Will 2021 Be the Year for Value Stocks?

Over the last decade, value stocks have underperformed when compared to growth stocks. However, several signs point to this long-term slump coming to an end.

Value investing has seen better days. The alluring returns of growth stocks, particularly concentrated in the tech sector, are far more enticing to institutional investors and retail investors alike. There’s no shortage of investors ready to call the time of death for value investing — but 2021 could be the year that proves them all wrong.

In fact, we might be looking at an extended period of time in which value investing will make a big return. And this isn’t just idle speculation: Well-established, respected names in the financial space share this sentiment, including Vanguard. 

But we don’t have to take their word for it. While the numbers clearly suggest that value stocks will make a strong comeback, a large part of that process will be driven by common-sense investing in the months to come.

Let’s jump into precisely what that means.

Why Value Stocks Have Underperformed

First, let’s deal with the performance of value stocks in recent years. Looking at data from the last decade, it is apparent that growth stocks have outperformed value stocks by quite a large margin. And although that fact has caused many to declare that growth stocks are intrinsically superior, this is a narrow and shortsighted approach.

Let’s take a look at the data. Vanguard’s Russell 1000 growth index (VRGWX) has seen returns of 16.36% when looking at a 10-year period, while the Russell 1000 value index (VRVIX) has netted investors returns of 10.32% in the same timeframe.

Although returns of 10.32% are below the 13.6% current 10-year average of the S&P 500, it is clear that value stocks are far from a thing of the past. In fact, this level of performance is encouraging, considering that market conditions have been very unfavorable toward value stocks in the past decade.

What market conditions, you may ask? It’s simple — portfolios that focus on value stocks frequently overweigh industries that haven’t fared so well in the past 10 years, such as energy, utilities and the financial sector. On top of that, it has been demonstrated that low interest rates have a negative effect on value stocks while bringing a positive effect to growth stocks at the same time. 

Growth and Value Cycles

We’ve established that growth stocks have outperformed value stocks in the last decade, but don’t let that fool you. Historically, value stocks have netted investors far greater returns over the long run.

Does this mean that value stocks are always the right call? Well, no. An individual investor’s own investment timeframe is much more important than long-reaching historical data. Up to this point, investing mostly in growth stocks was the better option, but only because we’ve been in a growth cycle.

Much like the market has bullish and bearish cycles, it also has growth and value cycles. As we’ve discussed, the last 10 years have been part of an (admittedly long) growth cycle, driven primarily by tech stocks. However, the conditions that lead to this aren’t set in stone.

In fact, the current growth cycle might be at an end. Although tech stocks may continue to rise, it is uncertain if they can retain their current rate of growth. The largest cause of their meteoric rise, by far, is the monopolization of services. 

With Google, Amazon, Netflix and others like them having already carved up impenetrable economic moats, whether or not they will see a continued rise in share price is an entirely valid question. 

The possibility of higher interest rates and inflation also brings another element of uncertainty to the future of tech stocks.

Stimulus Payments, Reopening the Economy and Value Stocks

The single most important event that will accelerate the return of value stocks is the stimulus in the U.S. and the eventual reopening of the economy after the COVID-19 pandemic.

Although stimulus payments likely won’t cause as much inflation as the most pessimistic among us think, inflation will occur, thereby curbing the returns of growth stocks and increasing the returns of value stocks. 

As the economy reopens, sectors that have been hit hard by the pandemic will likely see a rapid recovery. Reopening the economy will lead to a much larger cash flow for currently undervalued businesses, which will allow them to invest in further growth. This, in turn, will lead to a renewal in investor confidence, culminating in a domino effect of rising stock prices.

If, in fact, the Biden administration passes the sweeping infrastructure bill that it has promised, you should also keep in mind that infrastructure stocks could be poised to see a large increase in price. Many see the industry as undervalued as of late, which can add to the appeal of Biden’s agenda.

What to Keep in Mind Amid Rising Tides

The old adage of rising tides lifting all boats hasn’t fared all too well when it comes to the economy. The expected recovery of the U.S. economy will certainly have a very positive effect on a lot of businesses — perhaps most businesses, even. However, this doesn’t mean that value investing will suddenly become a foolproof silver bullet.

Growth stocks certainly have a place in portfolios, and any warning with the tech sector doesn’t mean that growth should be avoided. In fact, the tech industry is a prime candidate for value investing. However, you should keep an eye out and avoid tech industry value traps — innovative companies that attract a lot of venture capital without actually bringing a product to market.

Look for companies that have intrinsic value, and that you truly believe in. While that may seem like generic advice, something tells me that this year, it could become a lot more profitable than it has shown to be in years past.

Founder, Lakeview Capital

Tim Fries is co-founder of Protective Technologies Capital, an investment firm focused on helping owners of industrial technology businesses manage succession planning and ownership transitions. He is also co-founder of the financial education site The Tokenist. Previously, Tim was a member of the Global Industrial Solutions investment team at Baird Capital, a Chicago-based lower-middle market private equity firm.

Source: kiplinger.com

What Is a Spousal IRA – Rules, Eligibility & Benefits

In order to contribute to an individual retirement account (IRA), you must have earned income, right?

Although that’s true for most people, the IRS makes an exception for nonworking spouses. The government acknowledges that in some households, one spouse stays home with the kids while the other generates income, so they allow both spouses to contribute to IRAs based on the joint household income. To do otherwise would put these households at an unfair disadvantage in retirement planning.

Known informally as spousal IRAs, these tax-sheltered accounts help families save more money for retirement without the burden of taxes.

Eligibility for Spousal IRAs

The “spousal IRA” is just a regular IRA — the name merely refers to the fact that the working spouse can make a contribution to an IRA held in the name of a nonworking spouse. All the same rules apply, and the stay-at-home parent opens a standard IRA in their own name.

