In pursuit of the future
Retirement outlook not as bleak as many think, AgeLab head says
By Robert Powell, MarketWatch
Last Update: 10:22 PM ET Sep 26, 2007
BOSTON (MarketWatch) -- Most retirement gurus are extremely pessimistic about the future. Some are modestly hopeful. But there is one who is "wildly optimistic" about what's in store for the millions upon millions of aging baby boomers. Meet Joseph Coughlin, Ph.D., director of the Massachusetts Institute of Technology's AgeLab.
Coughlin and his team of researchers are stationed in a building like many others on the MIT campus, nondescript and near the banks of the Charles River. But what they are doing is anything but nondescript. They are "innovating" the future. And if half the things the AgeLab is working on become a reality then the future will indeed require shades.
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In short, the AgeLab is working on a future where older citizens not just add years to their life but add life to their years. And it's a life that will include fun, purpose, health, wealth and -- not surprisingly -- technology. "We see that it will be a great time to grow old," said Coughlin, who last week released, along with The Hartford, research about retirement rationalizations.
Yes, there are plenty of reasons why gurus are pessimistic. People tend to tell themselves little lies about retirement, according to the AgeLab's and The Hartford's study. They tend to think that they won't live that long, that someone will take care of them, that they will save whatever they can for retirement and then wing it.
And there are plenty of reasons why people are pessimistic. For starters, there are many depressing "facts" about retirement that are presented under the guise of motivating Americans to save more or prepare for retirement. Trouble is, those facts have not inspired Americans to act at all. "We have done a dismal job of helping people understand why they should think about tomorrow."
But Coughlin isn't keen on a world that has its collective head in the sand, where desperation becomes the mother of innovation. Instead, Coughlin wants to create the future absent the desperation. "We want to invent the future, otherwise we know what it's going to be."
So what will the future hold? Well, I am freshly returned from a visit to the AgeLab where, among other things, I got to drive in the most expensive video game this side of the Mississippi -- a Volkswagen hooked up to a big-screen TV that tested my driving skills (I only exceeded the speed limit a couple times) and I got to check out a shopping cart outfitted with a computer that tell shoppers whether the cookies they are about to drop in their carts are on their diet or not. But that doesn't tell the half of it.
Possibilities
Here's what in store on several retirement fronts:
Thinking differently. Retirement as we know it today is not sustainable, either on a personal level or a public level. So first off, Coughlin says business, government and individuals will have to rethink all things retirement. Most organizations, he says, were created yesterday and use yesterday's thinking to create solutions. "The lifestyle assumptions and calculations based on our parents' retirement are incomplete and incorrect," he said. In other words, Coughlin doesn't want firms to create investment and insurance products that are based on the proverbial nest egg number or vague concepts such as retirement dreams; rather he wants financial firms to design products that will provide income to Americans who want to modify their houses as they age or who still have transportation needs long after they stop driving. In addition, he sees technology - eye-tracking software specifically -- being used to help redesign the best way to present information on food labels and mutual fund prospectuses and the like to buyers. "Boomers are not the first generation to get old, but they are first to have health and wealth and the expectation that things will be different," said Coughlin. "They are the first to make old age cooler... It's a fundamental disruption."
Health and wellness. "We are about to see baby boomers sever the link between health and health care," said Coughlin. Boomers -- thanks in part to the rooting of the ownership society concept -- are intent on pursuing wellness and technology will play a big part in that pursuit. Shoppers will, for instance, use smart cards to learn right in the aisle -- not at the checkout counter -- whether the food they are about to drop in their grocery cart is on their diet or not. And Americans will also use kiosks in their pharmacy to learn about drug interactions and warnings. "We want people to use technology to make the right choice at the right time," he said.
Entrepreneurship. Boomers want to quit what they are doing to do something with "real promise." That means the next crop of entrepreneurs won't be newly minted MBAs but Americans over age 50 and especially the group referred to as "soccer moms." Soccer moms, says Coughlin, are ready to charge back into the work force. Trouble is, most companies aren't set up to bring back them back in a productive way. Most firms can't give soccer moms the flexibility they want so members of that group are likely to launch their own companies.
Working beyond age 65. Time was when people would stop working at age 62 or 65, never to punch a time clock again. Now, however, people are living longer and will need to work longer for a variety of reasons.
Education. Having a college degree at age 21 doesn't make one smart for a lifetime. According to Coughlin, boomers are likely to age not in place but on a college campus where they can enroll in college courses but also have ready access to health care. "Boomers will want to remain alive not just live longer," he said.
Employers. Employers of the future will set the agenda for how people navigate longevity. Indeed, employers will, for instance, establish employee-benefit programs that include not just day-care centers for children but for elders as well. In addition, employers will introduce wellness and lifelong learning programs designed to reduce costs and retain workers. "Employers want their workers to be at the top of their game for a lifetime," said Coughlin. "Employers will give workers a chance to reinvent themselves."
Financial advisers. Way back when, financial advisers were called customer's man. Years later, advisers became more sophisticated. But in the years to come, Coughlin said advisers will become even more sophisticated and multitalented, helping clients not only with their money but with their career and life's purpose.
Friday, September 28, 2007
Auto lease
The lease switch
When transferring out of, or into, an auto lease, caveat emptor applies
By Andrea Coombes, MarketWatch
Last Update: 12:01 AM ET Sep 27, 2007
SAN FRANCISCO (MarketWatch) -- With home foreclosure rates rising and economic volatility the norm, it's easy to understand why more people might want to get out from under a $400-per-month car lease that stretches on for two or three years more.
Companies such as LeaseTrader.com and Swapalease.com offer such services, connecting people who want to get out of a lease with those eager to get a deal on a short-term arrangement, but consumers should proceed carefully before paying hundreds of dollars for a lease transfer.
MarketWatch Special Report
CAR-BUYING GUIDEGet Smart?
Pet rock or the next step in the greening of America? When it comes to the Smart ForTwo, a little bit of both could amount to a big U.S. debut for Daimler’s extra-tiny-micro-compact car.• Switching into, or out of, a lease• Portable GPS vs. in-dash models• Slideshow: Best-selling crossovers• See the full special report
The idea of escaping a lease is gaining in popularity. LeaseTrader.com says it expects to handle 35,000 transactions this year, up from about 20,000 in 2006.
"Since the auto payment is typically consumers' second-highest monthly bill, if you can't control your mortgage from going up, this is certainly an excellent way of controlling" monthly expenses, said John Sternal, spokesman for Miami, Fla.-based LeaseTrader.com.
Some consumers might be trying to rein in their monthly budget: Smaller cars are gaining favor among those seeking lease vehicles, with about 15% of prospective buyers on LeaseTrader.com seeking a small car, up from 2% a year ago, Sternal said.
Lease-transfer services help consumers get out of contracts that are otherwise pricey to exit. Generally, if you try to end your lease rather than transferring it, you pay the total remaining monthly payments due.
"When a person wants to get out of a lease, it's difficult and very expensive," said Philip Reed, senior consumer advice editor with Edmunds.com. "Essentially you're being held responsible for all of the payments."
People on the buying end of a lease transfer enjoy benefits, too. "You don't have to pay a down payment, which in many cases is anywhere from $2,000 to $5,000, and you don't have to get strapped into a long-term lease," Sternal said.
In 2006, about 28% of new car sales were leases, according to the National Automobile Dealers Association, in McLean, Va.
But, while a lease transfer may sound appealing, consumers on both sides of the deal have homework to do. For instance, those trying to get out of a lease should confirm the finance company is willing to remove the original lease-holder's name from the contract.
Otherwise, the original lease-holder may still be liable for payments if the new "buyer" defaults or if the car is returned to the lease company with worse than normal wear-and-tear.
All in a name
"For the consumer, it's important to remember that you may still have responsibilities for the vehicle, particularly the vehicle's condition," said Paul Taylor, chief economist with the National Automobile Dealers Association. "The legal obligations are just not as simple as the old customer and the new customer would wish them to be," he said.
Others agreed. "It's your name on the contract. You need the permission of the financial institution that holds the lease to transfer that into somebody else's name," said Jack Nerad, executive market analyst with Kelley Blue Book, in Irvine, Calif.
Companies vary widely in their willingness to do lease transfers, and, if they are willing, that doesn't always mean they'll remove the original lease-holder's name.
For instance, Honda Finance prohibits lease transfers. "Our [lease] contracts do not allow trading," said Chris Martin, a spokesman with Honda. Of course, it's possible the lease on your Honda is through another finance company, and that company may allow transfers.
Chrysler Financial allows transfers, but doesn't remove the original lease-holder's name from the contract, said Amber Gowen, a company spokeswoman, in an e-mail message.
"The language of the lease agreement means that the original lessee is still responsible for living up to the agreement if the new party defaults," she said. Often, such lease transfers are between family members, Gowen said.
About 80% of finance companies allow a transfer with a new name on the lease, another 10% allow the transfer but don't remove the original name, and 10% don't permit transfers, said Scot Hall, executive vice president of operations with Swapalease.com, in Cincinnati, Ohio.
'Like a dating service'
Still, if you've confirmed your financial institution will allow you to transfer out, a lease transfer might make sense.
"You might be dealing with an adverse life situation, a death in the family or a loss of a job, and all of a sudden you are looking at a very severe financial situation," Reed said.
You can initiate a lease transfer on your own, without the help of an intermediary, if you can find a suitable buyer. That way you avoid the fees of the sites that offer to find lease buyers, though you don't escape the finance company's transfer fee which can range from zero to $650.
Of course, finding a willing and credit-worthy buyer is one of the sticking points these Web sites help you overcome.
"It's almost like a dating service. We match them up and then tell them, 'this is where you need to go to get this done correctly,'" said Hall, of Swapalease.com.
Homework, for buyers and sellers
The first step for consumers is confirming their lease company's policies with regard to transfers. "I can't stress enough that we only advocate going by the book of your leasing company. We don't want consumers on either side of the equation getting into any trouble," Hall said.
Then, there are the fees to consider. Both the buyer and seller pay fees for using Swapalease.com, LeaseTrader.com or similar services. The buyer and seller can negotiate who pays the finance company's transfer fee.
The lease listing sites charge a variety of fees, and consumers should check to assess which fees are refundable in the event you aren't able to complete a transaction, as not all listings result in a transfer. For example, lease transfers are initiated on about one-third of Swapalease.com listings, Hall said.
For sellers, Swapalease.com offers various packages, including one $49.95 for an indefinite listing with an added $95 one-time fee if a lease transfer is initiated (this fee is nonrefundable but if the transfer doesn't complete, that fee can be applied to another transfer), as well as other packages ranging from $99 to $150, depending on ad placement, with no transfer fee.
Buyers who go to Swapalease.com pay a one-time fee from about $35 to $80, depending on the length of membership and other factors.
At LeaseTrader.com, sellers pay about $79 to list their lease, plus $250 when a lease transfer is initiated, but there is a $100 rebate on that fee.
Buyers at LeaseTrader.com pay $39 to $79 - the price varies depending on how long you get access, plus other factors -- and about $150 when a lease transfer is initiated. At both sites, consumers can look at the listings for free.
Buyers beware
Buyers have homework, too. First, compare leases offered on similar models to assess what kind of deal you're getting, Reed said. He suggested LeaseCompare.com and manufacturers' Web sites as they often show lease offers. Edmunds.com also lists lease deals.
Be sure you're comparing total lease payments - some advertisements leave out the tax portion of payment, Reed said.
Verify the condition of the car by either looking at it yourself or hiring a mechanic or another third-party to do so. If the condition of the car does not meet the lease terms for regular wear-and-tear when you return the car, whoever is named on the lease will be forced to pay.
If you're buying a lease from a car owner in another state, ask the finance company whether the payment will change due do the new state's different tax rate.
Finally, assess whether leasing is the right move for you.
"A lot of people think leasing gives more flexibility than buying," Nerad said. "Buying a car gives you more flexibility."
If you own the car, you can simply sell, and if you still owe money on the loan, "there's a standard procedure" for handling that, Nerad said. "To get out of a lease, it becomes more of a one-off situation. You're at the mercy of ... the financial institution."
Meredith Libbey, a spokeswoman with Ford Motor Credit Company, agreed.
"With a lease," Libbey said, "we're the owner, so we have to agree to anything you do."
When transferring out of, or into, an auto lease, caveat emptor applies
By Andrea Coombes, MarketWatch
Last Update: 12:01 AM ET Sep 27, 2007
SAN FRANCISCO (MarketWatch) -- With home foreclosure rates rising and economic volatility the norm, it's easy to understand why more people might want to get out from under a $400-per-month car lease that stretches on for two or three years more.
