Matthew Perry of “Friends” found a buyer who was there for him. He has successfully sold his Malibu, CA, beach house for $13.1 million.
Perry had initially listed his “kick-ass Malibu home”—as he called his place on social media—in August for $14.95 million. In September, the actor dropped the asking price by a million dollars, to $13.95 million.
He then slashed the price one last time to $12.95 million. That reduction attracted a buyer, who scooped up the swanky space for just a little over the ask.
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Although the price ended up lower than his initial asking price, Perry came out ahead. The savvy star picked up the the property in 2011 for $12 million.
Perry reportedly bought the beachfront abode from the Southern California developer Scott Gillen, who completely transformed the circa-1960 build.
The result is a loftlike space with expansive walls of glass, looking out to the Pacific Ocean.
The fab pad can hold lots of friends, with two floors, four bedrooms, and 3.5 bathrooms on 5,000 square feet. The main level features an open living and dining area, a fireplace, beamed ceilings, and sparkling views of the ocean. The glass walls completely open up, extending the living area out to a deck that runs the length of the house on both floors.
A floating wood-and-steel staircase leads to the lower-level master suite, which includes a sitting area, walk-in closet, and luxurious bathroom.
The home also features an outdoor spa and a state-of-the-art home theater.
Meanwhile, the deck comes with plenty of seating and a fire pit, perfect for catching the sunset.
The open floor plan made the buyer swoon, according to Luis Robledo, the Douglas Elliman agent who represented the buyer.
“The minute you walk through the front door, you have a completely open and expansive view of the ocean, with floor-to-ceiling and wall-to-wall windows,” Robledo says. “Two decks on both levels spanning the length of the home—maximizing the outdoor space—also made it extremely compelling. This is the perfect getaway place.”
Perry took full advantage of the beach pad as his personal getaway during the pandemic. He posted photos to his Instagram account from the property as he hung out on his deck or baked cookies in the kitchen.
Perry had been on a selling spree, also placing a posh penthouse on the market in Los Angeles in 2019 for $35 million. In 2017, he bought the “mansion in the sky,” which occupies the entire 40th floor of the Wilshire Corridor’s elite Century Building, for $20 million.
He renovated the place to his taste, with what looks like wall-to-wall velvet furniture, a huge master suite with views, and the home theater. The listing is currently off market.
Now that he’s freed from his real estate concerns, the star’s new focus appears to be an adorable puppy.
Luis Robledo of Douglas Elliman represented the buyer. Joshua Flagg with Rodeo Realty repped the seller.
Over the past year, more than 20 million federal student loan borrowers have been able to pause their payments to cope with pandemic-induced financial stress — a postponement that President Joe Biden recently extended through September 2021.
But those who have private student loans? Not so much.
Private student loans represent about 8% of total education debt, according to MeasureOne, which tracks data on private student lending. Not only are these borrowers left out of the payment pause granted to federal borrowers, they’re also rarely included in ongoing conversations about loan forgiveness.
The only mention of private student loan borrowers in relief proposals has been as part of the Heroes Act Oct. 1 update — it included a measure that would have paid off $10,000 of loan debt for economically distressed private student loan borrowers. However, it didn’t find traction then and didn’t make the December 2020 relief package or Biden’s most recent proposal.
Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, says borrowers shouldn’t expect relief to come from Congress.
“I think the moment to help those borrowers unfortunately has sort of passed,” Mayotte says, though she adds that she’s not hearing from troubled private loan borrowers any more often than usual.
That doesn’t mean private student loan borrowers aren’t now facing headwinds or hoping for some kind of relief. But federal loans fall under the purview of the federal government, and any relief there affects far more borrowers.
That’s why Robert Kelchen, associate professor of higher education at Seton Hall University in South Orange, New Jersey, says federal student loan forgiveness stands a better chance of happening. He says private student loan debt forgiveness is “a possibility,” but unlikely.
“Most people with private student debt also have federal student debt, so [private loan borrowers] probably wouldn’t get anything forgiven,” Kelchen says.
One change that might help: bankruptcy reform
Mayotte says she thinks there’s “good potential in the next two years” for a change in bankruptcy rules for student loans, adding that an appetite to do so exists on both sides of the aisle.
Recent court rulings and a bankruptcy reform proposal by Biden indicate a shift is already happening toward making it easier to dismiss student loans in bankruptcy.
Currently, courts have high standards for proving “undue hardship” that would result in loans — whether federal or private — being discharged. Pursuing bankruptcy is also cost-prohibitive for many borrowers to attempt without the security of knowing they can win.
But it’s harder to prove undue hardship with private loans since they don’t have as many safeguards as federal loans do, such as income-driven repayment.
