with the most hybrids out there,” Miles said. He expects Toyota to do it right when it makes its move into electric.
After more than 100 years of gas- and diesel-power engines and gas stations to go with them, it is no surprise that interested buyers may be a bit overwhelmed by the new technology and its reliability.
THREE buying TIPS from Nik Miles at ourautoexpert.com.
Tip No. 1: Don’t buy, lease!!! The technology is advancing so fast that an electric car you buy today or even tomorrow will be out of date with old technology in two or three years. The resale value will be questionable. “When your lease is up, you won’t be stuck owning an outdated vehicle,” Miles said.
Tip No. 2: Don’t go out looking at what’s electric. Instead, thoughtfully (my words) consider what you need in a vehicle. What fits your lifestyle. Then look at how much money you can spend.
“After all that, start looking at electric cars,” he said. “Do it the other way around (looking first) and you end up with something that doesn’t work for you.”
Tip No. 3: Test drive and test drive some more. “Test drive everything you can get your hands on,” Miles said. “Test driving doesn’t cost you anything. It will make a big difference.”
Because our interview with Miles was to pick his brain on the basics of electric vehicles, we left a lot of questions unanswered. Cost could have been a big topic. Research again will pay-off. At www.fueleconomy.gov, the U.S. Dept. of Energy provides a table showing federal tax credits available by brand and model, if you buy hybrid or all-electric.
For example, you get up to a $7,500 federal tax credit when you buy a 2021 Ford Mustang Mach-E Premium AWD. But there are quotas and other considerations to gain these tax credits. Automakers are allotted 200,000 buyers per eligible EV buyer. When that number of buyers have used up the credits, they’re gone for the rest of the year.
Bottom line on cost: You can get into an electric vehicle for a little as $7,500, if you buy used. Or go for a luxury car such as the Tesla long-range Model 3 with a battery range of 353 miles for $50,190. There is a lot more coming to address every price category and user preference.
This is another area deserving in-depth buyer research. How will you charge your electric car battery and how long will it take? Must you invest in upgraded 220-volt or 240-volt outlets at home to get a full charge in a reasonable amount of time? How much will all that cost? Will cold weather affect battery range and performance? We didn’t talk with Miles about any of this.
He observed that the door on the electric car market is only just beginning to open. “We are in the pre-fireworks stage of electrics, he said.
A big unanswered question: How reliable is the nation’s power grid? Can existing electric power companies, their generating capacity and infrastructure supply enough power to juice up all these electric batteries every night? What happens if we begin experiencing more brownouts and blackouts like those that already have occurred in California. Will we be walking to work?
Electric car technology is just getting started. Exciting but a lot to think about before you buy. Thanks, Nik!
BY JULIA ANDERSON
The Campbell Soup Co. is raising prices on an array of grocery items by fall.
Crude oil prices are hitting three-year highs, boosting the gasoline pump price by 95 cents a gallon from a year ago.
As restaurant operators struggle to hire and retain workers the cost of eating out has skyrocketed. Yes from home construction materials to automobiles, prices are rising.
These increases on a market-basket of goods and services tracked by the U.S. Department of Labor are running at an estimated overall 6 percent a year. Our cost-of-living is going up. In other words, we have an INFLATION problem.
After more than two decades of keeping inflation at bay, we all are talking about it and what to do about it.
Economists say a bit of inflation in the range of 2 percent a year is OK, but 4-percent, 6-percent, 8-percent a year is a hardship especially on retired people with fixed incomes and on women who tend to save less and are more conservative investors.
Inflation is the invisible enemy that eats into your buying power and your long-term savings and investment strategy. Here’s why:
Let’s say you save $1,000 in a bank savings account. If the cost-of-living increases by 2 percent over the next 12 months, the buying power of that $1,000 drops by $20 to $980. That’s because as prices increase it will take more money to buy the same stuff.
Twenty dollars may not seem like a big deal, but if the cost-of-living increases at 2 percent a year for 10 years, the buying power of your $1,000 drops to $800. In other words, your $1,000 of savings takes a 20 percent hit over those 10 years.
Here’s another way to look at inflation and how it undermines investors. You have $200,000 in a tax-deferred savings plan such as an Individual Retirement Account or a 401(k) through your job. You lose sleep at night when stock markets go down, so you have your money in “safe” money market funds. You just can’t stand seeing your retirement savings drop in value if markets retreat.