Companies such as LeaseTrader.com and Swapalease.com offer such services, connecting people who want to get out of a lease with those eager to get a deal on a short-term arrangement, but consumers should proceed carefully before paying hundreds of dollars for a lease transfer.
MarketWatch Special Report
CAR-BUYING GUIDEGet Smart?
Pet rock or the next step in the greening of America? When it comes to the Smart ForTwo, a little bit of both could amount to a big U.S. debut for Daimler’s extra-tiny-micro-compact car.• Switching into, or out of, a lease• Portable GPS vs. in-dash models• Slideshow: Best-selling crossovers• See the full special report
The idea of escaping a lease is gaining in popularity. LeaseTrader.com says it expects to handle 35,000 transactions this year, up from about 20,000 in 2006.
"Since the auto payment is typically consumers' second-highest monthly bill, if you can't control your mortgage from going up, this is certainly an excellent way of controlling" monthly expenses, said John Sternal, spokesman for Miami, Fla.-based LeaseTrader.com.
Some consumers might be trying to rein in their monthly budget: Smaller cars are gaining favor among those seeking lease vehicles, with about 15% of prospective buyers on LeaseTrader.com seeking a small car, up from 2% a year ago, Sternal said.
Lease-transfer services help consumers get out of contracts that are otherwise pricey to exit. Generally, if you try to end your lease rather than transferring it, you pay the total remaining monthly payments due.
"When a person wants to get out of a lease, it's difficult and very expensive," said Philip Reed, senior consumer advice editor with Edmunds.com. "Essentially you're being held responsible for all of the payments."
People on the buying end of a lease transfer enjoy benefits, too. "You don't have to pay a down payment, which in many cases is anywhere from $2,000 to $5,000, and you don't have to get strapped into a long-term lease," Sternal said.
In 2006, about 28% of new car sales were leases, according to the National Automobile Dealers Association, in McLean, Va.
But, while a lease transfer may sound appealing, consumers on both sides of the deal have homework to do. For instance, those trying to get out of a lease should confirm the finance company is willing to remove the original lease-holder's name from the contract.
Otherwise, the original lease-holder may still be liable for payments if the new "buyer" defaults or if the car is returned to the lease company with worse than normal wear-and-tear.
All in a name
"For the consumer, it's important to remember that you may still have responsibilities for the vehicle, particularly the vehicle's condition," said Paul Taylor, chief economist with the National Automobile Dealers Association. "The legal obligations are just not as simple as the old customer and the new customer would wish them to be," he said.
Others agreed. "It's your name on the contract. You need the permission of the financial institution that holds the lease to transfer that into somebody else's name," said Jack Nerad, executive market analyst with Kelley Blue Book, in Irvine, Calif.
Companies vary widely in their willingness to do lease transfers, and, if they are willing, that doesn't always mean they'll remove the original lease-holder's name.
For instance, Honda Finance prohibits lease transfers. "Our [lease] contracts do not allow trading," said Chris Martin, a spokesman with Honda. Of course, it's possible the lease on your Honda is through another finance company, and that company may allow transfers.
Chrysler Financial allows transfers, but doesn't remove the original lease-holder's name from the contract, said Amber Gowen, a company spokeswoman, in an e-mail message.
"The language of the lease agreement means that the original lessee is still responsible for living up to the agreement if the new party defaults," she said. Often, such lease transfers are between family members, Gowen said.
About 80% of finance companies allow a transfer with a new name on the lease, another 10% allow the transfer but don't remove the original name, and 10% don't permit transfers, said Scot Hall, executive vice president of operations with Swapalease.com, in Cincinnati, Ohio.
'Like a dating service'
Still, if you've confirmed your financial institution will allow you to transfer out, a lease transfer might make sense.
"You might be dealing with an adverse life situation, a death in the family or a loss of a job, and all of a sudden you are looking at a very severe financial situation," Reed said.
You can initiate a lease transfer on your own, without the help of an intermediary, if you can find a suitable buyer. That way you avoid the fees of the sites that offer to find lease buyers, though you don't escape the finance company's transfer fee which can range from zero to $650.
Of course, finding a willing and credit-worthy buyer is one of the sticking points these Web sites help you overcome.
"It's almost like a dating service. We match them up and then tell them, 'this is where you need to go to get this done correctly,'" said Hall, of Swapalease.com.
Homework, for buyers and sellers
The first step for consumers is confirming their lease company's policies with regard to transfers. "I can't stress enough that we only advocate going by the book of your leasing company. We don't want consumers on either side of the equation getting into any trouble," Hall said.
Then, there are the fees to consider. Both the buyer and seller pay fees for using Swapalease.com, LeaseTrader.com or similar services. The buyer and seller can negotiate who pays the finance company's transfer fee.
The lease listing sites charge a variety of fees, and consumers should check to assess which fees are refundable in the event you aren't able to complete a transaction, as not all listings result in a transfer. For example, lease transfers are initiated on about one-third of Swapalease.com listings, Hall said.
For sellers, Swapalease.com offers various packages, including one $49.95 for an indefinite listing with an added $95 one-time fee if a lease transfer is initiated (this fee is nonrefundable but if the transfer doesn't complete, that fee can be applied to another transfer), as well as other packages ranging from $99 to $150, depending on ad placement, with no transfer fee.
Buyers who go to Swapalease.com pay a one-time fee from about $35 to $80, depending on the length of membership and other factors.
At LeaseTrader.com, sellers pay about $79 to list their lease, plus $250 when a lease transfer is initiated, but there is a $100 rebate on that fee.
Buyers at LeaseTrader.com pay $39 to $79 - the price varies depending on how long you get access, plus other factors -- and about $150 when a lease transfer is initiated. At both sites, consumers can look at the listings for free.
Buyers beware
Buyers have homework, too. First, compare leases offered on similar models to assess what kind of deal you're getting, Reed said. He suggested LeaseCompare.com and manufacturers' Web sites as they often show lease offers. Edmunds.com also lists lease deals.
Be sure you're comparing total lease payments - some advertisements leave out the tax portion of payment, Reed said.
Verify the condition of the car by either looking at it yourself or hiring a mechanic or another third-party to do so. If the condition of the car does not meet the lease terms for regular wear-and-tear when you return the car, whoever is named on the lease will be forced to pay.
If you're buying a lease from a car owner in another state, ask the finance company whether the payment will change due do the new state's different tax rate.
Finally, assess whether leasing is the right move for you.
"A lot of people think leasing gives more flexibility than buying," Nerad said. "Buying a car gives you more flexibility."
If you own the car, you can simply sell, and if you still owe money on the loan, "there's a standard procedure" for handling that, Nerad said. "To get out of a lease, it becomes more of a one-off situation. You're at the mercy of ... the financial institution."
Meredith Libbey, a spokeswoman with Ford Motor Credit Company, agreed.
"With a lease," Libbey said, "we're the owner, so we have to agree to anything you do."
Credit score when you get married
Joint accounts
What will happen to your credit score when you get married?
By Lew Sichelman
Last Update: 7:33 PM ET Sep 27, 2007
WASHINGTON (MarketWatch) -- Question: I was wondering what will happen to my credit score after my boyfriend and I get married. We both have bad credit and we have been working on repairing mine first because it isn't as bad and will repair sooner. We would love to buy our first home, but I am curious: If we get married, does "his" score become "our" score and all the repair to mine won't matter much?
When we do buy a home, will his credit need to be considered as well as mine because we are married or can I apply for the loan separately? Tracey (and Ben)
Answer: The short answer is no, your credit scores remain separate once you are married. That's the good news.
Lots morereal estate
Coverage of home buying and selling, housing prices, mortgage information and home improvement.• Beware alluring mortgage ads• Using the Web to snare a loan• Make an acceptable lowball offer• Desperate home-seller tacticsGet our free Real Estate newsletter
The troubling news, at least in your case, arises when you choose to mingle accounts and apply for joint credit and loans. In these cases, says Eric Lindeen of Zoot Enterprises, a Bozeman, Mont., firm which provides financial-services companies with instant credit "decisioning" and loan origination systems, both credit scores are taken into consideration.
Consequently, you need to weigh the pros and cons of a joint application. In some cases, you may end up paying a higher interest rate or receive less money than you would had you applied for a mortgage on your own, depending upon the severity of damage contained in both credit reports.
If you choose to apply for the home loan separately, Lindeen says, your husband's credit history legally cannot be taken into account unless you are relying on his income to assist with getting the loan and paying the bills.
But if you live in a community property state -- including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington -- information regarding your spouse may be requested. Your spouse also may be required to sign a waiver in these states.
Lindeen also advises that in all cases, it is important to check the type of loan that you are applying for to see if the bank will take your spouse's credit history into account when making the decision.
"In general, if you apply for a loan separately, your credit is the one that will be considered when assessing the risk," he says. "Although applying jointly can help repair your spouse's credit by providing positive payment information, you will be assuming full responsibility for those debts. Bankruptcy is much more difficult today, and certain loan types, such as student loans, are not dismissed in a bankruptcy."
It is important to note that when repairing damage to your credit, focus on reputable methods versus a quick fix that may not serve you well. The first step to repairing credit is to stop accumulating debt. Reputable means of repairing your credit also include paying off your debt, making sure delinquent accounts are brought current, checking your credit report for errors, not applying for more credit and decreasing your "open to buy" credit limits.
Be cautious of companies that promise to fix your credit fast by cleaning up your credit report and claim they can convince creditors that you don't owe the debt, Lindeen warns.
"Lenders look for indications of unscrupulous repairs and will adjust your score appropriately. If it sounds too good to be true, it probably is. There isn't a quick solution to repairing credit."
Feedback
More than a few readers have said the advice offered in my response about the impact on your credit score by paying off old debt was incorrect. Actually, it was the advice of Ron Litt, president of Market Kinetix in Houston, but others have told me the same thing. And now, it seems, we're all wrong. See previous Realty Q&A.
"Paying any amount on an old past due account does not reset the seven-year reporting clock," commented Michael Bovee of the Consumer Recovery Network. "It is unfortunate that there are so many misconceptions on this issue. Consumers need the facts so that they can map and plan for their future."
Bovee says the only way an account can be "re-aged" is by the original credit grantor and even then only if the account has been "brought current." "If a furnisher of information to the credit-reporting agencies were to do as your quote suggests, it would be a violation of the Fair Credit Reporting Act. Admittedly this happens far too often. Exposing the practice is what needs to be addressed, not legitimizing it."
According to reader Nancy Nihart, the purge date and seven-year rule draw from the original delinquency date that lead up to the collection or charge off. "Paying the debit does not change the original delinquency date, only the last activity date," Nihart reports.
Moreover, she assures that if a debit is sold to a collection agency or other company, the original delinquency date cannot be changed to keep it on your credit report longer.
What will happen to your credit score when you get married?
By Lew Sichelman
Last Update: 7:33 PM ET Sep 27, 2007
WASHINGTON (MarketWatch) -- Question: I was wondering what will happen to my credit score after my boyfriend and I get married. We both have bad credit and we have been working on repairing mine first because it isn't as bad and will repair sooner. We would love to buy our first home, but I am curious: If we get married, does "his" score become "our" score and all the repair to mine won't matter much?
When we do buy a home, will his credit need to be considered as well as mine because we are married or can I apply for the loan separately? Tracey (and Ben)
Answer: The short answer is no, your credit scores remain separate once you are married. That's the good news.
Lots morereal estate
Coverage of home buying and selling, housing prices, mortgage information and home improvement.• Beware alluring mortgage ads• Using the Web to snare a loan• Make an acceptable lowball offer• Desperate home-seller tacticsGet our free Real Estate newsletter
The troubling news, at least in your case, arises when you choose to mingle accounts and apply for joint credit and loans. In these cases, says Eric Lindeen of Zoot Enterprises, a Bozeman, Mont., firm which provides financial-services companies with instant credit "decisioning" and loan origination systems, both credit scores are taken into consideration.
Consequently, you need to weigh the pros and cons of a joint application. In some cases, you may end up paying a higher interest rate or receive less money than you would had you applied for a mortgage on your own, depending upon the severity of damage contained in both credit reports.
If you choose to apply for the home loan separately, Lindeen says, your husband's credit history legally cannot be taken into account unless you are relying on his income to assist with getting the loan and paying the bills.
But if you live in a community property state -- including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington -- information regarding your spouse may be requested. Your spouse also may be required to sign a waiver in these states.
Lindeen also advises that in all cases, it is important to check the type of loan that you are applying for to see if the bank will take your spouse's credit history into account when making the decision.