Fewer private borrowers seeking relief
Private student loans, unlike federal loans, are underwritten using traditional credit standards, and over the years their default rate has been much, much lower — less than 2% annually, according to a 2019 MeasureOne report.
At the start of the pandemic, private lenders offered borrowers experiencing financial hardship short-term emergency forbearance or deferment or a temporary lower payment amount.
Relatively few borrowers took advantage of them. MeasureOne found fewer borrowers were using forbearances during the third quarter of 2020 (July, August and September) compared with the previous three months (3.68% versus 7.04%, respectively). It’s worth noting that many of the special forbearances were available in 90-day increments only.
A NerdWallet survey of 30 private lenders found virtually all requests for short-term forbearance during 2020 were granted.
Ascent said 2.8% of its student loan portfolio requested an emergency forbearance and 100% of those requests were approved.
Among Funding U borrowers, less than 5% requested a forbearance and 100% of those requests were approved.
Splash Financial reported 1.7% of its borrowers requested a special forbearance and 93% were approved (borrowers were rejected if they didn’t provide requested documentation).
Most lenders who responded to NerdWallet’s questionnaire said they weren’t currently reporting delinquent accounts to collections, and among those who were, the reporting rates were low. For example, Ascent reported 0.9% of its portfolio had gone to collections.
Some of these special relief options are continuing into 2021, but several lenders have already sunsetted their programs.
In those cases, borrowers must rely on existing options. That usually means requesting regular forbearances lenders already offer, which carry limits (typically around 12 months, but some offer double that). If you have private student loans, contact your lender to find out what it offers.
For private borrowers who are facing financial trouble, this relief may not be enough.
Seth Frotman, executive director of the Student Borrower Protection Center, a nonprofit based in Washington, D.C., questions whether private lenders are doing their part.
“Companies are making all of these promises about supposed help in the face of the pandemic, and we have heard time and again from borrowers that they’re getting bad information, no information, conflicting information or the total runaround about how you can get access to these programs,” Frotman says.
If you eat rice, you likely are ingesting arsenic, a known carcinogen that impacts virtually every organ in the body. Arsenic exposure has been linked to:
Bladder, lung and skin cancer
Diabetes
Heart disease
Lung diseases
Skin lesions
In utero impacts on a developing immune system
Because arsenic is water-soluble, it accumulates naturally in rice grown in flooded fields. But a recent study has found that cooking rice in a specific way removes up to 50% of the naturally occurring arsenic in brown rice, and 74% in white rice, while retaining most of the grain’s nutrients.
The trick is to cook the rice using a method known as “parboiling with absorption,” say researchers at the Institute for Sustainable Food at the University of Sheffield in England. This involves a few steps:
Add water to a pot — using 4 cups of water for every cup of dry rice that you plan to cook — and bring the water to a boil.
Add the rice to the boiling water and let the rice boil for five minutes.
Drain and refresh the water, this time using 2 cups of water per cup of dry rice.
Cook the rice on low to medium heat until all the water is absorbed.
For years, experts have been concerned about the level of arsenic found in rice.
A 2012 Consumer Reports study discovered measurable levels of arsenic in nearly all of 60 rice varieties and rice products the publication tested. Follow-up research was even more troubling. According to CR:
“We found that rice cereal and rice pasta can have much more inorganic arsenic — a carcinogen — than our 2012 data showed. According to the results of our new tests, one serving of either could put kids over the maximum amount of rice we recommend they should have in a week.”
So, aside from cooking the rice the right way, which rice should you buy?
Brown rice — which is unmilled or unpolished and retains its bran — contains more arsenic than white rice. Unfortunately, though, the same milling process that removes arsenic from white rice also eliminates 75% to 90% of the rice’s nutrients, according to the University of Sheffield researchers.
Consumer Reports says that as a general rule, white basmati rice from California, India and Pakistan, and sushi rice from the U.S., have half as much inorganic arsenic as most other types of rice, on average.
Meanwhile, brown basmati rice from California, India or Pakistan has about one-third less inorganic arsenic than other types of brown rice, CR says.
CR also suggests steering clear of rice from three U.S. states in particular:
“All types of rice (except sushi and quick cooking) with a label indicating that it’s from Arkansas, Louisiana, or Texas or just from the U.S. had the highest levels of inorganic arsenic in our tests. For instance, white rices from California have 38 percent less inorganic arsenic than white rices from other parts of the country.”
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.
If you have a business you’re trying to get off the ground, you’ll want to register for the Influence & Impact Summit! This is a FREE online event that features over 20 speakers to help you learn how to maximize your influence and impact with your business or brand.