The eligibility requirements for the spousal IRA are straightforward:

  • Marital Status: Married
  • Tax Filing Status: Married, filing jointly
  • Earnings: The contributing spouse must have compensation or earned income of at least the amount annually contributed to the nonworking spouse’s IRA. If the contributing spouse also has an IRA, annual compensation or earned income must exceed the combined contributions of both IRAs.
  • Age: The nonworking spouse must be under age 72 in the year of the contribution for a traditional IRA. There are no age restrictions on a Roth IRA for a nonworking spouse.

Understand that IRAs are owned separately, not jointly. This means the nonworking spouse owns the assets in the IRA. Once your working spouse contributes to the IRA, the money becomes yours. The IRA is in your name and opened with your Social Security number, and it remains yours even if you divorce.

How It Works: Creating and Contributing to Accounts

Once you determine that you meet the eligibility requirements, you can open an IRA through your regular investment brokerage (E*Trade and SoFi are our favorites). You open the account in your name even if your working spouse is the one who contributes to it.

Once created, you or your spouse can transfer money into your spousal IRA from your checking account. At the time of transfer, you specify which year you want the contribution to count toward.

You can then invest in any assets allowed by your brokerage. You completely own and control the account, as with all IRAs.

Contribution Limits and Deadlines

Because spousal IRAs work just like any other IRA, the contribution limits are the same. They remain unchanged from 2020 to 2021 at $6,000 per year per adult. Adults 50 and over can contribute an extra $1,000 as a catch-up contribution, for a total annual contribution limit of $7,000.

Thus, a married couple under age 50 can contribute a total of $12,000, and couples over 50 can contribute up to $14,000 per year.

You can contribute to a traditional IRA, Roth IRA, or both. The combined total can’t exceed the limit, so for example a 40-year-old could contribute $2,000 to their traditional IRA and $4,000 to their Roth IRA to max out their annual contributions at a combined total of $6,000.

The IRS allows you to contribute funds to your IRA up until the tax return filing deadline for the previous year — usually April 15, but extended to May 17, 2021, for individuals for tax year 2020. So for the first several months each year, you can make IRA contributions for either the previous year or the current one.

Income Limits and Tax Benefits

Spousal IRAs offer the same tax benefits as an account in the name of a working spouse. These tax advantages come with limits that depend on your age and income, as well as the type of IRA.

Traditional IRA

The main tax benefit of traditional IRAs is that you can deduct the contribution from your taxable income. You don’t pay taxes on the earnings until you withdraw money from the account during retirement. At that point, the amount you withdraw each year is taxed as regular income. In fact, you must start taking required minimum distributions (RMDs) once you turn 72.

No matter how high your income, you can contribute to a traditional IRA. But you only get the tax benefit of deducting your contribution if the working spouse earns less than the income limits.

If the working spouse doesn’t participate in an employer-sponsored retirement plan, such as a 401(k) or SIMPLE IRA, the deductible amount phases out for incomes between $198,000 and $208,000 in tax year 2021 (up from $196,000 and $206,000 for 2020).

If the working spouse does participate in an employer-sponsored retirement account, the income limits are lower. In 2021, the ability to deduct contributions phases out between $105,000 to $125,000 (up from $104,000 to $124,000 in 2020).

Roth IRA

When you contribute to a Roth IRA, you don’t get an immediate tax deduction. Instead, your Roth IRA contributions grow and compound tax-free, and you don’t pay taxes on withdrawals in retirement.

Unlike a traditional IRA, which requires you to begin taking minimum distributions at age 72, you are never required to take minimum distributions from a Roth IRA.

The ability to contribute to a Roth IRA starts phasing out for couples earning more than $198,000 in 2021 ($196,000 in 2020), and disappears entirely for those earning more than $208,000 ($206,000 in 2020).

What Happens to IRAs When One Spouse Dies?

When you open an IRA, you name a beneficiary for the event of your death. The IRA bypasses probate and goes directly to that beneficiary, and creditors can’t touch it. If that beneficiary dies before you do, then your IRA goes into probate to be distributed as part of your estate.

Most married couples name their spouse as the designated beneficiary for their IRA. Spouses get special treatment by the IRS, with more options available to them for handling the inherited IRA.

When you inherit your spouse’s IRA, you can do any of the following with the funds.

Roll Over Funds to Your Own IRA

Unique to married couples, you can roll over funds from your deceased spouse’s IRA to your own IRA. You pay no penalties or taxes on the money at the time of rollover. The funds simply get treated as part of your own IRA from then on.

This is usually the best option for spouses from a tax planning perspective.

Leave the Money as an Inherited IRA

Inherited IRAs follow slightly different rules.

Withdrawals continue to be treated based on your deceased spouse’s age. On the plus side, you can start taking withdrawals penalty-free, even if you’re under 59 ½, as long as your deceased spouse had been over 59 ½. The downside is that you must take required minimum distributions based on your spouse’s age, even if you are under 72.

You can, however, submit a new schedule based on your age.

If you inherit a Roth IRA, you must take RMDs on it, which is not the case with your own Roth IRA (including if you had rolled over the IRA funds to your Roth IRA).

Take All the Money Now

You can just cash out the money in your deceased spouse’s IRA. The IRS doesn’t hit you with penalties, even if you’re under 59 ½. But you do have to pay income taxes on it, which may thrust you into a higher tax bracket.

Disclaim Some or All of the Money

Don’t want the money for some reason?

If you want some or all of the IRA funds to go to your spouse’s other designated beneficiaries instead of you, you can disclaim it within nine months of your spouse’s death. In effect, you take a pass on receiving it, so it goes to the other beneficiaries instead.

This may make sense from a tax planning perspective. Or maybe you just don’t need the money, and the other beneficiaries do.

Final Word

A spousal IRA is a great way to boost household retirement savings contributions and build a bigger nest egg. Plus, it gives a nonworking spouse the chance to build up assets, rather than missing out on some of his or her potential earning power due to helping out at home. Given the retirement challenges many women face in particular, spousal IRAs can create added financial security in addition to the tax benefits.