"In general, if you apply for a loan separately, your credit is the one that will be considered when assessing the risk," he says. "Although applying jointly can help repair your spouse's credit by providing positive payment information, you will be assuming full responsibility for those debts. Bankruptcy is much more difficult today, and certain loan types, such as student loans, are not dismissed in a bankruptcy."
It is important to note that when repairing damage to your credit, focus on reputable methods versus a quick fix that may not serve you well. The first step to repairing credit is to stop accumulating debt. Reputable means of repairing your credit also include paying off your debt, making sure delinquent accounts are brought current, checking your credit report for errors, not applying for more credit and decreasing your "open to buy" credit limits.
Be cautious of companies that promise to fix your credit fast by cleaning up your credit report and claim they can convince creditors that you don't owe the debt, Lindeen warns.
"Lenders look for indications of unscrupulous repairs and will adjust your score appropriately. If it sounds too good to be true, it probably is. There isn't a quick solution to repairing credit."
Feedback
More than a few readers have said the advice offered in my response about the impact on your credit score by paying off old debt was incorrect. Actually, it was the advice of Ron Litt, president of Market Kinetix in Houston, but others have told me the same thing. And now, it seems, we're all wrong. See previous Realty Q&A.
"Paying any amount on an old past due account does not reset the seven-year reporting clock," commented Michael Bovee of the Consumer Recovery Network. "It is unfortunate that there are so many misconceptions on this issue. Consumers need the facts so that they can map and plan for their future."
Bovee says the only way an account can be "re-aged" is by the original credit grantor and even then only if the account has been "brought current." "If a furnisher of information to the credit-reporting agencies were to do as your quote suggests, it would be a violation of the Fair Credit Reporting Act. Admittedly this happens far too often. Exposing the practice is what needs to be addressed, not legitimizing it."
According to reader Nancy Nihart, the purge date and seven-year rule draw from the original delinquency date that lead up to the collection or charge off. "Paying the debit does not change the original delinquency date, only the last activity date," Nihart reports.
Moreover, she assures that if a debit is sold to a collection agency or other company, the original delinquency date cannot be changed to keep it on your credit report longer.
Wednesday, September 26, 2007
Stock Values
Life Time Fitness looks pretty healthy
Q: What do you think of Life Time Fitness (LTM) for an investor looking for slow but predictable growth?
A: Life Time Fitness is trying to help you and your family fit into your jeans.
The Minnesota-based company was running about 60 sports and athletic fitness center in 13 states as of February. Life Time Fitness is trying to be more than just a gym filled with rows of treadmills and exercise bikes. Many of its centers have swimming pools with slides, basketball courts, childcare centers, spas, climbing walls and other fun and active things for the family to do. It's a interesting idea. Rather than take the kids to a pizza parlor or bowling alley, you could, in theory take them to a Life Time Fitness center where they could play in the pool, or take classes in hip-hop dancing, basketball, karate, yoga and even Spanish.
Investors seem to think it's a good idea, too. Shares of Life Time Fitness have gained 23% this year through mid-September, during which time the Standard & Poor's 500 rose just 7.1%.
But is this the stock that will put your portfolio into good health? To find out, we'll put it through the paces and subject the stock to the four Ask Matt steps:
Step 1: Risk versus reward. When you take a risk on a stock, you want to make sure you're properly rewarded. So we download Corning's trading history back to 2004. During that time, the company generated an average annual compound rate of return of 33%. That is exceptional, and well above the return of the Standard & Poor's 500 during the same period.
And to get that return, you accepted relatively moderate risk of 12.8 percentage points.
This stock's volatility has been pretty average and the returns have been outstanding. So far, this stock looks to fit your criteria and probably explains why you own it. There's just one giant caveat. We're basing this analysis on just three years of data which is not even close to being an adequate sample size. Many think you need at least 20 years of data before this analysis is meaningful.
Step 2: Measure the stock's discounted cash flow. Some investors decide if a stock is pricey by comparing its current stock price to the present value of its expected cash flows. It's a complicated analysis made simple with a system from NewConstructs. When we run the stock, though, it's not available in the NewConstructs database currently. The company doesn't have adequate data available.
So, instead, we'll use this Discounted Cash Flow Calculator from MoneyChimp. You can enter the company's earnings per share over the past 12 months, which was $1.57. Next, you enter the stock's expected growth rate over the next five years of 25%. Lastly, enter an 5% annual growth rate in year six and beyond and a 10% return available from the Standard & Poor's 500. Click the calculate button and the site says the stock is worth $74.18, making it look reasonable next to the current price of $60. You might try the same analysis using cash flow instead of earnings.
Step 3: Compare the current valuation to the historical range. You can see how a stock's price-to-earnings ratio (P-E) stacks up against its historical range to determine if it's a buy or not. BetterInvesting's Stock Selection Guide can help you. If the analysts are right and the company grows 25% a year the next five years, that would put the stock in the "buy" range.
Step 4: Check the company's financial health. Before investing in any company, you want to make sure it's in good financial shape. A quick way to check is running it through the USA TODAY Stock Meter. Life Time Fitness scores riskier than average 3.8 here. You can get a Stock Meter score for almost any stock by going to money.usatoday.com and putting the stock's ticker symbol or company name into the Get a Quote box.
My bottom line? If you were looking for a stock with the potential of providing steady and strong growth, you've certainly found it for now. It's hard to knock this stock based on the four things Ask Matt readers look for. My only caution, though, would be to remember this is an individual stock. Contrary to the last four years of trading history may indicate, individual stocks tend to be riskier than diversified baskets of stocks. If safety is your top concern, you might strongly consider adding a diversified investment to you portfolio to go along with your Life Time Fitness stock. If anything happens to disrupt this company's steady growth, you can expect investors to punish it severely. This is one of those stocks that's riskier than it appears.
Matt Krantz is a financial markets reporter at USA TODAY. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com.
Tuesday, September 25, 2007
Death's certain. Taxes? Avoidable
Inheritance tips: Death's certain. Taxes? Avoidable
By Mindy Fetterman, USA TODAY
Financial planners, estate planners and other experts often quote this statistic: 70% of all inheritances are frittered away in the first three years. Here are some things to consider if you plan to leave an inheritance or expect to get one:
IF YOU WANT TO GIVE MONEY: (Go to: If you expect to receive money)
Even if you don't have a huge estate, there are ways you can leave money to your family or others that can save you taxes and make a big difference in their lives. Many people give money while they're alive to reduce the size of their estates — and estate taxes.
•You can give some money each year.
Each person can give $12,000 a year to any person — a child, another relative or the milkman — without having to file a gift-tax return with the IRS. If you have several children, you can give $12,000 a year to each. A married couple can "bundle" their gifts to give a combined $24,000 to each child ($12,000 per spouse).
Over your lifetime, $1 million in gifts is excluded from gift taxes. But any amount you give over $12,000 to one person counts toward that $1 million.
Time gifts for impact: For instance, a married couple could give a child $24,000 in December and $24,000 in January, says Michael Yoshikami, president of YCMNET Advisors in Walnut Creek, Calif. "That's a good chunk of a down payment for a house," he says.
•You can bequeath money after death.
Each person also has a one-time exclusion of $2 million from estate taxes after they die (the $1 million above is part of this). Combined, a married couple has $4 million that's excluded from estate taxes. If you want your heirs to be able to take advantage of the growth in assets you give them — and you're not sure they'd invest it wisely themselves — you can set up a trust to hold onto the money for any period of time.
STORY: 'Giving while living' alters inheritances
If you leave $1 million using a will, the money would be paid soon after your death. By contrast, if you left it in a trust, it could grow to $2 million over time, doubling the amount your child could inherit without triggering estate taxes.
The $2 million exclusion is "a use-it-or-lose-it provision," says Richard Stone, CEO of Salient Wealth, a wealth management firm in San Rafael, Calif.
•You can pay for education.
If you want to pay education costs for your children, grandchildren or anyone else, you can fund a 529 plan or prepaid college fund. Money in such funds grows tax-free over time, and the proceeds are free of taxes — as long as the money is used to pay for education expenses.
You can make the maximum $12,000 per-person, per-year gift to a 529 plan, or "front load" your gifts by putting five years' of donations in at once.
"You can't make another gift for five years, but it means Grandpa and Grandma can give $120,000 upfront," Stone says. That money also comes right out of their estate, so no estate taxes are owed on it after they die. The student gets the gift tax-free.
You can pay for education or medical expenses outright as long as you write a check directly to the college or medical institution.
Don't give it first to the student or her parents. The check has to go to the school.
•You can set up a trust.
A trust is a way to bequeath money to your heirs beyond using a will. Families with as little as $300,000 to leave should consider a trust for their estate, Yoshikami suggests. That's enough money to make it worthwhile to pay the fees to set it up. Once life insurance, retirement savings and the rising value of real estate are combined, he says, many people have estates worth that much.
One advantage to a trust: It doesn't have to pass through probate court, as a will does. The amount and details of the trust don't become public, says Stone of Salient Wealth. And money or property in a trust stays with the intended person. It can't, for example, be mingled with other assets and divided in a divorce.
"A lot of families use them to protect money against creditors or a bad marriage," Stone says.
A trust isn't always for everything in your estate. Leaving an IRA in a trust, Yoshikami says, doesn't give the same tax advantages that leaving it to an individual does. "If you leave an IRA to an individual, they can choose to take the payout over years and earn more over time," he says.
There are many kinds of trusts, and tax implications, to consider. You should have a trust attorney or financial adviser help you decide which is best for you.
•You can open a private foundation.
"There's just something about the sound of 'The Eric L. Green Foundation,' " laughs Eric L. Green, an estate attorney at Convicer & Percy of Glastonbury, Conn.
Green says some families with as little as $500,000 extra — after retirement, college and lifestyle needs are met — set up a foundation to support a charity.
You can pay your child a salary to run the foundation, he says, or pay him to serve on the board. A foundation has to disperse only 5% of its assets each year.
"I've helped people set up foundations to advance poetry reading and to spread medical information in Africa," Green says. It will cost you about $2,500 to $5,000 to set up a small foundation; up to $50,000 for larger ones, he says.
"Wealthy families think it's good for their kids to have to work with a charity," he says. "They think it's better than throwing fancy cars and money at them."
IF YOU EXPECT TO RECEIVE MONEY (Go to: If you want to give money)
Try not to blow it right away.
"Most people act like they've just won the lottery," says Michael Yoshikami, a wealth manager in Walnut Creek, Calif. "They buy a boat or a motorcycle or put an addition onto the house. They just add to their financial obligations."
Not everyone who inherits money, or who gets money regularly from living relatives, is rich. Most are, but not everyone. And not every inheritance is large.
A typical scenario for a typical American who receives an inheritance might go something like this:
An elderly mother dies, her husband having died earlier. She leaves her son and daughter the family home, which has been paid for, and a Roth IRA worth about $100,000. She and her husband bought the house in 1960 for $50,000. Now, it's worth $300,000.
All of a sudden, her two boomer-aged kids have an "estate" worth nearly half a million dollars. What should they do to derive the most benefit from the money and avoid being hit with a big tax bill?
"It can be nerve-racking," says Greg Fernandez, a financial planner at Nations Capital Wealth Management in McLean, Va.
•When you get Mother's house
The best thing about inheriting a house is that you get a "step up" in the value of the house for tax purposes when you sell it.
"The tax basis completely starts on the date of death," Yoshikami says. In our example, if your mother gives you a house she bought for $50,000, you get to "step up" to its current value of $300,000. So if you sell it for $300,000, you wouldn't pay any taxes. It doesn't matter that the home originally was worth $50,000.
Still, selling the family home can be an "emotional moment," Yoshikami says. Some families just can't do it. They let a member of the family move in.
"You need to stand back and make a rational decision," he says. "But if you do make an emotional one, at least understand the financial consequences."
If you let a relative remain in the house, you should have him or her buy your share, Yoshikami says. Get an appraisal and split the value of the house as if it were being sold immediately. Your sibling would pay you for your half.
The best thing in most cases, Fernandez says, is to sell the house and divide the money among siblings. If you wait to sell, and the value of the home falls after your mother's death, just as many home values are dropping now, you would have a loss.
•What to do with a Roth IRA?
Inheriting an IRA can serve you well, as long as you make a couple of decisions by certain deadlines, Fernandez says. The rules are slightly different when inheriting a traditional IRA or a Roth IRA. Our example is for a Roth, from which money distributed is tax-free.
But for that to happen, the Roth IRA must have been in existence for at least five years. If it was a traditional IRA that was converted to a Roth IRA, the conversion must have occurred at least five years ago.
Beneficiaries who aren't the spouse of the deceased can take distributions two ways: over a lifetime or within five years.