I was so honored to be invited to speak at this event, alongside a group of 20 other successful entrepreneurs who have SO much wisdom to share!
You can go here to register for this event for FREE. You will be able to watch all of the online presentations during a time that works best for you, but you must watch all of them before October 13, 2015.
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A note from a dedicated reader inspired today’s article. It’s a question about the stock market and investing at all-time highs. It reads:
Table of Contents show
Hey Jesse. So, back in March you said that you were going to keep on investing despite the major crash. Fair enough, good call!
Note: here and here are the two articles that likely inspired this comment
But now that the market has recovered and is in an obvious bubble (right?), are you still dumping money into the market?
Thanks for the note, and great questions. You might have heard “buy low, sell high.” That’s how you make money when investing. So, if the prices are at all-time highs, you aren’t exactly “buying low,” right?
I’m going to address this question in three different ways.
General ideas about investing
Back-testing historical data
Identifying and timing a bubble
Long story short: yes, I am still “dumping” money into the stock market despite all-time highs. But no, I’m not 100% that I’m right.
General Ideas About Investing
We all know that that investing markets ebb and flow. They goes up and down. But, importantly, the stock market has historically gone up more than it has gone down.
Why does this matter? I’m implementing an investing plan that is going to take decades to fulfill. Over those decades, I have faith that the average—the trend—will present itself. That average goes up. I’m not betting on individual days, weeks, or months. I’m betting on decades.
It feels bad to invest right before the market crashes. I wouldn’t enjoy that. But I’m not worried about the value of my investments one month from now. I’m worried about where they’ll be in 20+ years.
Allowing short-term emotions—e.g. fear of an impending crash—to cloud long-term, math-based thinking is the nadir of result-oriented thinking. Don’t do it.
Don’t believe me? Here’s a fun idea. Google the term “should I invest at all-time highs?”
When I do that, I see articles written in 2016, 2017, 2018…you get it. People have been asking this question for quite a while. All-time highs have happened before, and they beg the question of whether it’s smart to invest. Here’s the S&P 500 data from 2016 to today.
S&P 500 – Past five years. Punctuation my own addition.
So should you have invested in 2016? In 2017? In 2018? While those markets were at or near all-time highs, the resounding answer is YES! Investing in those all-time high markets was a smart thing to do.
Let’s go further back. Here’s the Dow Jones going back to the early 1980s. Was investing at all-time highs back then a good idea?
I’ve cherry-picked some data, but the results would be convincing no matter what historic window I chose. Investing at all-time highs is still a smart thing to do if you have a long-term plan.
Investing at all-time highs isn’t that hard when you have a long outlook.
But let’s look at some hard data and see how the numbers fall out.
Historical Backtest for Investing at All-Time Highs
There’s a well-written article at Of Dollars and Data that models what I’m about to do: Even God Couldn’t Beat Dollar-Cost Averaging.
But if you don’t have the time to crunch all that data, I’m going to describe the results of a simple investing back-test below.
First, I looked at a dollar-cost averager. This is someone who contributes a steady investment at a steady frequency, regardless of whether the market is at an all-time high or not. This is how I invest! And it might be how you invest via your 401(k). The example I’m going to use is someone who invests $100 every week.
Then I looked at an “all-time high avoider.” This is someone who refuses to buy stocks at all-time highs, saving their cash for a time when the stock market dips. They’ll take $100 each week and make a decision: if the market is at an all-time high, they’ll save the money for later. If the market isn’t at an all-time high, they’ll invest all their saved money.
Thearticle from Of Dollars and Data goes one step further, if you’re interested. It presents an omniscient investor who has perfect timing, only investing at the lowest points between two market highs. This person, author Nick Maggiulli comments, invests like God would—they have perfect knowledge of prior and future market values. If they realize that the market will be lower in the future, they save their money for that point in time.
What are the results?
The dollar-cost averager outperformed the all-time high avoider in 82% of all possible 30-year investing periods between 1928 and today. And the dollar-cost averager outperformed “God” in ~70% of the scenarios that Maggiulli analyzed.
How can the dollar-cost averager beat God, since God knows if there will be a better buying opportunity in the future? Simple answer: dividends and compounding returns. Unless you have impeccable—perhaps supernatural—timing, leaving your money on the sidelines is a poor choice.
Investing at all-time highs is where the smart money plays.
Identifying and Timing a Bubble
One of my favorite pieces of finance jargon is the “permabear.” It’s a portmanteau of permanent and bear, as in “this person is always claiming that the market is overvalued and that a bubble is coming.”