If you or your spouse stay at home, check to see if you meet the criteria for eligibility, and consider investing through a spousal IRA.

Source: moneycrashers.com

Understanding Fee Simple vs Leasehold Ownership

Leasehold ownership only applies in a few states, but if you’re buying property in one of them, you’ll want to read this.

Most people only know of one type of real estate ownership: fee simple, also known as freehold. But a handful of states have another form of ownership, known as leasehold.
The difference in these two types of land tenure is very different and affects the value of the real estate.  It is important to know the difference, especially if you’re buying real estate in a leasehold state (i.e., Hawaii, New York, Florida).

What is the difference between leasehold and fee simple?

  • Fee simple ownership. Fee simple ownership is probably the form of ownership most residential real estate buyers are familiar with. Depending on where you are from, you may not know of any other way to own real estate. Fee simple is sometimes called fee simple absolute because it is the most complete form of ownership.  A fee simple buyer is given title (ownership) of the property, which includes the land and any improvements to the land in perpetuity. Aside from a few exceptions, no one can legally take that real estate from an owner with fee simple title. The fee simple owner has the right to possess, use the land and dispose of the land as he wishes — sell it, give it away, trade it for other things, lease it to others, or pass it to others upon death.
  • Leasehold ownership. A leasehold interest is created when a fee simple land-owner (Lessor) enters into an agreement or contract called a ground lease with a person or entity (Lessee). A Lessee gives compensation to the Lessor for the rights of use and enjoyment of the land much as one buys fee simple rights; however, the leasehold interest differs from the fee simple interest in several important respects. First, the buyer of leasehold real estate does not own the land; they only have a right to use the land for a pre-determined amount of time. Second, if leasehold real estate is transferred to a new owner, use of the land is limited to the remaining years covered by the original lease. At the end of the pre-determined period, the land reverts back to the Lessor, and is called reversion. Depending on the provisions of any surrender clause in the lease, the buildings and other improvements on the land may also revert to the lessor. Finally, the use, maintenance, and alteration of the leased premises are subject to any restrictions contained in the lease.

Important leasehold terms to know:

  • Lease Term – The length of the lease period (usually 55 years or more)
  • Lease Rent – The amount of rent paid to the Lessor for use of the land
  • Fixed Period – The period in which the lease rent amount is fixed
  • Renegotiation Date – Date after the fixed period that the lease rent is renegotiated
  • Expiration Date – The date that the lease ends
  • Reversion – The act of giving back the property to the Lessor
  • Surrender – Terms of the reversion
  • Leased Fee Interest – An amount a Lessor will accept to convey fee simple ownership


Source: zillow.com

How Much Are Old Records Worth? Here’s What We Found Out

Money sits on top of a record in a record player.

Getty Images and Ken Lyons/The Penny Hoarder

When it comes to selling your old records to make extra cash, don’t get your hopes up.

And know this: Condition matters most. Frank Sinatra matters least.

“At one time the shelf that held all the Sinatra albums was 70 feet wide,” said Doug Allen, owner of Bananas Records, which is based in St. Petersburg, Florida. “We have way too much of that.”

What Bananas Records buys and sells the most are classic rock ‘n’ roll, punk and jazz albums. And that’s for around $5 — if the album and the cover are in great condition.

“Records don’t compare to coins and stamps and books,” Allen said. ”There’s not really anything that’s worth $100,000 or more.”

Many records that sold in the millions are still popular with collectors and album buyers, but so many copies are still in circulation that they don’t sell for much.

On the other hand, records that only sold 20,000 copies — jazz from the 1950s, early punk rock — may be worth more. Allen has seen jazz albums from that era, such as early Miles Davis, go for $500 to $700 a piece, while classic punk might sell for $50 to $100.

Most record collectors these days are between the ages of 18 and 35, and used record dealers will try to buy records that will appeal to both avid collectors as well as other, more casual buyers.  That includes artists like Jimi Hendrix, Pink Floyd, David Bowie and John Coltrane.

“There are still some Beach Boy fans out there,” Allen said. “There’s some country that’s worth something. Early Hank Williams. Some Johnny Cash.”

Allen would pay around $3 to $5 an album for these in good condition. He noted that Michael Jackson albums in good shape are selling.

“Two weeks after his death you could sell anything you could get your hands on for $30 to $40,” Allen said. “Now they are worth about $7 to $10.”

However, don’t bother bringing your Neil Diamond, Barry Manilow or Elvis Presley records.

“These kids who are buying records today, many of them have never heard of Elvis,” Allen said. “That era is gone.”

This three part photo shows the album cover and the actual record of Sonny Rollins, who is considered one of the most important jazz musicians in America. The record retails for $1,000 at Banana Records. Then there is a portrait of Doug Allen, the Banana Records owner, with his warehouse full of records. Some are on shelves while others are in boxes.
Doug Allen, bottom, co-owns Bananas Records with his wife, Michelle Allen, not photographed, which is one of the largest vinyl record retailers in the world with about 3.5 million records. Sonny Rollins, top, is considered one of the most important jazz musicians in American history. His sixth album, Saxophone Colossus, is selling at Bananas Records for $1,000. Chris Zuppa / The Penny Hoarder

An Album’s Value Is About More Than the Music

Other factors affect the value of an album, including a record label or address of the recording studio, which can indicate if it’s a first or second pressing; the country in which the album was released; and whether the album was autographed.

The condition of the album cover is as important as the vinyl itself. Water damage, tears and marks can all decrease an album’s value. However, Allen and other collectors frequently buy the album alone if it’s in good shape and the cover isn’t, and vice versa.

Allen advises anyone who is trying to sell their collection to take it to their local vintage record store and have them take a look and let you know what’s worth money.

One couple recently brought two wheeled suitcases full of albums into Bananas Record, and they were able to sell many of them for a total of $60.

Here’s What Your DVDs and CDs Are Actually Worth

What about DVDs, CDs and even 8-tracks? Allen and Genny Stout, manager of Bananas Records,  have some guidance for anyone trying to unload their old movies and music.