The inflation problem
The problem? Money market and bank accounts are paying you nothing on the savings. The Federal Reserve Bank is keeping interest rates low, near zero, to stimulate the economy as it rebounds from the Covid-19 pandemic. Unfortunately, inflation at 6 percent this year is outpacing your savings by a lot. Your money is “safe,” but you actually are losing money on the safe savings. If it keeps up, your $1,000 will lose $60 of purchasing power in just the next 12 months.
Meanwhile that $200,000 retirement account is losing buying power, too, unless its value grows at least even with the inflation rate. Better yet your long-term investments should be gaining on inflation.
To review, over 10 years with little or no interest income on your $200,000 money market account, you effectively lose $40,000 of buying power if the inflation rate holds at around 2 percent. If the cost-of-living jumps to 6 percent a year over ten years, you lose $120,000 or 60 percent of your buying power on the $200,000.
Beating inflation requires confidence
This is where risk vs. reward comes in. In the current financial environment where ordinary bank savings, money market accounts and certificates of deposit are paying little or nothing in interest, you must look for other ways to “GROW” your investments. It is counter-intuitive but safe money in a bank with no interest is not safe.
If you are working, use the 60/40 ratio of stock investments vs bonds or other holdings. Stock index funds work best because they spread the risk and are low-cost. Management fees should be under 1 percent on the value of the fund. Use the fund dividends paid quarterly to reinvest by buying more fund shares. Over time you will be happily rewarded by the “miracle of compound interest” growth in the value of your savings investments.
Diversify by spreading your investments over several growth categories – real estate investment trusts, shorter-duration bonds, Treasury Inflation-Protected Bonds, or individual dividends-producing blue-chip stocks. So, research to determine long-term performance and management fees.
If you don’t have the confidence to do this on your own, hire a financial consultant for a one-hour session to advise you. Or take your nest egg to an adviser to manage. Just make sure you know how much in fees you are paying them for the privilege.
Keep in mind that some inflation around 2 percent a year is normal. Historically over the past 20 years that’s about what we’ve been seeing. Also remember that being too conservative with your savings is a liability. You must accept some risk to earn the rewards.
And beside, The Fed is counting on the inflation surge to abate as the economy gets back to a more balanced supply-demand ratio. But a lot of stimulus (money) has been dumped into the economy. Normal may take awhile.
Historically, U.S. equities (stocks and stock funds) have generated an average 5 percent to 7 percent return annually. They must form the bedrock of your long-term financial plan.
"Worried about surging inflation? Here's 3 ways to protect your wallet from taking a hit, Bankrate.com, click here.
"Warren Buffett's top tips for beating inflation," Bankrate.com click here.
"9 Assets for Protection Against Inflation," Forbes, click here.
Why a capital gains tax increase hurts us all
BY JULIA ANDERSON
Those of us who are retired should pay attention to the proposed tax increases on capital gains income being promoted both by states (Washington state) and by the Biden Administration.
Even though President Biden says his capital gains tax increase will only affect the wealthy, not you, don’t believe it. Any change in tax law affects markets top to bottom, changes investment strategies and could generally dampen enthusiasm for capital investment at all levels.
Retirees are living on investment savings --- CDS, stocks and bonds -- and income generated by U.S. stock markets and underlaying resilient economy. For the past ten years, it has been a good ride, up 13.6 percent a year. Our portfolios are looking healthy.
Here’s the deal. Even though only those with $400,000 of capital gains “profit” or more annually would pay higher capital gains taxes up to 43.4 percent (double the current rate), the higher tax rate will hurt markets…our markets.
Capital gains tax (15 percent for middle income investors, 20 percent for the wealthy) have been used by government for decades to deliberately create incentives for investors who put money into new business ventures and into corporate stock. This tax strategy supports new enterprise, grows overall employment, and strengthens the general economy. Middle-income retirees benefit from this economic momentum. When these stocks are sold, up to now, we pay a lower income tax on the gain (or profit). Here’s a chart:
2021 capital gains tax rates:
15 percent for those with taxable income of $40,451 to $441,450.
20 percent for those with taxable income $441,451 and more
2021 ordinary federal income tax rates - married, filing jointly.