The IRS assumes that you'll take distributions over your lifetime, but the first payment must come out of the account before Dec. 31 of the year after your mother's death, Fernandez says. If it doesn't, you'll default to the five-year payout plan.
That may be OK for you. You can choose how much to get in each of the five years — $50,000 one year, zero the next, $20,000 the third, etc. But you'll lose the ability to keep that money in an account that grows tax-deferred over time.
Remember: You can't roll over an inherited Roth IRA into your IRA. It must remain separate.
To take advantage of growth over time, you should choose to withdraw money over your estimated lifetime. (You'll use the IRS' life-expectancy tables to figure that out.) You'll get smaller annual amounts from the Roth IRA each year than if you took the five-year payout, but a much greater amount over your lifetime.
"We call that a stretch IRA, because you're stretching the payments out over your life," Fernandez says.
For a $100,000 Roth IRA that grows in value at 8% a year given out over nearly 20 years, a 43-year-old beneficiary could potentially withdraw more than $795,000 over his lifetime, Fernandez says. (That assumes he dies at 83.)
And he'd still have $61,000 left to give to his heirs.
By Mindy Fetterman, USA TODAY
Financial planners, estate planners and other experts often quote this statistic: 70% of all inheritances are frittered away in the first three years. Here are some things to consider if you plan to leave an inheritance or expect to get one:
IF YOU WANT TO GIVE MONEY: (Go to: If you expect to receive money)
Even if you don't have a huge estate, there are ways you can leave money to your family or others that can save you taxes and make a big difference in their lives. Many people give money while they're alive to reduce the size of their estates — and estate taxes.
•You can give some money each year.
Each person can give $12,000 a year to any person — a child, another relative or the milkman — without having to file a gift-tax return with the IRS. If you have several children, you can give $12,000 a year to each. A married couple can "bundle" their gifts to give a combined $24,000 to each child ($12,000 per spouse).
Over your lifetime, $1 million in gifts is excluded from gift taxes. But any amount you give over $12,000 to one person counts toward that $1 million.
Time gifts for impact: For instance, a married couple could give a child $24,000 in December and $24,000 in January, says Michael Yoshikami, president of YCMNET Advisors in Walnut Creek, Calif. "That's a good chunk of a down payment for a house," he says.
•You can bequeath money after death.
Each person also has a one-time exclusion of $2 million from estate taxes after they die (the $1 million above is part of this). Combined, a married couple has $4 million that's excluded from estate taxes. If you want your heirs to be able to take advantage of the growth in assets you give them — and you're not sure they'd invest it wisely themselves — you can set up a trust to hold onto the money for any period of time.
STORY: 'Giving while living' alters inheritances
If you leave $1 million using a will, the money would be paid soon after your death. By contrast, if you left it in a trust, it could grow to $2 million over time, doubling the amount your child could inherit without triggering estate taxes.
The $2 million exclusion is "a use-it-or-lose-it provision," says Richard Stone, CEO of Salient Wealth, a wealth management firm in San Rafael, Calif.
•You can pay for education.
If you want to pay education costs for your children, grandchildren or anyone else, you can fund a 529 plan or prepaid college fund. Money in such funds grows tax-free over time, and the proceeds are free of taxes — as long as the money is used to pay for education expenses.
You can make the maximum $12,000 per-person, per-year gift to a 529 plan, or "front load" your gifts by putting five years' of donations in at once.
"You can't make another gift for five years, but it means Grandpa and Grandma can give $120,000 upfront," Stone says. That money also comes right out of their estate, so no estate taxes are owed on it after they die. The student gets the gift tax-free.
You can pay for education or medical expenses outright as long as you write a check directly to the college or medical institution.
Don't give it first to the student or her parents. The check has to go to the school.
•You can set up a trust.
A trust is a way to bequeath money to your heirs beyond using a will. Families with as little as $300,000 to leave should consider a trust for their estate, Yoshikami suggests. That's enough money to make it worthwhile to pay the fees to set it up. Once life insurance, retirement savings and the rising value of real estate are combined, he says, many people have estates worth that much.
One advantage to a trust: It doesn't have to pass through probate court, as a will does. The amount and details of the trust don't become public, says Stone of Salient Wealth. And money or property in a trust stays with the intended person. It can't, for example, be mingled with other assets and divided in a divorce.
"A lot of families use them to protect money against creditors or a bad marriage," Stone says.
A trust isn't always for everything in your estate. Leaving an IRA in a trust, Yoshikami says, doesn't give the same tax advantages that leaving it to an individual does. "If you leave an IRA to an individual, they can choose to take the payout over years and earn more over time," he says.
There are many kinds of trusts, and tax implications, to consider. You should have a trust attorney or financial adviser help you decide which is best for you.
•You can open a private foundation.
"There's just something about the sound of 'The Eric L. Green Foundation,' " laughs Eric L. Green, an estate attorney at Convicer & Percy of Glastonbury, Conn.
Green says some families with as little as $500,000 extra — after retirement, college and lifestyle needs are met — set up a foundation to support a charity.
You can pay your child a salary to run the foundation, he says, or pay him to serve on the board. A foundation has to disperse only 5% of its assets each year.
"I've helped people set up foundations to advance poetry reading and to spread medical information in Africa," Green says. It will cost you about $2,500 to $5,000 to set up a small foundation; up to $50,000 for larger ones, he says.
"Wealthy families think it's good for their kids to have to work with a charity," he says. "They think it's better than throwing fancy cars and money at them."
IF YOU EXPECT TO RECEIVE MONEY (Go to: If you want to give money)
Try not to blow it right away.
"Most people act like they've just won the lottery," says Michael Yoshikami, a wealth manager in Walnut Creek, Calif. "They buy a boat or a motorcycle or put an addition onto the house. They just add to their financial obligations."
Not everyone who inherits money, or who gets money regularly from living relatives, is rich. Most are, but not everyone. And not every inheritance is large.
A typical scenario for a typical American who receives an inheritance might go something like this:
An elderly mother dies, her husband having died earlier. She leaves her son and daughter the family home, which has been paid for, and a Roth IRA worth about $100,000. She and her husband bought the house in 1960 for $50,000. Now, it's worth $300,000.
All of a sudden, her two boomer-aged kids have an "estate" worth nearly half a million dollars. What should they do to derive the most benefit from the money and avoid being hit with a big tax bill?
"It can be nerve-racking," says Greg Fernandez, a financial planner at Nations Capital Wealth Management in McLean, Va.
•When you get Mother's house
The best thing about inheriting a house is that you get a "step up" in the value of the house for tax purposes when you sell it.
"The tax basis completely starts on the date of death," Yoshikami says. In our example, if your mother gives you a house she bought for $50,000, you get to "step up" to its current value of $300,000. So if you sell it for $300,000, you wouldn't pay any taxes. It doesn't matter that the home originally was worth $50,000.
Still, selling the family home can be an "emotional moment," Yoshikami says. Some families just can't do it. They let a member of the family move in.
"You need to stand back and make a rational decision," he says. "But if you do make an emotional one, at least understand the financial consequences."
If you let a relative remain in the house, you should have him or her buy your share, Yoshikami says. Get an appraisal and split the value of the house as if it were being sold immediately. Your sibling would pay you for your half.
The best thing in most cases, Fernandez says, is to sell the house and divide the money among siblings. If you wait to sell, and the value of the home falls after your mother's death, just as many home values are dropping now, you would have a loss.
•What to do with a Roth IRA?
Inheriting an IRA can serve you well, as long as you make a couple of decisions by certain deadlines, Fernandez says. The rules are slightly different when inheriting a traditional IRA or a Roth IRA. Our example is for a Roth, from which money distributed is tax-free.
But for that to happen, the Roth IRA must have been in existence for at least five years. If it was a traditional IRA that was converted to a Roth IRA, the conversion must have occurred at least five years ago.
Beneficiaries who aren't the spouse of the deceased can take distributions two ways: over a lifetime or within five years.
The IRS assumes that you'll take distributions over your lifetime, but the first payment must come out of the account before Dec. 31 of the year after your mother's death, Fernandez says. If it doesn't, you'll default to the five-year payout plan.
That may be OK for you. You can choose how much to get in each of the five years — $50,000 one year, zero the next, $20,000 the third, etc. But you'll lose the ability to keep that money in an account that grows tax-deferred over time.
Remember: You can't roll over an inherited Roth IRA into your IRA. It must remain separate.
To take advantage of growth over time, you should choose to withdraw money over your estimated lifetime. (You'll use the IRS' life-expectancy tables to figure that out.) You'll get smaller annual amounts from the Roth IRA each year than if you took the five-year payout, but a much greater amount over your lifetime.
"We call that a stretch IRA, because you're stretching the payments out over your life," Fernandez says.
For a $100,000 Roth IRA that grows in value at 8% a year given out over nearly 20 years, a 43-year-old beneficiary could potentially withdraw more than $795,000 over his lifetime, Fernandez says. (That assumes he dies at 83.)
And he'd still have $61,000 left to give to his heirs.
4 ways women can be better investors
By MarketWatch
For years there's been plenty of talk -- and research -- on the role of women in the business world and as investors. The latest findings still point to a gap between the needs, attitudes and involvement of men and women in investing. Yet, at the same time, women are making more progress than ever as professionals.
So, especially for those who follow principles in my book "The Millionaire Zone," I wanted to share my thoughts on why the gap still exists and what you as an investor can do about it.
According to the research organization Catalyst, women now occupy 50.6% of workplace managerial and professional positions. Yet as investors, women still don't get involved or they invest too conservatively, leaving money on the table.
From extensive research on the topic published by the Oppenheimer Funds, the Allianz banking and insurance group, and others, there are, in a nutshell, four factors:
Education.Women growing up are simply not socialized as investors. According to Oppenheimer, 76% of women wish they had learned more about investing while growing up.
Experience.Most women don't take the investing helm when married.
Fear.According to Allianz, some 90% of women fear "losing it all," and even 48% of those with incomes exceeding $100,000 annually cite that fear.
Adviser disconnect.Most financial advisers are men, and they're still geared to talk to men. According to Sacha Millstone, a founding financial adviser for the Millstone Evans Group at Raymond James, most advisers still talk in jargon. "'Basis points' still don't mean as much as percentages," Millstone says. And there's still a "tendency to tell women what they want to hear, to comfort them, instead of talking about the opportunities in a situation."
It's obvious: Women need to "connect" with investing because we live longer. Through death or divorce, we are more likely to spend more time in control of our financial destiny. About 80% to 90% of women will be solely responsible for their finances someday, according to the National Center for Women and Retirement Research.
And with no defined benefit pension to count on.
And I'll bet you didn't realize this: Allianz found that 96% of men think that financially secure women are sexy.
The good news Current trends and research point to some good news, too.
First, Allianz reported that more women than ever describe themselves as "confident, analytical and disciplined savers." Further, according to Oppenheimer, 46% of women now consider themselves "very or somewhat knowledgeable about investing."
Second, women have always had less ego in their investing approach. As a result they often outperform men, particularly those who have short-term, aggressive investing styles.
Finally, women also are willing to network and use the investment-club approach. About 70% of investment-club members are women.
4 ways to get started I think the following points will help all investors, but especially women who may still be reluctant to wade into investing waters:
Think like a business owner.Business owners understand how businesses work and how to handle the ups and downs. Women are good at this in the business world. According to Millstone: "Women can handle negative news in a business setting, but it brings fear in investing. There's no reason for it."
Buy businesses you understand.If inclined to buy individual stocks, this is a fundamental Warren Buffett value principle. As a woman, you probably understand some businesses better than your male counterparts -- use this to your advantage.
Video on MSN Money
The ABCs of mutual fundsHere's how to sift through the alphabet soup of funds to find one that's right for you.
Get the right advice.Research shows that women prefer the help of advisers. Some 75% of women who rely on advisers are "more comfortable with investing." That said, finding the right one is important -- one tuned in to the needs of women.
Follow role models.In business -- and in investing -- it always helps to find good role models and to study their actions and response to business and market stimuli. Buffett, an investor role model for years, is a good place to start.
Interestingly, a study of the Fortune 500 companies by Catalyst found that companies with more women at the top delivered a higher return -- 34% higher -- than companies with the fewest women. That's another reason women might find a greater connection to investing in the market.
This article was reported and written by Jennifer Openshaw for MarketWatch.com.
For years there's been plenty of talk -- and research -- on the role of women in the business world and as investors. The latest findings still point to a gap between the needs, attitudes and involvement of men and women in investing. Yet, at the same time, women are making more progress than ever as professionals.