CDs are less popular each year, as there are fewer cars with CD players. Stout usually pays 25 cents for them.


Stout will offer up to 50 cents for DVDs from the ‘80s and ‘90s that aren’t very common. This does not include romantic comedies and blockbusters like “The Matrix.”

“Nobody wants to buy romantic comedies, or all the Adam Sandler movies,” Stout said.

A Disney classic in good shape might bring $1 or $2.

“Most of those are destroyed because people let their children put them in and out [of the DVD players],” Stout said.


“We haven’t purchased those in 5 to 6 years,” she said, adding that it’s hard to find non-profit retail stores that accept them.


“I would say there’s no market for them with the exception of a cult following,” Allen said. “Maybe a KISS 8-track, something you wouldn’t expect.” Those might bring in $10 to $15.

Katherine Snow Smith is a contributor to The Penny Hoarder.

Source: thepennyhoarder.com

Mortgage Protection Insurance vs Term Life Insurance

An unfortunate fact of life is that your debt doesn’t disappear when you die. Your heirs can inherit some types of debt, along with any positive financial legacy you leave.

If you have a mortgage, someone will remain responsible for paying it if you die — such as your spouse, if they’re a co-borrower or co-signer on the loan, or your children. They’ll have to assume responsibility for monthly payments or sell the house to cover the debt.

A hefty mortgage balance could become a huge burden for your loved ones in these circumstances. To avoid leaving it behind, some people purchase mortgage protection insurance, a type of insurance that pays off your mortgage if you die.

Mortgage Protection vs. Term Life

A lot of experts say mortgage protection insurance is unnecessary because your beneficiaries can cover your mortgage debt with a basic term life benefit or proceeds from the sale of the home.

Mortgage protection policies have their place, however, so don’t write them off immediately when choosing your life insurance coverage. First, consider your family’s circumstances and financial needs, and how both term life and mortgage protection could apply to them.

What Is Term Life Insurance?

Term life insurance is a policy that pays out a set benefit amount to your designated beneficiaries in case you die.

A term life policy covers you for a set number of years — the “term” — unlike whole life insurance, which gives lifetime coverage. You typically purchase a term life policy for 5, 10, 15, 20, 25, or 30 years, and your beneficiaries can receive the death benefit if you die anytime within the term. After the term ends, you have to purchase another policy to continue coverage.

You have to qualify to receive life insurance. Whether you’re accepted and how much you pay for premiums depends on several factors, including your age and health.

Traditionally, purchasing life insurance required a medical exam to assess your health, but now many online life insurance companies can help you find a policy with no medical exam. No matter what, you could have trouble getting basic life insurance coverage if you’re in poor health, smoke cigarettes, or engage in high-risk hobbies like skydiving.

Life insurance companies let policyholders expand their coverage through life insurance riders, which can increase the payout amount, expand the types of events that are covered, or both. Common riders include coverage for accidental death and dismemberment, long-term care, and return of premiums. Riders don’t cover mortgage payments.

Does Life Insurance Cover Mortgage Insurance?

Life insurance can pay off a mortgage, but it isn’t the same thing as mortgage insurance. The payout amount isn’t guaranteed to cover your mortgage debt, and it won’t go directly to your lender.

Recipients can use a life insurance death benefit to pay for anything. They receive the money as a lump sum, so they can put it toward whatever costs they need it for, such as your funeral costs, monthly bills, or debts like a mortgage.

Term Life Insurance Rates

Life insurance premium rates vary from person to person, depending on:

  • Your age
  • Your health
  • How much coverage you need
  • The length of the term
  • Your lifestyle, including habits like smoking or high-risk activities

Generally, a young person in good health can get relatively cheap term life insurance compared with an older person or anyone in poor health. A shorter term is likely to get you a lower rate because the chance of your circumstances changing is smaller in a shorter period.

What Is Mortgage Protection Insurance?

Mortgage protection insurance (MPI) — sometimes known as mortgage payment protection or mortgage life insurance — is designed to cover your mortgage debt in case you lose your job, become disabled, or die.

Depending on the type of policy you purchase, MPI is similar to long-term disability insurance or term life insurance, but it only covers your outstanding mortgage debt.

MPI only pays out the amount necessary to pay off your mortgage, so the benefit amount goes down over time as you make mortgage payments. If you die, the MPI benefit payment goes directly to your mortgage lender to satisfy your remaining mortgage balance. Compare that to life insurance, which pays out a flat benefit amount to your beneficiaries.

MPI tends to be easier to qualify for than life insurance and doesn’t typically require a medical exam, so you may be able to get this type of coverage even if your age or health disqualify you from a basic life insurance policy.

Many mortgage lenders sell mortgage protection insurance. You can also purchase it from a life insurance company or other insurance provider.

What Does Mortgage Protection Insurance Cover?

Unlike life insurance, a mortgage protection insurance benefit only covers mortgage debt. The payout is equal to the amount needed to pay off your outstanding mortgage, and the payment goes directly to the lender, not a beneficiary.

Depending on your policy, MPI could pay out for a set amount of time if you become unable to work due to injury or disability or if you die.

What Mortgage Protection Insurance Does Not Cover

Mortgage protection insurance only pays your remaining mortgage debt. It’s not a substitute for these other types of insurance homeowners often have to buy:

  • PMI. Private mortgage insurance protects a lender in case you don’t repay the loan. You’re usually required to purchase it and pay alongside your monthly mortgage payments if you put less than 20% down when purchasing a home, and it goes away after you’ve paid off at least 20% of the home’s value.
  • Mortgage Premium Insurance. Even though this is also abbreviated “MPI,” it’s not the same as mortgage protection insurance. This is insurance you pay if you take out an FHA home loan. Like PMI, it protects the lender in case you don’t repay the loan.
  • Homeowners Insurance. This protects your finances in case of damage or theft to your home under restricted circumstances. It doesn’t cover mortgage payments.