12 percent for those with taxable income from $19,751 to $80,250
22 percent for those with taxable income of $80,251 to $171,050
Raising capital gains taxes punishes businesses seeking capital investment to support expansion. At the same time, higher capital gains tax punishes investors by reducing income. That means fewer of their discretionary dollars are spent on housing, cars, consumer goods, dining out -- all the sectors that need support as we recover from the pandemic. The higher tax puts a damper on the entire U.S. economy.
Meanwhile, wealthy Americans are already strategizing for how to avoid higher capital gains taxes. Wharton School of Business researchers conclude that tax avoidance could cut $900 billion from the estimated $1 trillion the Biden Administration says it will collect in new capital gains tax money to pay for infrastructure and more. Do they think the wealthy are stupid? An easy alternative for them? Tax-exempt municipal bonds.
By the way, money coming out of your tax deferred retirement (401(k) and IRAs) accounts is taxed as ordinary income at a rate commensurate with your federal income tax bracket. An increased capital gains tax applies only to income from shares invested outside of a retirement plan.
Expert analysis in numerous studies on capital gains taxes, however, says that a rise in the capital gains tax rate reduces wage growth by dampening investment in corporations looking for new capital to expand. At the same time, the tax reduces revenue growth for governments simply because people will be more reluctant to sell stock and thus pay the higher tax. According to the Congressional Budget Office for each 1 percent increase in the capital gains rate, there is a 1.2 percent reduction in tax realizations (collections). That’s because rich investors will hold on to investments longer and look for other ways to avoid taxes.
There are other aspects in the Biden tax proposal that have estate planners and their clients worried. Those include changes in inheritance tax regulations that will make it harder to pass on farms and businesses to a new generation. But that deserves a separate column.
Many states also have capital gains taxes or are implementing them. California leads the pack with a rate of 13.3 percent. Among other top five capital gains tax states are Hawaii, (11 percent), New jersey, (10.75 percent), Oregon, (9.9 percent) and Minnesota, (9.8 percent).
Washington state’s Legislature has approved a bill (2021) that creates a new capital gains flat tax of 7 percent on the long-term gain from the sale of stocks, bonds, and other high-end assets more than $250,000 for both individuals and couples. For details, click here.
The tax exempts real estate, retirement accounts, agricultural land, and family-owned small businesses. It still is a new tax on income in a state that up to now has not had an income tax.
Meanwhile, the Biden administration is proposing a top tax rate on capital gains of 43.4 percent, up from the current 23.8 percent. That means on every $10,000 of stock sold, the tax would total $4,340, up from $2,380 with the lower rates. The editorial board of the Wall Street Journal calls the idea, “the dumbest way” to raise taxes.
The bandwagon to raise capital gains taxes is pitched as a tax on “rich people” who should “pay their fair share.” This ignores that fact that the top 50 percent of all taxpayers already pay 97 percent of all federal individual income tax. The top 1 percent pay 40.1 percent. The bottom 90 percent of taxpayers combined pay 28.6 percent of all federal income tax. In 2019, 46.6 percent of U.S. households with an annual income of between $40,000 and $50,000 paid NO income taxes at all. Click here.
The Biden Administration says only 500,000 taxpayers would be affected by the proposed tax. The issue is not about who pays but the longer-term impact on markets in terms of slower investment and slower economic growth that will affect us all.
It’s politics, not common-sense economics that is driving the capital-gains campaign. Tax incentives related to capital gains have been on the books for more than 50 years. They work.
Women and good financial credit: You may need it sooner than you think
BY JULIA ANDERSON
Don’t wait until you are widowed at 67 to build a credit history. When you lose a spouse to death or divorce, (or never marry, for that matter) creditors may view you differently, as a bigger credit risk.
It may come as a surprise for many women that access to credit in the form of credit cards, a car loan or mortgage refinance may be a bigger challenge, when single and financially independent. The pandemic has been a set-back.
Last year, some women lost income, increased debt, and put less into savings. All of this can undermine your credit standing. According to Experiena.com, a major online credit score service, 2.7 million women left the workforce in 2020 as compared with 1.7 million men. Female participation in the workforce is now the lowest since 1988, the report said.
Married or single, women need a good credit history in their own right. It is another aspect of planning for the unexpected…an unplanned death, an unplanned divorce, a serious accident, or illness that can affect finances and the ability to borrow.
What is good credit?