So, especially for those who follow principles in my book "The Millionaire Zone," I wanted to share my thoughts on why the gap still exists and what you as an investor can do about it.
According to the research organization Catalyst, women now occupy 50.6% of workplace managerial and professional positions. Yet as investors, women still don't get involved or they invest too conservatively, leaving money on the table.
From extensive research on the topic published by the Oppenheimer Funds, the Allianz banking and insurance group, and others, there are, in a nutshell, four factors:
Education.Women growing up are simply not socialized as investors. According to Oppenheimer, 76% of women wish they had learned more about investing while growing up.
Experience.Most women don't take the investing helm when married.
Fear.According to Allianz, some 90% of women fear "losing it all," and even 48% of those with incomes exceeding $100,000 annually cite that fear.
Adviser disconnect.Most financial advisers are men, and they're still geared to talk to men. According to Sacha Millstone, a founding financial adviser for the Millstone Evans Group at Raymond James, most advisers still talk in jargon. "'Basis points' still don't mean as much as percentages," Millstone says. And there's still a "tendency to tell women what they want to hear, to comfort them, instead of talking about the opportunities in a situation."
It's obvious: Women need to "connect" with investing because we live longer. Through death or divorce, we are more likely to spend more time in control of our financial destiny. About 80% to 90% of women will be solely responsible for their finances someday, according to the National Center for Women and Retirement Research.
And with no defined benefit pension to count on.
And I'll bet you didn't realize this: Allianz found that 96% of men think that financially secure women are sexy.
The good news Current trends and research point to some good news, too.
First, Allianz reported that more women than ever describe themselves as "confident, analytical and disciplined savers." Further, according to Oppenheimer, 46% of women now consider themselves "very or somewhat knowledgeable about investing."
Second, women have always had less ego in their investing approach. As a result they often outperform men, particularly those who have short-term, aggressive investing styles.
Finally, women also are willing to network and use the investment-club approach. About 70% of investment-club members are women.
4 ways to get started I think the following points will help all investors, but especially women who may still be reluctant to wade into investing waters:
Think like a business owner.Business owners understand how businesses work and how to handle the ups and downs. Women are good at this in the business world. According to Millstone: "Women can handle negative news in a business setting, but it brings fear in investing. There's no reason for it."
Buy businesses you understand.If inclined to buy individual stocks, this is a fundamental Warren Buffett value principle. As a woman, you probably understand some businesses better than your male counterparts -- use this to your advantage.
Video on MSN Money
The ABCs of mutual fundsHere's how to sift through the alphabet soup of funds to find one that's right for you.
Get the right advice.Research shows that women prefer the help of advisers. Some 75% of women who rely on advisers are "more comfortable with investing." That said, finding the right one is important -- one tuned in to the needs of women.
Follow role models.In business -- and in investing -- it always helps to find good role models and to study their actions and response to business and market stimuli. Buffett, an investor role model for years, is a good place to start.
Interestingly, a study of the Fortune 500 companies by Catalyst found that companies with more women at the top delivered a higher return -- 34% higher -- than companies with the fewest women. That's another reason women might find a greater connection to investing in the market.
This article was reported and written by Jennifer Openshaw for MarketWatch.com.
10 things your insurance may not cover
By Liz Pulliam Weston
Most people think about their homeowners insurance only a few times in their lives: when they select their insurer, when they're writing premium checks and when they have a claim.
By the time something goes wrong, however, it's usually way too late to begin learning about your policy.
Here are some gaps in your coverage you can't do anything about, of course. Insurers aren't going to cover you for a nuclear accident, for example, no matter how many companies you ask.
Many so-called exclusions, though, vary by the insurer. If you know about them in advance, you may be able to switch carriers or buy extra insurance to stay protected. So pull out your policy and check for the following:
Mold and water damage A spike in mold-related claims at the turn of the century led most insurers to strike the coverage entirely from their homeowners policies.
The frenzy over toxic mold reached a peak around 2002, the year television personality Ed McMahon filed a $20 million lawsuit against his insurer over mold that he said sickened his family and killed his dog. (McMahon later settled for $7.2 million.) A huge increase in mold-related claims in Texas, California, Florida, Nevada and Arizona led insurers to eliminate or at least reduce their exposure.
Most homeowners insurers now exclude mold from their coverage, said Frank J. Coyne, chairman and CEO for the Insurance Services Office, which supplies statistical data to property and casualty insurers. Many insurers also limit how much they'll cover for water damage.
In fact, in some cases you may have trouble getting coverage for a home that's had water claims in the past. Read "When NOT to file a claim" for more details.
Sewer backup The only thing more disgusting than a bathroom floor overflowing with waste is the fact that you may have to pick up the cleaning bill yourself.
Sewage backups are frequently not covered by homeowners policies unless you purchase a special rider. Many homeowners who experience this particular disaster try to get their cities to pay for the damage, but governments typically aren't liable unless the homeowner can prove negligence -- and is willing to go to court over the matter.
A cheaper solution? Check your policy, and if you're not covered, buy the rider for $50 to $100.
War, nuclear accidents and terrorism If your home is burned in a riot or other civil commotion, your insurer probably will pay to rebuild it. If your home is damaged by an invading army or is irradiated by a nearby power plant, however, you're not covered. If your house is destroyed during a terrorist attack, you also may be on your own.
Insurers have long excluded war and nuclear accidents from the list of perils they cover. Until the Sept. 11 attacks, though, most homeowners policies either covered terrorism or were silent on the issue, which usually implies coverage.
Video: Save money on home insurance
Since the World Trade Center attacks, an increasing number of insurers are specifically excluding terrorism coverage from their personal insurance lines, such as homeowners, in addition to banning it from their commercial coverage.
Natural disasters If your home burns in a wildfire, you're probably covered if you live in a developed area. If you live in a remote cabin or your home is rattled apart by an earthquake, inundated by a flood or blown away in a hurricane, you may not be.
The more likely you are to be a victim of a natural disaster, the more reluctant insurers may be to cover you. That's why residents who live near the Gulf Coast or the Atlantic Ocean typically need to supplement their homeowners insurance with hurricane coverage offered by a high-risk pool (and the number of properties considered high-risk has exploded since Hurricane Katrina). California residents, meanwhile, get earthquake coverage from the state-run California Earthquake Authority or from a handful of insurers willing to write earthquake policies.
Many insurers also won't cover fire risks for people who live in forests or far from fire stations. That's true even though some of the biggest wildfire losses have come in developed areas: the Oakland Hills fires of 1991, for example, the Laguna Beach and Malibu fires of 1993, and the San Diego wildfires in 2003. Most of those homeowners had no trouble getting insurance before the fires, while their more remote neighbors often had to buy insurance from high-risk pools.
Continued: Neglect, trampolines and dogs
Floods, meanwhile, aren't covered under homeowners insurance policies -- something many Katrina victims learned to their chagrin. The National Flood Insurance Program, run by the Federal Emergency Management Agency, offers coverage. If you live in an area that's prone to either floods or hurricanes, you need both wind and flood coverage.
If you're the victim of a landslide, however, you're pretty much on your own. That kind of earth movement usually isn't covered, so it pays to get a geologist's report before buying any home near a cliff or on a hill.
Neglect If a tree topples over in a windstorm and crushes your house, you're covered. If your home collapses because of a termite infestation, you're probably not.
Insurers expect you to take care of your home and deal with any maintenance issues on your own dime. Insurance generally covers sudden and unexpected losses, not losses from termites, rodent infestations or a water leak you never quite got around to fixing. You're expected to detect the problem and prevent the situation from getting out of control. If you don't, any damage done typically won't be covered by your insurer.
Bruce Johnson, author of "50 Simple Ways to Save Your House," recommends you conduct regular inspections to detect such problems. At least twice a year, tour the exterior of your home looking for cracks, decay or water damage. Check the condition of the roof and inspect the basement or crawl space for other hidden problems, including rodent droppings, termites or leaks.
If you find a problem, fix it. Remember that home maintenance problems usually just get more expensive.
Trampolines Insurers charge more for certain hazards, like pools and spas. Trampolines, though, are often excluded outright.
They're a whole lot of fun, but they also offer a whole lot of ways to seriously hurt yourself. That's why your homeowners policy probably excludes trampolines from coverage and why your current insurer may threaten to drop you if you buy one. They simply don't want to pay for the lawsuit and medical bills if the neighbor kid breaks his neck.
If you insist on having one, you may need to shop around for an insurer that will tolerate, if not cover, trampolines. But you might want to think seriously about a less hazardous form of at-home fun.
Dogs If you own a toothless Chihuahua, your insurer probably doesn't care. Buy a pit bull, Rottweiler or wolf hybrid, however, and you may find your insurance gets more expensive -- if you can persuade your insurer to cover you at all.
Dog bites cost insurers about $310 million a year, and an increasing number of companies have a blacklist of breeds they won't accept or charge more to cover. Pit bulls, which lead the Centers for Disease Control and Prevention's list (.pdf download) of deadly breeds, are particularly unwelcome. Other troublesome breeds include German shepherds, Rottweilers, wolf hybrids, huskies, malamutes and Dobermans.
Video: Save money on home insurance
If your dog has ever bitten anyone, regardless of its breed, you're probably going to have trouble getting coverage as well -- particularly if it was an unprovoked attack.
Each insurer has different policies, though, so you may be able to find affordable coverage if you shop around. You also can ask the insurer to exclude your dog, meaning that you'll pay for any damage it does. You also should invest in some training, since a biting dog is a hazard to everyone around you.
Continued: Intentional damage, computers and luxury goods
Intentional damage If your ex sets fire to your home, you're probably covered. If the fire is started by your rebellious teenager or an estranged spouse, however, you may not be.
Intentional damage by an insured person -- or by the person's spouse, children or relatives living in the house -- typically isn't covered. Estranged spouses often come into a gray area. Although they may not live in the home, they may be listed on the policy or the property deed and be considered to have an insurable interest in the home. Companies have, in fact, made this argument to deny or limit coverage to homeowners whose property was damaged by an estranged spouse. (See "Your teen's troubles can cost you a bundle.")
Victims advocates complain these policies are unfair, since there's often no way to prevent such damage. If you're worried about the risk, however, it may motivate you to get help for a destructive teen, beef up your home's security system or reach a quicker divorce settlement.
Computer equipment If you have a personal computer or two, your homeowners insurance may pay you enough to buy a new one -- or it may not. If you're running a home business, however, your homeowners insurance almost certainly will fall short.
Here's another area where it pays to read your policy. Some insurers will give you a check only for what your computer equipment is worth now, which is probably a fraction of what you paid for it. Even those that do pay for replacements typically have a cap, often about $2,500. Many require you to have supplemental coverage if you want a bigger check than that, or if you run a business from your home.
Read your policy, note the limits and talk to your insurer about supplemental coverage if you need more.
Also, know that most policies won't cover the value of digital information stored on your computer, including your music and photo collections. That's all the more reason to invest in a good, off-site backup system and to use it frequently.
Luxury items and collectibles If you don't own anything special, the entire contents of your home are probably covered under your homeowners policy. If you have antiques, guns, jewelry, collectibles or fine furs, you may need extra coverage.
Video: Save money on home insurance
The typical policy limits coverage for luxury items and collectibles. You might get as little as $200 for the coin collection you were hoping would fund Junior's college, or $1,000 to cover all your jewelry, watches and furs.Once again: Check your policy, and buy supplemental insurance if you want more coverage. To make sure you have enough coverage for all your stuff, use the home inventory software available at the Insurance Information Institute.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published Sept. 24, 2007
Most people think about their homeowners insurance only a few times in their lives: when they select their insurer, when they're writing premium checks and when they have a claim.
By the time something goes wrong, however, it's usually way too late to begin learning about your policy.
Here are some gaps in your coverage you can't do anything about, of course. Insurers aren't going to cover you for a nuclear accident, for example, no matter how many companies you ask.
Many so-called exclusions, though, vary by the insurer. If you know about them in advance, you may be able to switch carriers or buy extra insurance to stay protected. So pull out your policy and check for the following:
Mold and water damage A spike in mold-related claims at the turn of the century led most insurers to strike the coverage entirely from their homeowners policies.
The frenzy over toxic mold reached a peak around 2002, the year television personality Ed McMahon filed a $20 million lawsuit against his insurer over mold that he said sickened his family and killed his dog. (McMahon later settled for $7.2 million.) A huge increase in mold-related claims in Texas, California, Florida, Nevada and Arizona led insurers to eliminate or at least reduce their exposure.
Most homeowners insurers now exclude mold from their coverage, said Frank J. Coyne, chairman and CEO for the Insurance Services Office, which supplies statistical data to property and casualty insurers. Many insurers also limit how much they'll cover for water damage.