Mortgage Protection Insurance Rates

Like life insurance, MPI rates vary depending on your age and health. In the case of mortgage disability insurance, the industry you work in is also a factor because of the varying levels of risk in different types of jobs.

MPI rates are often higher than term life insurance rates, so compare your options. You may be to increase your life insurance coverage to receive the same benefit with lower total monthly premiums.

The biggest drawback to mortgage protection insurance is that the premium rate stays the same, even as your benefit amount goes down because you’re paying off your mortgage. You don’t get a lower rate even though the insurance company assumes a lower risk every month you make a mortgage payment.

Is It Worth Getting Mortgage Protection Insurance?

If you’re covered by life insurance and disability insurance and you have a solid emergency fund, mortgage protection insurance isn’t necessary. You should be able to cover mortgage payments in case of your death or disability and avoid the added monthly premiums more insurance requires.

But MPI can increase your payouts and guarantee you have enough to cover your mortgage and avoid losing your home in case of the unexpected. That frees up your basic life or disability benefit, or your emergency fund, to cover other expenses.

Mortgage protection insurance could also be worthwhile if you can’t qualify for basic life insurance. It doesn’t offer the kind of broad financial support your beneficiaries would get from life insurance, but it at least keeps them from being saddled with a large mortgage.

Should You Buy Mortgage Protection or Term Life Insurance?

In most cases, you may want both life insurance and mortgage protection insurance or just life insurance — but probably not just mortgage protection insurance. But exceptions always exist, so consider your circumstances and your family’s financial needs.

Why Buy Term Life Insurance?

  • Low Premium. Life insurance tends to come with lower monthly premiums than mortgage protection, and buying term life at a young age could help you lock in a low rate.
  • Fixed Benefit. Life insurance pays out a set amount whenever you die, not tied to how beneficiaries will use the money.
  • Unlimited Use. Beneficiaries can use a life insurance death benefit however they choose, with no restrictions, including to pay off a mortgage or cover monthly payments.

Why Buy Mortgage Protection Insurance?

  • Guaranteed Mortgage Coverage. MPI pays off your mortgage in case you die, so your family doesn’t become responsible for repayment. It also pays directly to the lender, which simplifies the process, so your family doesn’t have to worry about contacting your lender and squaring away the debt.
  • Easier to Qualify. MPI doesn’t typically require a medical exam, and acceptance rates are much higher than those for life insurance. Mortgage protection might be your best option if you can’t qualify for basic life insurance.
  • Increased Coverage. If you buy both MPI and term life insurance, your beneficiaries won’t have to worry about covering the mortgage with the life insurance payout and can use the funds for other needs.
  • Disability Protection. MPI also generally covers some or all of your monthly mortgage payments in case you’re injured or disabiled, which life insurance does not cover.

Final Word

Mortgage payment protection is one of many types of insurance you might need. Whether it makes sense for your family depends on your circumstances and financial situation.

MPI is somewhat superfluous coverage if you already have a life insurance policy. Beneficiaries can use your life insurance benefit to cover mortgage payments and any other costs after you die. Purchasing MPI along with a term life policy would mean paying an extra monthly premium in exchange for a greater payout.

You could probably save money on life insurance by increasing your term life coverage and premium, rather than purchasing MPI for an even greater monthly premium.

But if you can’t qualify for basic life insurance, purchasing mortgage protection could be a wise move to protect your family from inheriting a massive debt in case you die.

Source: moneycrashers.com

10 Money Books for Children and Teens

Reading is one of the most valuable skills children learn. Not only does reading enable us to navigate the modern world, it provides an endless source of learning and entertainment.

I am incredibly thankful that all of my children are avid readers who love nothing more than to have a fresh new book in their hands, but over the years, I’ve learned that you can’t just toss any book at them and expect them to read it. They’re engaged by compelling stories and by things that match up well with their interests in the moment. They’re not immediately going to gravitate to a book about money unless it speaks to them in some way.

Why worry about it at all? The reality is that financial education is a big part of modern parenting. Many schools provide very little in terms of practical financial education, leaving it up to parents to prepare their children for this aspect of adult life, and it can be a real challenge.

There’s an abundance of great financial books for adults, but it’s harder to find great options for children that really hit the sweet spot of being age-relevant and interesting to them. Here are 10 options that manage to balance these two goals.

In this article

The Berenstain Bears’ Trouble with Money by Stan and Jan Berenstain is a wonderful picture book for read aloud time or for early independent readers. It tells a relatable story from the perspective of the two younger Berenstain Bears about the challenge of having limited amounts of money. Children are going to be familiar with the idea of not having enough money to buy the things that they want, but what do they do in that situation? This book handles it with care.

Another good financially minded book choice for preschool children is Curious George Saves His Pennies by H.A. Rey. It focuses on the challenge of having enough patience to save for a large goal without getting distracted, balanced with George’s colorful adventures and distractions.

Brock, Rock, and the Savings Shock by Sheila Bair and Barry Gott takes the idea of compound interest and makes it into an accessible children’s book with a lot of clever rhyming and beautiful illustrations. The book focuses on twin brothers, one of whom chooses to spend on momentary impulses while the other saves his money, leading to the end when the saving brother has a lot of money built up thanks to the compounding.

Another great choice for early elementary children is The Squirrel Manifesto by Ric and Jean Edelman and illustrated by Dave Zaboski. It’s a beautifully illustrated book that brings to mind the fable of the grasshopper and the ant, focusing on a parable involving a squirrel saving resources for the winter to come.

For upper elementary kids: Lunch Money

Lunch Money by Andrew Clements and illustrated by Brian Selznick tells a great story of a rivalry between two entrepreneurially minded children, but within the rollicking tale comes a lot of good ideas about working to earn money, the value of cooperation, investing in yourself, and putting aside money for the long haul. These ideas are really effortlessly weaved into the story.