Establishing good credit means that you pay bills on time. It means not taking on more debt than you should related to your income. Good credit means not having filed for bankruptcy in the past seven years, not having been foreclosed on or had a debt sent to a collection agency.
Lenders use your income and your bill-paying history to establish your credit score, which in turn helps determine if you are a good credit risk and likely to pay back a loan over time.
Financially independent women know that a good credit score helps with credit cards and loans, but also with lower insurance rates and when applying to rent an apartment. Yes, you can live without a credit score but that might mean carrying around more cash or going through a bigger hassle is securing a loan.
What is a credit score?
There is no one credit score, but a higher score or scores usually means it will be easier to get a loan or rent an apartment.
“Any credit score depends on the data used to calculate it, and may differ depending on the scoring model, the source of your credit history, the type of loan product, and even the day when it was calculated,” says the federal Consumer Financial Protection Bureau. “Most credit scores range from 300-850.”
The good news is that in 2021, men and women now share the save average national credit score of 705. “This is a 1-point increase for women from 2019 and about a 10-point increase for both groups from 2015,” said Experian.com, an online credit rating service.
How to build good credit
Establishing good credit takes time, maybe several years, as you create a bill-paying record. Here are tips from the federal Consumer Financial Protection Bureau for how “get and keep a good credit score.”
Pay your loans on time, every time.
Don’t get close to your credit limit on a credit card. Only apply for the credit you need. (According to Consumer Financial Protection, if you apply for a lot of credit over a short period of time, it may appear to lenders that your economic circumstances have changed for the worse.) Keep your credit card debt below 30 percent of your limit.
Avoid high interest rate charges by paying off your credit card(s) every month.
Fact-Check your credit scores. (You are entitled to a free credit report every 12 months from each of the three major consumer reporting companies – Equifax, Experian, and TransUnion. To do that visit AnnualCreditReprt.com or call 877 322 8228 to get a report)
Avoid web sites that offer free credit report assistance. For most, it’s free, only if you buy their products.
Unlike Dave Ramsay, I believe there is “good” debt but that is debt you can pay off on time. I never believed lenders who told me that based on my income I could afford xxxx amount of mortgage debt. For me, the amount was about half what they said I could borrow.
Establish a credit card in your own name, separate from a joint family account. While married, I’ve kept my own name on credit cards and my home mortgage loan. When refinancing your home mortgage, do it in your own name, separate from a new married partner. Otherwise, he becomes joint 50 percent owner on the title.
In a divorce, make sure your spouse’s aggressive attorney does not put a lien on your house without notice. Then this attorney forgets to remove the lien in the divorce settlement. Only three years later do you find out about the lien when you can’t refinance your loan unless it is removed. That means tracking down your ex-spouse, a frustrating and painful experience.
A recent survey by creditsesame.com, an online card and loan tracking service, showed that 55 percent of women say, “they were never taught the best ways to manage credit and about a quarter would give themselves a failing grade when it comes to their current understanding of credit scores.” Tell your granddaughters about the good and bad of credit cards and about how to get and keep good credit.
What to do if you have BAD credit
Credit counseling can help if you have bad credit, are behind with bill paying or have defaulted on a loan. Credit counseling services can help you organize a debt management plan to pay down debt. Some of these services are free, some are not. Read the fine print before signing an agreement.
For more: Go to www.consumerfinance.gov, search for credit counseling services. Topics include how to choose a credit counselor, counseling service fees and agreements. Or search YouTube for my Smart Money piece on credit and credit counseling services. Click here.
It wasn’t long ago (early 1970s) that women could not apply for a loan in their own name, not gain a credit card in their own name without a male co-signer or make larger down payments on mortgage without a co-signer.
The 1974 Equal Credit Opportunity Act prohibited creditors from such discrimination based on race, color, religion, national origin, sex, age, and marital status. It took years of lawsuits and complaints for lenders to comply. I know because in the late 1980s when divorcing, I asked my bank to reissue my credit card using my new name. It refused. I was shocked. I had the same job, the same credit history and same savings and checking accounts.
I then applied to a national Mastercard issuer, got a new card, and changed banks.
A Quote: “If you have debt, I’m willing to bet that general clutter is a problem for you too.”
-- Suze Orman, American financial advisor, book author and podcast host. (1951 - )
I meet women all the time who face job and money transitions and who want to do them right. It’s about building confidence and taking charge of the future. This is your money. No one cares more than you do!
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