In fact, in some cases you may have trouble getting coverage for a home that's had water claims in the past. Read "When NOT to file a claim" for more details.
Sewer backup The only thing more disgusting than a bathroom floor overflowing with waste is the fact that you may have to pick up the cleaning bill yourself.
Sewage backups are frequently not covered by homeowners policies unless you purchase a special rider. Many homeowners who experience this particular disaster try to get their cities to pay for the damage, but governments typically aren't liable unless the homeowner can prove negligence -- and is willing to go to court over the matter.
A cheaper solution? Check your policy, and if you're not covered, buy the rider for $50 to $100.
War, nuclear accidents and terrorism If your home is burned in a riot or other civil commotion, your insurer probably will pay to rebuild it. If your home is damaged by an invading army or is irradiated by a nearby power plant, however, you're not covered. If your house is destroyed during a terrorist attack, you also may be on your own.
Insurers have long excluded war and nuclear accidents from the list of perils they cover. Until the Sept. 11 attacks, though, most homeowners policies either covered terrorism or were silent on the issue, which usually implies coverage.
Video: Save money on home insurance
Since the World Trade Center attacks, an increasing number of insurers are specifically excluding terrorism coverage from their personal insurance lines, such as homeowners, in addition to banning it from their commercial coverage.
Natural disasters If your home burns in a wildfire, you're probably covered if you live in a developed area. If you live in a remote cabin or your home is rattled apart by an earthquake, inundated by a flood or blown away in a hurricane, you may not be.
The more likely you are to be a victim of a natural disaster, the more reluctant insurers may be to cover you. That's why residents who live near the Gulf Coast or the Atlantic Ocean typically need to supplement their homeowners insurance with hurricane coverage offered by a high-risk pool (and the number of properties considered high-risk has exploded since Hurricane Katrina). California residents, meanwhile, get earthquake coverage from the state-run California Earthquake Authority or from a handful of insurers willing to write earthquake policies.
Many insurers also won't cover fire risks for people who live in forests or far from fire stations. That's true even though some of the biggest wildfire losses have come in developed areas: the Oakland Hills fires of 1991, for example, the Laguna Beach and Malibu fires of 1993, and the San Diego wildfires in 2003. Most of those homeowners had no trouble getting insurance before the fires, while their more remote neighbors often had to buy insurance from high-risk pools.
Continued: Neglect, trampolines and dogs
Floods, meanwhile, aren't covered under homeowners insurance policies -- something many Katrina victims learned to their chagrin. The National Flood Insurance Program, run by the Federal Emergency Management Agency, offers coverage. If you live in an area that's prone to either floods or hurricanes, you need both wind and flood coverage.
If you're the victim of a landslide, however, you're pretty much on your own. That kind of earth movement usually isn't covered, so it pays to get a geologist's report before buying any home near a cliff or on a hill.
Neglect If a tree topples over in a windstorm and crushes your house, you're covered. If your home collapses because of a termite infestation, you're probably not.
Insurers expect you to take care of your home and deal with any maintenance issues on your own dime. Insurance generally covers sudden and unexpected losses, not losses from termites, rodent infestations or a water leak you never quite got around to fixing. You're expected to detect the problem and prevent the situation from getting out of control. If you don't, any damage done typically won't be covered by your insurer.
Bruce Johnson, author of "50 Simple Ways to Save Your House," recommends you conduct regular inspections to detect such problems. At least twice a year, tour the exterior of your home looking for cracks, decay or water damage. Check the condition of the roof and inspect the basement or crawl space for other hidden problems, including rodent droppings, termites or leaks.
If you find a problem, fix it. Remember that home maintenance problems usually just get more expensive.
Trampolines Insurers charge more for certain hazards, like pools and spas. Trampolines, though, are often excluded outright.
They're a whole lot of fun, but they also offer a whole lot of ways to seriously hurt yourself. That's why your homeowners policy probably excludes trampolines from coverage and why your current insurer may threaten to drop you if you buy one. They simply don't want to pay for the lawsuit and medical bills if the neighbor kid breaks his neck.
If you insist on having one, you may need to shop around for an insurer that will tolerate, if not cover, trampolines. But you might want to think seriously about a less hazardous form of at-home fun.
Dogs If you own a toothless Chihuahua, your insurer probably doesn't care. Buy a pit bull, Rottweiler or wolf hybrid, however, and you may find your insurance gets more expensive -- if you can persuade your insurer to cover you at all.
Dog bites cost insurers about $310 million a year, and an increasing number of companies have a blacklist of breeds they won't accept or charge more to cover. Pit bulls, which lead the Centers for Disease Control and Prevention's list (.pdf download) of deadly breeds, are particularly unwelcome. Other troublesome breeds include German shepherds, Rottweilers, wolf hybrids, huskies, malamutes and Dobermans.
Video: Save money on home insurance
If your dog has ever bitten anyone, regardless of its breed, you're probably going to have trouble getting coverage as well -- particularly if it was an unprovoked attack.
Each insurer has different policies, though, so you may be able to find affordable coverage if you shop around. You also can ask the insurer to exclude your dog, meaning that you'll pay for any damage it does. You also should invest in some training, since a biting dog is a hazard to everyone around you.
Continued: Intentional damage, computers and luxury goods
Intentional damage If your ex sets fire to your home, you're probably covered. If the fire is started by your rebellious teenager or an estranged spouse, however, you may not be.
Intentional damage by an insured person -- or by the person's spouse, children or relatives living in the house -- typically isn't covered. Estranged spouses often come into a gray area. Although they may not live in the home, they may be listed on the policy or the property deed and be considered to have an insurable interest in the home. Companies have, in fact, made this argument to deny or limit coverage to homeowners whose property was damaged by an estranged spouse. (See "Your teen's troubles can cost you a bundle.")
Victims advocates complain these policies are unfair, since there's often no way to prevent such damage. If you're worried about the risk, however, it may motivate you to get help for a destructive teen, beef up your home's security system or reach a quicker divorce settlement.
Computer equipment If you have a personal computer or two, your homeowners insurance may pay you enough to buy a new one -- or it may not. If you're running a home business, however, your homeowners insurance almost certainly will fall short.
Here's another area where it pays to read your policy. Some insurers will give you a check only for what your computer equipment is worth now, which is probably a fraction of what you paid for it. Even those that do pay for replacements typically have a cap, often about $2,500. Many require you to have supplemental coverage if you want a bigger check than that, or if you run a business from your home.
Read your policy, note the limits and talk to your insurer about supplemental coverage if you need more.
Also, know that most policies won't cover the value of digital information stored on your computer, including your music and photo collections. That's all the more reason to invest in a good, off-site backup system and to use it frequently.
Luxury items and collectibles If you don't own anything special, the entire contents of your home are probably covered under your homeowners policy. If you have antiques, guns, jewelry, collectibles or fine furs, you may need extra coverage.
Video: Save money on home insurance
The typical policy limits coverage for luxury items and collectibles. You might get as little as $200 for the coin collection you were hoping would fund Junior's college, or $1,000 to cover all your jewelry, watches and furs.Once again: Check your policy, and buy supplemental insurance if you want more coverage. To make sure you have enough coverage for all your stuff, use the home inventory software available at the Insurance Information Institute.
Columns by Liz Pulliam Weston, the Web's most-read personal finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.
Published Sept. 24, 2007
Friday, September 21, 2007
Credit vs Debit
NEW YORK (MarketWatch) -- It's a question we face daily that still leaves most of us mystified: "Debit or credit?" Here, courtesy of Consumer Reports' Money Advisor, are seven reasons to opt for credit:
- Credit costs you less. Some banks charge customers for so-called in-store "PIN-based" debit-card transactions. Fees range from 25 cents to $1, depending on the bank, Money Advisor reports. By choosing a "signature-based" transaction, you sidestep these fees.
- Credit won't result in a hold on your account. When you use a debit card to reserve a hotel, rent a car or even fill up your tank, vendors sometimes put a "block" on your checking account until the transaction is processed -- and the amount of the block can significantly exceed the purchase price. Using your debit card to buy $25 worth of gas, for instance, may result in $100 of the money in your account being "blocked." If you're running a low balance, this can result in punishing overdraft charges.
- Credit makes it easier to cover your bases. If you haven't been keeping a close eye on your bank balance, it may be a good idea to choose the credit option on your debit card because it takes longer for the money to be debited from your account (usually around two days). This gives you a little time to make sure you have enough in your account to cover the charge.
- Credit offers better rewards. While some debit cards now offer rewards, such as air miles and cash-back bonuses, credit-card rewards tend to be far more generous, according to Money Advisor.
- Credit allows interest to accrue. If you religiously pay off your balance at the end of the month, you stand to make more money by paying with a no-fee credit card. Why? Because you can allow your money to grow in an interest-bearing account until your bill comes due.
- Credit gives you an out. Using a traditional credit card makes it easier to reverse the charges if you get into a dispute with a merchant or vendor.
- Credit shields you from liability. If someone gets hold of your credit card and wracks up a laundry list of charges, you're typically responsible for only $50 worth of fraudulent charges. If you're unfortunate enough to have your debit card stolen, you may be liable for as much as $500 in unauthorized purchases, unless you report the theft within two business days.
Thursday, September 20, 2007
Tax Info - 2008
CCH Projects Inflation-Adjusted Tax Brackets and Other Amounts for 2008
As a service to our subscribers, CCH Tax & Accounting has prepared projected inflation-adjusted tax brackets for the 2008 Tax Rate Schedules, standard deduction amounts and personal exemption amounts for use in year-end and 2008 tax planning. The projected figures are based on the inflation-adjustment provisions of the Internal Revenue Code (IRC) as currently in force and the average of the Consumer Price Index for All Urban Consumers (CPI-U) published by the Department of Labor for each month in the 12-month period ending on August 31, 2007. Official IRS figures will not be released until later in 2007.
Tax Brackets
Joint returns. For married taxpayers filing jointly and surviving spouses, the maximum taxable income subject to the 10-percent bracket will rise from $15,600 in 2007 to $16,050 in 2008; the top of the 15-percent tax bracket will increase from $63,700 to $65,100. The bracket amounts for the remaining tax rates show similarly proportionate increases: $131,450 as the maximum for the 25-percent bracket (up $2,950 from 2007); $200,300 for the 28-percent bracket (up $4,450 from 2007); and $357,700 for the 33-percent bracket (up $8,000 from 2007). Amounts above the $357,700 level will be taxed at the 35 percent rate.
Unmarried filers. For single taxpayers, the maximum taxable income for the 10-percent bracket will increase to $8,025 for 2008 (up from $7,825 in 2007). The remainder of the rate brackets show inflation increases of: $700 for the top of the 15-percent bracket (to $32,550); $1,750 for the 25-percent bracket (to $78,850); $3,700 for the 28-percent bracket (to $164,550); and $8,000 for the top of the 33-percent bracket (to $357,700).
Married filing separately. Married taxpayers filing separately will see a $200 increase for the upper range of the 10-percent bracket (to $8,025) and a $700 increase for the 15-percent bracket (to $32,550). The top of the 25-percent bracket will increase by $1,475 (to $65,725); the 28-percent bracket will increase by $2,225 (to $100,150); and the 33-percent bracket will increase by $4,000 (to $178,850).
Heads of household. For heads of households, the maximum taxable income for the 10-percent bracket will rise to $11,450 (from $11,200). The top of the remainder of the bracket amounts will also increase: up $1,000 from 2007 for the 15-percent bracket, to $43,650; up $2,550 from 2007 for the 25-percent bracket, to $112,650; up $4,050 from 2007 for the 28-percent bracket, to $182,400; and up $8,000 from 2007 for the 33-percent bracket, to $357,700.
Estates and trusts. For estates and nongrantor trusts, the maximum taxable income for the 15-percent bracket will increase by $50 over the 2007 level, to $2,200 (there is no 10-percent bracket for these taxpayers). For the 25-percent bracket, the maximum for the bracket will be $5,150 (up $150 from 2007); for the 28-percent bracket, $7,850 (up $200 from 2007); and for the 33-percent bracket, $10,700 (up $250 from 2007).
Standard Deduction
The 2008 standard deduction will rise by $100, to $5,450, for single taxpayers; by $150, to $8,000, for heads of households; by $200, to $10,900, for married taxpayers filing jointly and surviving spouses; and by $100, to $5,450, for married taxpayers filing separately. The standard deduction for dependents will remain at $900 (or earned income plus $300).
Personal Exemptions
The amount of personal and dependency exemptions for 2008 will increase from the 2007 level by $100 to $3,500.