An alternative choice is How to Turn $100 into $1,000,000 by James McKenna, Jeannine Glista and Matt Fontaine. While this isn’t story-oriented like many of the other selections here, the provocative title and the perfect approach for older elementary-age children who are beginning to have somewhat more expensive tastes make this a great choice for adolescents.

Money Hungry by Sharon Flake tells a very memorable story about a 13-year-old girl who seems obsessed with money, finding all sorts of ways to earn a dollar here and a dollar there. As the story progresses, it becomes clear that she’s driven by a fear of poverty and some painful memories of not having enough when she was younger. This book has spurned some wonderful conversations in our home about money, needs and how different people see those things differently.

Another really great option for middle schoolers is Katie Bell and the Wishing Well by Nephi and Elizabeth Zufelt, which takes something of an opposite approach to Money Hungry. Here, the titular character finds all of her financial wishes easily granted, but finds that it’s not all it’s cracked up to be and that much of what we think of as a wealthy life comes from other things, like relationships.

The Truth About Forever by Sarah Dessen is a beautiful story about a teenager with a summer job who is using that opportunity to both earn money and escape from some difficult life issues, particularly the death of a parent. The book intertwines money issues with the multitude of concerns and difficulties teens often face, resulting in a wonderful story with a great conclusion.

A completely different type of financial book that might just click with your high schooler is I Want More Pizza by Steve Burkholder and editors Rebecca Maizel and David Aretha. This is a nonfiction book, but it’s extremely applicable to and targets almost perfectly the financial concerns of high schoolers. Should they get a job? Should they be saving for college or for a car? It does a great job of addressing the exact questions I often hear from the high schooler in my home.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

The Best Places to Live in Wisconsin in 2021

When people think of Wisconsin, they usually think of cheese, the Green Bay Packers or its largest city, Milwaukee.

The best places to live in Wisconsin are scattered throughout the state and include communities both big and small. After all, this Midwest state is home to 777 cities, each with its own strong community and unique personality.

So, whether you’re looking for an apartment while attending one of their excellent universities or colleges, making a move for a new job or looking for something new and different, there is a city and community waiting for you.

Here are 10 of the best places to live in Wisconsin.

Appleton, WI.

Photo source: Fox Cities Convention & Visitors Bureau / Facebook
  • Population: 73,637
  • Average age: 40.8
  • Median household income: $58,112
  • Average commute time: 22.3 minutes
  • Walk score: 41
  • Studio average rent: N/A
  • One-bedroom average rent: $918
  • Two-bedroom average rent: $1,281

Creative outdoor murals line the buildings, while cute boutiques, cozy coffee shops, and delicious food is found throughout historic downtown Appleton.

The city is among more than a dozen that make up the Fox Cities community and overlooks the Fox River.

It’s family-friendly and has a dense suburban feel with highly-rated schools. It’s also home to Lawrence University, a residential liberal arts college and conservatory of music.

Eau-Claire, WI, one of the best places to live in wisconsin

Photo source: Visit Eau-Claire / Facebook
  • Population: 67,250
  • Average age: 40
  • Median household income: $55,477
  • Average commute time: 20.9 minutes
  • Walk score: 47
  • Studio average rent: $608
  • One-bedroom average rent: $722
  • Two-bedroom average rent: $844

Whether it’s gathering with friends and neighbors to enjoy some of the many live music options throughout the city, including the Jazz Fest in the spring, followed by Country Fest, Rock Fest and Blue Ox Music Festival in the summer, or taking in some local art or walking along the historic bridges, Eau Claire is known for its welcoming vibe.

It’s especially welcoming to independent artists who create art installations, building murals and more.

According to a study released by Smart Asset, Eau Claire is also the third most livable small city in the country.

Fond-Du-Lac, WI.

  • Population: 43,145
  • Average age: 42.8
  • Median household income: $52,724
  • Average commute time: 22.4 minutes
  • Walk score: 49
  • Studio average rent: n/a
  • One-bedroom average rent: $822
  • Two-bedroom average rent: $895

Fond du Lac is a family-friendly community with a strong sense of history. The Fond du Lac County Historical Society connects residents to the local history of the town.

The public library and several sporting centers offer programming year-round and there is no shortage of restaurants and bars to enjoy dining and imbibing.

Green Bay, WI, one of the best places to live in wisconsin

  • Population: 104,984
  • Average age: 39.8
  • Median household income: $49,251
  • Average commute time: 22.8 minutes
  • Walk score: 45
  • Studio average rent: $955
  • One-bedroom average rent: $1,152
  • Two-bedroom average rent: $1,252

Most people know Green Bay for its football team (Fun fact: the Green Bay Packers football team is the only NFL team owned by its fans) but there is more than football in this northeastern part of Wisconsin and at the mouth of the Fox River.

While it can get cold during the winter months, Green Bay residents love spending time outdoors whenever possible. Easy access to the Fox River also means water-based activities such as fishing.

As the state’s oldest settlement, it’s also known for its family and business-friendly community.

Kenosha, WI.

  • Population: 98,545
  • Average age: 40.5
  • Median household income: $55,417
  • Average commute time: 29.2 minutes
  • Walk score: 51
  • Studio average rent: $1,254
  • One-bedroom average rent: $1,344
  • Two-bedroom average rent: $1,581

Located on the southwestern shore of Lake Michigan and at the northern border of Illinois, Kenosha is sometimes called a bedroom community between Chicago and Milwaukee.

Outdoor activities are popular, whether it’s water-based activities on Lake Michigan or playing a round of golf at one of the Kenosha County golf courses.

Kenosha is also home to Carthage College and the University of Wisconsin-Parkside.

La Crosse, WI, one of the best places to live in wisconsin

  • Population: 51,965
  • Average age: 39.1
  • Median household income: $45,233
  • Average commute time: 19.2 minutes
  • Walk score: 60
  • Studio average rent: $773
  • One-bedroom average rent: $1,100
  • Two-bedroom average rent: $1,245

Nestled along the Mississippi River, La Crosse is the largest city on Wisconsin’s western border. It’s home to a few colleges, including the University of Wisconsin-La Crosse, Western Technical College and Viterbo University.