Gift Tax
The gift tax annual exemption, which rose from a base of $10,000 to $11,000 in 2002 and to $12,000 in 2006, will remain at the $12,000 level for 2008. Pursuant to the IRC, the exemption can rise only when the inflation adjustment produces an increase of $1,000 or more.
Personal Exemption, Itemized Deduction
Personal exemption phaseout. The 2008 personal exemption phaseout for married taxpayers filing jointly will increase by $5,350 over the 2007 level and will begin at adjusted gross income (AGI) of $239,950; for single taxpayers, the phaseout will increase by $3,550 over the 2007 level, to begin at AGI of $159,950; for heads of households, the increase over 2007 will be $4,450, to begin at AGI of $199,950; and for married taxpayers filing separately, the phaseout will begin at AGI of $119,975, representing an increase of $2,675.
Itemized deductions phaseout. For higher income taxpayers, the amount of their otherwise allowable itemized deductions will be reduced when AGI exceeds a threshold amount. The reduction is equal to the lesser of three percent of AGI over the threshold amount or 80 percent of itemized deductions otherwise allowable. For 2008, the threshold amount at which the three-percent itemized deduction limitation takes effect will increase by $3,550, to AGI of $159,950 for married taxpayers filing jointly, single taxpayers and heads of household, and will increase by $1,775, to AGI of $79,975 for married taxpayers filing separately.
Lesser phaseouts for 2008. New for 2008, the reduction of the inflation-adjusted phaseout of the personal exemption amounts and itemized deductions for taxpayers with adjusted gross income above certain thresholds get larger. Starting in 2008, taxpayers only lose one-third of the amount otherwise required under the phaseouts, down from two-thirds in 2006 and 2007. The amount hits zero in 2009.
New for 2008
The Code Sec. 179 expensing amounts, which were raised for 2007 by the Small Business and Work Opportunity Tax Act of 2007 (P.L. 110-28), will now be raised for inflation in 2008 to $128,000, with the starting phaseout amount also raised to $510,000. The Act raised it retroactively to January 1st for 2007 to $125,000 and $500,000 respectively, from the prior 2007 inflation-adjusted amount of $112,000 and $450,000.
While the kiddie tax inflation adjusted amounts are adjusted for 2008 as before, the Act changed the definition of "kiddies" that are subject to their parent's tax rates. Starting in 2008, the new law includes 18-year-olds, as well as students under 24 who may be claimed as dependents by a parent. The inflation-adjusted amounts themselves also rise independent of the Act, however, under the normal calculations, to $1,800 for 2008, up from $1,700 where it had been since 2006. The kiddie tax standard deduction rises from $850 to $900.
CCH Comment. Two other changes not keyed to automatic inflation adjustments but still very much governed by inflation include the AMT exclusion and the reduced capital gain rate:
--In 2006, the AMT exemption amounts were $42,500 for single individuals and $62,550 for married couples filing jointly. The higher amounts lapsed and are now set for 2007 and again for 2008 at just $33,750 for individuals and $45,000 for married couples filing jointly. Congress, however, is expected to enact another round of temporary relief.
--The net capital gain rate starting in 2008 is scheduled to be lowered to zero for those in the 15-percent income tax bracket, down from five percent in 2007.
Other Tax Figures
In addition to the projected tax figures for 2008 listed above, the IRC requires other adjustments based on the September 2006 through August 2007 CPI amounts. These additional amounts include:
Roth IRAs. The AGI limits for maximum Roth IRA contributions are: married filing jointly, $159,000 (formerly $156,000); other filing statuses, other than married filing jointly or separately, $101,000 (formerly $99,000).
IRAs. The AGI limits for maximum IRA contributions for individuals covered by a retirement plan are: married filing jointly, $85,000; head of household and single, $53,000.
Education savings bond interest exclusion. When U.S. savings bonds are redeemed to pay expenses for higher education, the interest may be excluded from income if the taxpayer's income is below a certain range. For 2007, that phaseout range begins at $67,100 modified AGI ($100,650 for joint returns).
Education credits. The HOPE and Lifetime Learning Credits for 2008 will be phased out for those taxpayers with modified adjusted gross income in 2008 starting at $48,000 ($96,000 for married joint filers). The $1,000 credit amount in 2008 goes up $100 to $1,200.
Adoption expense credit. This $10,000 maximum credit was first subject to an inflation adjustment after 2002. For 2008, the amount will increase to $11,650, with the AGI phaseout beginning at $174,730.
Student loan interest income phaseout. The $2,500 student loan interest deduction phaseout begins at $55,000 AGI for singles in 2008. The phaseout level for joint filers rises to $115,000.
Gifts to noncitizen spouses. The first $128,000 of gifts in 2008 to a spouse who is not a U.S. citizen will not be included in taxable gifts, up $5,000 from 2006.
Foreign gifts. A U.S. person receiving aggregate foreign gifts exceeding $13,560 in 2008 must file an information return.
Transportation fringe benefits. The monthly cap on the exclusion of qualified parking expenses will be $220 in 2008 (up from $215 in 2007). Transit passes/commuter highway vehicle amounts will rise $5 to $115 per month.
Child credit. The refundable child credit earned income threshold will be $12,050 (formerly $11,750).
By Torie Cole, CCH News Staff
Sunday, September 16, 2007
C vs Sub S
S vs. C CORPORATIONS
I continue to hear attorneys and other allegedly knowledgeable authorities recommending the use of Subchapter S corporations, when that ends up costing the clients a lot more in tax dollars. I guess it's time for another refresher on some of the big differences between normal C corporations and S. This is not intended as a claim that one size fits all in regard to business structure. There are times when an S corporation, or its newest corollary, Limited Liability Companies (LLCs) and Limited Liability Partnerships (LLPs), is a good idea. I just think it is wrong to so quickly jump into such an arrangement without evaluating all of the consequences of doing so.
Tax Brackets
With our country's "progressive" tax rate structure, it is very expensive to have too much income on any one tax return. For individuals, the nominal rates go from 10% to 15%, 27%, 30%, 35% and 38.6% with actual effective rates much higher due to the phasing out of so many tax breaks as income increases. With an S corp, all of the corporation's income flows right onto the 1040 returns of the shareholders, pushing them up into higher tax brackets. A C corporation has its own progressive tax rate structure, ranging from 15% on the first $50,000 of net income, to as much as 39%. My philosophy is to look at the overall tax picture for individuals and their companies by smoothing income over the personal (1040) and corporate (1120) tax returns. For 2000, a married couple's 15% tax bracket ends at $43,850 of taxable income. It then jumps to 28%, almost double the rate. However, if you consider that the couple's C corporation has its own $50,000 15% bracket, their overall combined 15% bracket has more than doubled to $93,850. That alone can save several thousands of dollars per year in income taxes.
Income Taxed
With an S corp, the shareholders are required to pay income tax on their share of the corporation's income whether they take any money out of the corporate account or leave it in there. A few years ago, I wrote about the consulting client who had to include over $300,000 of S corp income on his 1040, when he had only taken out about $30,000. It wasn't bad enough that he had to pay more income tax than he had received, but things were much worse. He had a child support arrangement requiring him to pay 29% of his adjusted gross income (AGI) each year. This meant he had to pay 29% of the $300,000 to his ex-wife. It's not fair and I have never understood why child support is based on the parents' income rather than the actual cost to feed and clothe the kids; but that is how things are. If he had shifted all or part of his income into a C corporation, his child support would have been much less expensive.
More Deductions
As I have described elsewhere, the Section 179 expensing election is much more lucrative for owners of C corporations because they can literally multiply their total deduction by splitting their purchases of business assets among their different business entities (1040 Sole Proprietorships vs. 1120 Corporations). With an S corp, the Section 179 deduction is limited to just the one amount. Likewise, the deduction for net rental losses is magnified by using a C corp because it can use rental losses to offset all operating income. An S corp's rental losses are subject to the restrictive passive loss rules.
Attack On the Rich
As I have described on many occasions, "Mean Testing" (penalizing the evil rich) is a growing trend in this country, and is most often measured by the AGI on your 1040. People over certain thresholds lose tax breaks and have to pay in more taxes and penalties than others do. Income from an S corp will just make things worse. Income on a C corp will not be counted in most mean testing.
Fiscal Year
One of the most useful tools in the tax game arsenal is the ability to shift income between taxable years. Individuals report their taxable income based on the January 1 to December 31 calendar year. S corporations are required to also use the calendar fiscal year, allowing no opportunity to shift income between years. C corporations, however, can end their fiscal year at the end of any month. The first tax return will almost always be less than a full 12 months, so don't worry about coordinating it with the incorporation date. How this saves on taxes is pretty straight forward. Toward the end of your personal fiscal year (12/31), you bleed off some of your taxable income to your C corp by paying it for something like rent or marketing services. In January, your corporation can pay it back to you. Near the end of the corp's fiscal year, bleed its net profits out by paying yourself This back and forth income shifting can go on for a long time. Sometimes income is never taxed; or if it is, we make sure that it is taxed at the lowest rate possible (15%).
Employee Benefits
One of the benefits of a corporation is having it provide lucrative employee benefits that are deductible by the corp and tax free to the employees. Medical, life insurance, education, childcare, and retirement plans are just a few of the types of benefits available. I don't have space here to go over the rules for each type of plan. However, on a side by side comparison, the tax free status of some of these plans is much less generous for people owning more than 2% of S corporation stock.
For a side by side comparison of the availability of tax free fringe benefits, check out this chart from the Small Business QuickFinder.
Double Taxation
The biggest fear of c-corporations has to do with double taxation, where after-tax earnings are distributed to shareholders as non-deductible dividends. This is rarely a problem with small corporations because there are plenty of ways to pull money out of the corp in a manner that is deductible, and thus only taxed once.
Compensation - wages or consulting income
Interest Payments
Lease Payments
Royalty Payments
Contributions to Retirement Accounts
Remedying A Bad Situation
If you have an S corp that is hurting you more than it is helping you, how should you fix it? While this is something you definitely need to work on with your own tax advisor, I can give some general advice. First, I have seen a lot of people confused as to whether they even have an S corp or not. When you charter a corporation with your state, it is a normal C corporation. Until you file its first income tax return, the fiscal year is still changeable, even if you said something else on the SS-4 form you filed with IRS to obtain an identification number. You have to take the formal step of filing Form 2553 with IRS, signed by all of the shareholders, in order to become an S corporation.
Now, if you are an S-corporation, can you convert it to a C corporation? You can by filing a formal request with IRS, that carries the requirement that you cannot change back to an S corporation for at least five years. You will however be stuck with the December 31 fiscal year, nullifying any ability to use the income shifting tax saving strategy. IRS will not allow you to change your fiscal year because they know that will save you money and that is contrary to their purpose in life. What I have found is that it is much easier to just set up a brand new virgin corporation, especially in states like Arkansas and Missouri where it only costs $50 in filing fees. In states like California, where the filing fees are in the thousands, this strategy is a bit more expensive and needs to be evaluated a little more closely .
Addendum
Lately, I have been receiving a lot of feedback from various people around the country who have read this article, thanking me for pointing out things that other advisors have been ignorant of. One area of confusion still seems to be regarding exactly when a corporation becomes an S. Many people believe that the decision to be an S or a C is made at the time when the corporation is originally formed. That is not true. All corporations, when originally chartered by the State, are C corporations. Do nothing extra and it will remain a C corp.
However, to convert it to an S corporation, the shareholders must all sign and submit Form 2553 with the IRS to request that status. This can be done right away after the corp is originally chartered, or several years down the road. You need to be sure to watch the effective dates of the S election. Some States automatically accept the IRS's S election, while others require a separate form to be submitted to the State tax agency.
If a corp has been using a fiscal year that ends in a month other than December, it will have to change to a 12/31 fiscal year end if it changes to an S status. If the S status is later revoked, you will not be allowed to change from the 12/31 year end.
Friday, September 14, 2007
Be sure to include health care costs in plans - USATODAY.com
By John Waggoner, USA TODAYOne thing that might not be in your retirement plans: an annual cashectomy. That's the amount you'll have to shell out each year for medical care. If you don't plan carefully for health care costs, your retirement dreams could end up in the emergency room.
Many retirees assume that Medicare, the government health care program, will cover most of their health care costs. Unfortunately, that's not the case.
If you're 65 and eligible for Medicare, be prepared to bear potentially major health care costs. Fidelity Investments estimates that a 65-year-old couple will spend about $200,000 over 20 years on health care, even with Medicare coverage. Let's start with the premiums for Medicare itself:
•Part A covers hospitalization costs. Your Medicare expenses depend on the number of three-month periods, or quarters, that you've had Medicare-covered employment. If you or your spouse has 40 or more quarters (10 years) of Medicare-covered employment, you pay no premium. The premium is $226 a month if you have 30 to 39 quarters of Medicare-covered employment. It's $410 a month if you have fewer than 30 quarters.