La Crosse has charming historic homes that have since been converted into bed and breakfasts, such as the Castle La Crosse Bed and Breakfast, while the Dahl Auto Museum pays tribute to the eight oldest Ford dealership under continuous family ownership in the nation.

Nature lovers can enjoy scenic views from 600-foot-high Grandad Bluff which overlooks the city of La Crosse.

Madison, WI.

  • Population: 249,409
  • Average age: 39
  • Median household income: $65,332
  • Average commute time: 23.7 minutes
  • Walk score: 64
  • Studio average rent: $969
  • One-bedroom average rent: $1,350
  • Two-bedroom average rent: $1,935

Madison is the home of Wisconsin’s state capital as well as the University of Wisconsin-Madison. It’s also one of the best cities for millennials.

The second-largest city in the state, Madison is a progressive urban city that is both affordable and offers great employment opportunities.

Outdoor lovers will appreciate the hiking and biking trails and the walkable downtown has bookshops, coffee shops and restaurants around every corner.

Milwaukee, WI, one of the best places to live in wisconsin

  • Population: 599,058
  • Average age: 37.8
  • Median household income: $41,838
  • Average commute time: 27.5 minutes
  • Walk score: 70
  • Studio average rent: $1,276
  • One-bedroom average rent: $1,428
  • Two-bedroom average rent: $1,803

Milwaukee is Wisconsin’s largest and most populated city, with almost 600,000 residents calling it home.

Located in the southern part of the state and along Lake Michigan, it’s known for its many cultural offerings, from the architecturally significant Milwaukee Art Museum to the Milwaukee Repertory Theater to its wildly popular annual Summerfest, one of the largest music festivals in the world.

It’s also home to the University of Wisconsin-Milwaukee and Marquette University campus as well as two major professional sports teams: the Milwaukee Bucks and the Milwaukee Brewers. Several Fortune 500 companies have headquarters here too, including WEC Energy Group, Northwestern Mutual and Harley-Davidson.

Wauwatosa, WI.

Photo source: Discover Wauwatosa / Facebook
  • Population: 47,772
  • Average age: 43.9
  • Median household income: $82,392
  • Average commute time: 24.6 minutes
  • Walk score: 57
  • Studio average rent: $1,221
  • One-bedroom average rent: $1,504
  • Two-bedroom average rent: $1,962

Wauwatosa, sometimes called Tosa by locals, is just 15 minutes west of downtown Milwaukee. Residents love the small-town feel and having easy access to independently-owned shops and restaurants.

A major employer is the Milwaukee Regional Medical Center and Wauwatosa is home to several colleges and universities.

Tosa Village, originally called Hart’s Mill in the 1800s, is a popular destination for locals and visitors alike as the thriving historic district includes parks, cultural attractions, restaurants, and bars.

Architecture fans will appreciate a trip to Annunciation Greek Orthodox Church, designed by architect Frank Lloyd Wright in 1956 and completed in 1961. The church is on the National Register of Historic Places and among Wright’s last works and completed after his death.

Waukesha, WI, one of the best places to live in wisconsin

  • Population: 71,536
  • Average age: 41.3
  • Median household income: $65,260
  • Average commute time: 26.7 minutes
  • Walk score: 33
  • Studio average rent: $898
  • One-bedroom average rent: $1,012
  • Two-bedroom average rent: $1,299

Waukesha is a city of neighborhoods, filled with strong schools, great shops, and an abundance of green spaces to play.

An active farmers market during the summer takes place in downtown Waukesha, where families and friends meet up.

It’s ideal for those who want a suburban environment with access to urban amenities and residents include families as well as young professionals.

The city is also conveniently located close to Milwaukee, just 18 miles west of the largest city in Wisconsin, and 59 miles east of Madison, making it easy to get to either place.

Experience the best cities in Wisconsin

Wisconsin checks off a lot of checkmarks when it comes to living in a vibrant Midwest state with great attractions, schools, outdoor and recreational activities.

Whether you’re looking for a slower pace of life or the energy of a busy city, there is a Wisconsin community ready to welcome you. We hope this list of best places to live in Wisconsin helps you choose your next home.

Rent prices are based on a rolling weighted average from Apartment Guide and Rent.com’s multifamily rental property inventory of one-bedroom apartments in March 2021. Our team uses a weighted average formula that more accurately represents price availability for each individual unit type and reduces the influence of seasonality on rent prices in specific markets.
Other demographic data comes from the U.S. Census Bureau.
The rent information included in this article is used for illustrative purposes only. The data contained herein do not constitute financial advice or a pricing guarantee for any apartment.

Source: rent.com

How to Pay Off $130,000 in Parent PLUS Loans for Just $33,000

Millennials are not the only ones saddled with the obligation to pay back massive amounts of student loans. Many parents take out loans in their names to help their children pay for college, and in many cases, these loans are getting in their way of achieving their goals, like retiring. 

Under the federal student loan system, parents can take out Parent PLUS loans for their dependent undergraduate students. One of the major differences between Parent PLUS loans and the loans that the students take out is that there are fewer repayment options available for Parent PLUS borrowers. Parent PLUS loans are only eligible for the Standard Repayment Plan, the Graduated Repayment Plan and the Extended Repayment Plan.

There are other strategies for managing Parent PLUS debt, however. When consolidated into a Direct Consolidation Loan, Parent PLUS loans can become eligible for the Income-Contingent Repayment (ICR) Plan, in which borrowers pay 20% of their discretionary income for up to 25 years.

Currently, ICR is the only income-driven repayment plan that consolidated loans repaying Parent PLUS loans are eligible for. However, when a parent borrower consolidates two Direct Consolidation Loans together, the parent can potentially qualify for an even better repayment plan and further reduce their monthly payments. 

Nate, the high school math teacher

Let’s take a look at Nate, age 55, as an example to see how a parent can manage Parent PLUS loans and still retire as hoped.

Nate is a public school teacher who makes $60,000 a year and just got remarried to Nancy, who is also a teacher. Nate took out $130,000 of Direct Parent PLUS loans with an average interest rate of 6% to help Jack and Jill, his two kids from a previous marriage, attend their dream colleges. Nate does not want Nancy to be responsible for these loans if anything happens to him, and he is also worried that he would not be able to retire in 10 years as he had planned!

If Nate tried to pay off his entire loan balance in 10 years under the federal standard repayment plan, his monthly payment would be $1,443. Even if he refinanced privately at today’s historically low rates, his payments would still be around $1,200, which is too much for Nate to handle every month. Also, since Nate’s federal loans are in his name only, they could be discharged if Nate dies or gets permanently disabled. Therefore, it is a good idea to keep these loans in the federal system so that Nancy would not be responsible for them. 

In a case like this, when it is difficult for a federal borrower to afford monthly payments on a standard repayment plan, it’s a good idea to see if loan forgiveness using one of the Income-Driven Repayment plans is an option. In Nate’s case, his Parent PLUS loans can become eligible for the Income-Contingent Repayment (ICR) plan if he consolidates them into one or more Direct Consolidation Loans. If Nate enrolls in ICR, he would be required to pay 20% of his discretionary income, or $709 a month. Compared to the standard 10-year plan, Nate can cut his monthly burden in half by consolidating and enrolling in ICR!

But that’s not all …

Double Consolidation

For Nate, there is another strategy worth pursuing called a double consolidation. This strategy takes at least three consolidations over several months and works in the following way:

Let’s say that Nate has 16 federal loans (one for each semester of Jack and Jill’s respective colleges). If Nate consolidates eight of his loans, he ends up with a Direct Consolidation Loan #1. If he consolidates his eight remaining loans, he ends up with Direct Consolidation Loan #2.  When he consolidates the Direct Consolidation Loans #1 and #2, he ends up with a single Direct Consolidation Loan #3. 

Since Direct Consolidation Loan #3 repays Direct Consolidation Loans #1 and 2, it is no longer subject to the rule restricting consolidated loans repaying Parent PLUS loans to only be eligible for ICR. Direct Consolidation Loan #3 could be eligible for some other Income-Driven Repayment plans, including IBR, PAYE or REPAYE, in which Nate would pay 10% or 15% of his discretionary income, rather than 20%.

Reducing Nate’s monthly payments

For example, if Nate qualifies for PAYE and he and Nancy file their taxes using the Married Filing Separately (MFS) status, only Nate’s $60,000 income is used to calculate his monthly payment. His monthly payment now would be reduced to $282. If he had chosen REPAYE, he would have to include Nancy’s annual income of $60,000 for the monthly payment calculation after marriage — regardless of how they file their taxes — so his payment would have been $782.

Double consolidation can be quite an arduous process, but Nate decides to do it to reduce his monthly payment from $1,443 down to $282. 

How Parent PLUS borrowers can qualify for forgiveness

Since Nate is a public school teacher, he would qualify for Public Service Loan Forgiveness (PSLF), and after making 120 qualifying payments, he would get his remaining loan balance forgiven tax-free. 

Since Nate is pursuing forgiveness, there is one more important thing he can do to further reduce his monthly payments. Nate can contribute more to his employer’s retirement plan. If Nate contributed $500 a month into his 403(b) plan, the amount of taxable annual income used to calculate his monthly payment is reduced, which further reduces his monthly payments to $232. 

Summarizing Nate’s options in dollars and cents 

  1. With the standard 10-year repayment plan, Nate would have to pay $1,443.26 every month for 10 years, for a total of $173,191. 
  2. With a consolidation, enrolling in ICR, filing taxes using the Married Filing Separately status and Public Service Loan Forgiveness, he would start with $709 monthly payments and pay a total of around $99,000 in 10 years.*
  3. With double consolidation, enrolling in PAYE, filing taxes using the Married Filing Separately status and Public Service Loan Forgiveness, his monthly payment starts at $282, and his total for 10 years would be around $40,000.
  4. For maximum savings: With double consolidation, enrolling in PAYE, filing taxes using the Married Filing Separately status, Public Service Loan Forgiveness and making $500 monthly contributions to his employer retirement account for 10 years, Nate’s monthly payment starts at $232, and his total payment would be around $32,500.      He would have contributed $60,000 to his 403(b) account in 10 years, which could have grown to about $86,000 with a 7% annual return. Comparing this option with the first option, we can project that Nate pays about $140,000 less in total, plus he could potentially grow his retirement savings by about $86,000.

As you can see, there are options and strategies available for parent borrowers of federal student loans. Some of the concepts applied in these strategies may work for student loans held by the students themselves as well.

An important thing to remember if you are an older borrower of federal student loans is that paying back the entire loan balance might not be the only option you have. In particular, if you qualify for an Income-Driven Repayment plan and are close to retirement, you can kill two birds with one stone by contributing as much as you can to your retirement account. Also, since federal student loans are dischargeable at death, it can be a strategic move to minimize your payments as much as possible and get them discharged at your death.

Also, loan consolidation can be beneficial as it was in this example, but if you had made qualifying payments toward loan forgiveness prior to the consolidation, you would lose all of your progress you had made toward forgiveness!

As always, every situation is unique, so if you are not sure what to do with your student loans, contact a professional with expertise in student loans.

*Note: The projections in Options 2 through 4 assume that, among other factors such as Nate’s PSLF-qualifying employment status and family size staying the same, Nate’s income grows 3% annually, which increases his monthly payment amount each year. Individual circumstances can significantly change results.

Associate Planner, Insight Financial Strategists

Saki Kurose is a Certified Student Loan Professional (CSLP®) and a candidate for the CFP® certification.  As an associate planner at Insight Financial Strategists, she enjoys helping clients through their financial challenges. Saki is particularly passionate about working with clients with student loans to find the best repayment strategy that aligns with their goals.

Source: kiplinger.com