Like most insurance plans, Part A charges deductibles: $992 for a hospital stay of 1 to 60 days, $248 a day for days 61 to 90, and $496 a day for days 91 through 150. A 150-day stay could cost as much as $38,192. After 150 days, you pay all costs.
•Part B covers doctor services and outpatient hospital services. The premium is $93.50 a month. Your deductible is $131 a year, but you pay 20% of the Medicare-approved amount after you meet the deductible. (You may pay more if you're single and your income is above $80,000, or $160,000 for married couples.)
Assuming you're perfectly healthy for the year, you'll spend $1,122 for Part B premiums. If you have fewer than 30 quarters of Medicare-covered employment, you'll spend $6,042 a year in Part A and Part B premiums.
Medication issues
But Part A and Part B don't cover prescription drugs. Medicare Part D does, and it's complicated. Each state has many different plans available; the cost of each plan depends in part on your deductible. Plans in California, for example, range from $9.70 a month for a plan with a $265 deductible and $80.90 a month with no deductible. People with low income and assets may be eligible for extra help from Social Security.
Furthermore, Part D coverage has a gap, called the "doughnut hole." Medicare will pay for 75% of your drugs, minus the deductible, up to total drug costs of $2,225. That figure includes your deductible, your co-pays and the amount Medicare pays.
After your total drug costs reach $2,225, though, you're on the hook for 100% of your costs until you've spent $3,600 in out-of-pocket drug costs. That's the doughnut hole. After you hit $3,600, you pay about 5% of your drug costs.
You can, however, buy "Medigap" plans, which pay some of your out-of-pocket costs. The government has standardized Medigap plans, from the most basic (Plan A) to other, more comprehensive and expensive plans. Plan A, for example, will pay the costs of days 61 through 90 in a hospital and give you 365 additional paid hospital days in your lifetime.
One catch: Even though the benefits of Medigap insurance are standard, the cost isn't. You have to shop carefully for the best deal. A 65-year-old in Virginia, for instance, can choose from Medigap A policies with costs ranging from $757 to $3,000.
Another catch: Medicare and Medigap still don't cover many costs. Dental care, for example, isn't covered. Neither are eyeglasses, hearing aids or regular checkups. (You do get one free checkup when you start Medicare.) Long-term nursing home care typically isn't covered, either.
You might consider a Medicare Advantage Plan, which works like a Health Maintenance Organization. You may get extra benefits from the Medicare Advantage Plan — and lower costs — but you might be restricted to the plan's doctors and hospitals. If you use a Medicare Advantage Plan, you probably won't need Medigap insurance.
Early retirement, then what?
What if you retire — or are forced to retire — before you're eligible for Medicare at age 65?
"I've had clients who have retired early and gotten health insurance, but it's expensive," says Jonathan Pond, author of You Can Do It! A Boomer's Guide to a Great Retirement.
Start by asking if you can continue to get insurance through your former employer. Your state may also offer group health plans for seniors.
Otherwise, you'll have to shop around for private health insurance. You can reduce your costs by taking health care plans that have high deductibles or no prescription drug coverage. But if you do, you'll need to have enough money stashed away to cover the deductible in case you need it.
AARP offers a comprehensive health care plan with a $2,500 deductible. Cost for a healthy 60-year-old: $449.75 a month. Choose a $5,000 deductible, and the monthly cost falls to $313.75.
Timothy McIntosh, a financial planner in Tampa, says it's best to keep $5,000 to $10,000 available each year to pay for your Medicare co-pays and other items that Medicare doesn't cover.
"Think of it as a slush fund for extra medical costs," he says.
Wednesday, September 12, 2007
Health Premiums top $12,000 for families
Health premiums top $12,000 for families
Americans' medical insurance costs are up an average of 6.1% this year, a slowdown from 2006 but still exceeding pay raises and inflation. Employers cover three-quarters of the expense.
By The Associated Press
Health insurance premiums paid by workers and their employers have risen an average of 6.1% this year, outpacing inflation and pay increases and taking a bigger chunk out of families' budgets, according to a new survey.
Premiums for employer-sponsored health insurance for the average family topped $12,000 -- with employees picking up about one-fourth of that cost -- although the increase in premiums slowed for a fourth straight year.
Insurance costs probably will rise again next year, according to the survey released today by the Kaiser Family Foundation, a health-care research organization that annually tracks the cost of insurance. Many of the more than 3,000 companies surveyed said they planned to make significant changes to their health plans and benefits, and nearly half said they were very or somewhat likely to raise premiums.
MSN Health & Fitness: Weight-loss success stories
This year, premiums reached an average of $12,106 for a family of four, with workers paying, on average, $3,281 of that. Premiums to cover a single person cost $4,479, with employees paying $694. The portions both families and single people pay in premiums has nearly doubled since 2001.
The 6.1% average increase for families was the lowest growth rate since 1999, when premiums rose 5.3% and cost an average of $2,196 for individuals and $5,791 for families. Health-care premiums rose 7.7% last year, when individuals paid an average of $4,242 and families paid $11,480.
This year's slowdown doesn't mean much when it outpaces wages, which rose an average of 3.7%, and inflation, which went up 2.6%, said Drew Altman, the Kaiser Family Foundation's president and CEO.
Since 2001, the cost of premiums has gone up 78%, far outpacing a 19% increase in wages and 17% jump in inflation.
"It just shows health insurance is becoming increasingly unaffordable for working people and many businesses in our country," Altman said.
That rising cost, coupled with the fact that it is outpacing inflation and wage growth, is pushing companies and employees to forgo insurance, he said. And that's why the number of uninsured Americans continues to rise, Altman said. The Census Bureau estimates 15.8% of Americans were uninsured last year, up from 15.3% the year before.
More tests, procedures and products Health insurance companies continue to see higher profits, but premiums keep going up because costs rise each year, said Gary Claxton, Kaiser's vice president. And much of that is because, through the years, the health-care system produces more tests, procedures and products that can treat more people, and all of that costs more, he said.
About 158 million people have health insurance through their employers. Sixty percent of companies offer health insurance to their employees, about the same as last year but down from 69% in 2000.
The larger a business, the greater the chance it offers health insurance. Though premiums may be similar for smaller and larger companies, smaller ones have higher deductibles, Kaiser says, and their administrative costs for plans may be higher because there are fewer employees over which to spread the costs.
Nearly all companies with 50 or more employees offer coverage, with firms with more than 200 employees particularly stable over the years. But only 45% of firms with three to nine employees offer health care, down from 57% in 2000.
Video on MSN Money
Mine your health policy for hidden discountsConsumers should evaluate their benefits before making health-care purchases, says MarketWatch's Kristen Gerencher. It's frustrating to know that premiums keep rising each year, but dropping or reducing coverage is not an option, said Jack Ross Williams, who owns four vehicle-emissions testing sites called Smog 'N Go around Elk Grove, Calif.
He said he'd rather keep copays for doctor visits and drugs stable at $20 than switch to a lower-price plan and skimp on coverage for the dozen employees who get insurance through his company. But that means the employees who enroll in the company's health-maintenance organization also feel the pinch because they split premiums equally with the company. For September, premiums for single employees ranged from $232.46 to $312.74.
"I guess we're both biting the bullet," Williams said. "My employees that want to keep it, they have to pay more every year. And I absorb half of that cost as well, so we do it jointly."
Many companies, like Williams', are just going to keep on paying and not cancel plans, the Kaiser survey said. Only 3% of respondents said they planned to drop coverage next year. Five percent said they planned to limit eligibility, though the survey did not ask them how they would do that.
But more companies are looking at changing benefits, whether by adding lower-cost insurance options or shifting more costs to employees, according to the Kaiser survey and another that was recently released.
Preliminary results of the Mercer Health & Benefits survey of 1,557 employer plans indicate that more than half of the respondents planned to shift costs to employees through higher premiums, deductibles, copays or out-of-pocket maximums.
The companies said that if they made no changes to their plans from this year, their costs would go up on average 9% next year.
Mercer Health & Benefits said given those changes, next year's increase to premiums is expected to be 6.7%.
Americans' medical insurance costs are up an average of 6.1% this year, a slowdown from 2006 but still exceeding pay raises and inflation. Employers cover three-quarters of the expense.
By The Associated Press
Health insurance premiums paid by workers and their employers have risen an average of 6.1% this year, outpacing inflation and pay increases and taking a bigger chunk out of families' budgets, according to a new survey.
Premiums for employer-sponsored health insurance for the average family topped $12,000 -- with employees picking up about one-fourth of that cost -- although the increase in premiums slowed for a fourth straight year.
Insurance costs probably will rise again next year, according to the survey released today by the Kaiser Family Foundation, a health-care research organization that annually tracks the cost of insurance. Many of the more than 3,000 companies surveyed said they planned to make significant changes to their health plans and benefits, and nearly half said they were very or somewhat likely to raise premiums.
MSN Health & Fitness: Weight-loss success stories
This year, premiums reached an average of $12,106 for a family of four, with workers paying, on average, $3,281 of that. Premiums to cover a single person cost $4,479, with employees paying $694. The portions both families and single people pay in premiums has nearly doubled since 2001.
The 6.1% average increase for families was the lowest growth rate since 1999, when premiums rose 5.3% and cost an average of $2,196 for individuals and $5,791 for families. Health-care premiums rose 7.7% last year, when individuals paid an average of $4,242 and families paid $11,480.
This year's slowdown doesn't mean much when it outpaces wages, which rose an average of 3.7%, and inflation, which went up 2.6%, said Drew Altman, the Kaiser Family Foundation's president and CEO.
Since 2001, the cost of premiums has gone up 78%, far outpacing a 19% increase in wages and 17% jump in inflation.
"It just shows health insurance is becoming increasingly unaffordable for working people and many businesses in our country," Altman said.
That rising cost, coupled with the fact that it is outpacing inflation and wage growth, is pushing companies and employees to forgo insurance, he said. And that's why the number of uninsured Americans continues to rise, Altman said. The Census Bureau estimates 15.8% of Americans were uninsured last year, up from 15.3% the year before.
More tests, procedures and products Health insurance companies continue to see higher profits, but premiums keep going up because costs rise each year, said Gary Claxton, Kaiser's vice president. And much of that is because, through the years, the health-care system produces more tests, procedures and products that can treat more people, and all of that costs more, he said.
About 158 million people have health insurance through their employers. Sixty percent of companies offer health insurance to their employees, about the same as last year but down from 69% in 2000.
The larger a business, the greater the chance it offers health insurance. Though premiums may be similar for smaller and larger companies, smaller ones have higher deductibles, Kaiser says, and their administrative costs for plans may be higher because there are fewer employees over which to spread the costs.
Nearly all companies with 50 or more employees offer coverage, with firms with more than 200 employees particularly stable over the years. But only 45% of firms with three to nine employees offer health care, down from 57% in 2000.
Video on MSN Money
Mine your health policy for hidden discountsConsumers should evaluate their benefits before making health-care purchases, says MarketWatch's Kristen Gerencher. It's frustrating to know that premiums keep rising each year, but dropping or reducing coverage is not an option, said Jack Ross Williams, who owns four vehicle-emissions testing sites called Smog 'N Go around Elk Grove, Calif.
He said he'd rather keep copays for doctor visits and drugs stable at $20 than switch to a lower-price plan and skimp on coverage for the dozen employees who get insurance through his company. But that means the employees who enroll in the company's health-maintenance organization also feel the pinch because they split premiums equally with the company. For September, premiums for single employees ranged from $232.46 to $312.74.
"I guess we're both biting the bullet," Williams said. "My employees that want to keep it, they have to pay more every year. And I absorb half of that cost as well, so we do it jointly."
Many companies, like Williams', are just going to keep on paying and not cancel plans, the Kaiser survey said. Only 3% of respondents said they planned to drop coverage next year. Five percent said they planned to limit eligibility, though the survey did not ask them how they would do that.
But more companies are looking at changing benefits, whether by adding lower-cost insurance options or shifting more costs to employees, according to the Kaiser survey and another that was recently released.
Preliminary results of the Mercer Health & Benefits survey of 1,557 employer plans indicate that more than half of the respondents planned to shift costs to employees through higher premiums, deductibles, copays or out-of-pocket maximums.
The companies said that if they made no changes to their plans from this year, their costs would go up on average 9% next year.
Mercer Health & Benefits said given those changes, next year's increase to premiums is expected to be 6.7%.
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