Being a permabear has one huge benefit. When a bubble bursts—and they always do, eventually—the permabear feels righteous justification. See?! I called it! Best Interest reader Craig Gingerich jokingly knows bears who have “predicted 16 of the last 3 recessions.”
Source: advisorperspectives.com
Suffice to say, it’s common to look at the financial tea leaves and see portents of calamity. But it’s a lot harder to be correct, and be correct right now. Timing the market is hard.
Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.
Peter Lynch
Predicting market recessions falls somewhere between the Farmers’ Almanac weather forecast and foreseeing the end of the world. It takes neither skill nor accuracy but instead requires a general sense of pattern recognition.
Note: The Farmers’ Almanac thinks that next April will be rainy. Nice work, guys. And I, too, think the world will end—at least at some point in the next few billions of years.
I have neither the skill nor the inclination to identify a market bubble or to predict when it’ll burst. And if someone convinces you they do have that skill, you have two options. They might be skilled. Or they are interested in your bank account. Use Occam’s Razor.
Just remember: some permabears were screaming “SELL!” in late March 2020. I’ve always heard “buy low, sell high.” But maybe selling your portfolio at the absolute market bottom is the new secret technique?
“But…just look at the market”
I get it. I hear you. And I feel it, too. If feels like something funny is going on.
The stock market is 12% higher than it was a year ago. It’s higher than it was before the COVID crash. How is this possible? How can we be in a better place mid-pandemic than before the pandemic?
One explanation: the U.S. Federal Reserve has dropped their interest rates to, essentially, zero. Lower interest rates make it easier to borrow money, and borrowing money is what keeps businesses alive. It’s economic life support.
Of course, a side effect of cheap interest rates is that some investors will dump their cheap money into the stock market. The increasing demand for stocks will push the price higher. So, despite no increase (and perhaps even a decrease) in the intrinsic value of the underlying publicly-traded companies, the stock market rises.
Is that a bubble? Quite possibly. But I’m not smart enough to be sure.
The CAPE ratio—also called the Shiller P/E ratio—is another sign of a possible bubble. CAPE stands for cyclically-adjusted price-to-earnings. It measures a stock’s price against that company’s earnings over the previous 10-years (i.e. it’s adjusted for multiple business cycles).
Earnings help measure a company’s true value. When the CAPE is high, it’s because a stock’s price is much greater than its earnings. In other words, the price is too high compared to the company’s true value.
Buying when the CAPE is high is like paying $60K for a Honda Civic. It doesn’t mean that a Civic is a bad car. It’s just that you shoudn’t pay $60,000 for it.
Similarly, nobody is saying that Apple is a bad company, but its current CAPE is 52. Try to find a CAPE of 52 on the chart above. You won’t find it.
So does it make sense to buy total market index funds when the total market is at a CAPE of 31? That’s pretty high, and comparable to historical pre-bubble periods. Is a high CAPE representative of solid fundamentals? Probably not, but I’m not sure.
My Shoeshine Story
There’s an apocryphal tale of New York City shoeshines giving stock-picking advice to their customers…who happened to be stockbrokers. Those stockbrokers took this as a sign of an oncoming financial apocalypse.
The thought process was: if the market was so popular that shoe shines were giving advice, then the market was overbought. The smart money, therefore, should sell.
I recently heard a co-worker talking about his 12-year old son. The kid uses Robin Hood—a smartphone app that boasts free trades to its users. Access to the stock market has never been easier.
According to his dad, the kid bought about $100 worth of Advanced Micro Devices (ticker = AMD). When asked what AMD produces, the kid said, “I don’t know. I just know they’re up 60%!”
This, an expert might opine, is not indicative of market fundamentals.
But then I thought some more. Is this how I invest? What does your index fund hold, Jesse? Well…a lot of companies I’ve never heard of. I just know it averages ~10% gains every year! My answer is eerily similar.
I’d like to believe that I buy index funds based on fundamentals that have been justified by historical precedent. But, what if the entire market’s fundamentals are out of whack? I’m buying a little bit of everything, sure. But what if everything is F’d up?
Closing Thoughts
Have you ever seen a index zealot transmogrify into a permabear?
Not yet. Not today.
I do understand why some warn of a bubble. I see the same omens. But I don’t have the certainty or the confidence to act on omens. It’s like John Bogle said in the face of market volatility:
Don’t do something. Just stand there.
John Bogle
Markets go up and down. The U.S. stock market might crash tomorrow, next week, or next year. Amidst it all, my plan is to keep on investing. Steady amounts, steady frequency. I’ve got 20+ years to wait.
History says investing at all-time highs is still a smart thing. Current events seem crazy, but crazy has happened before. Stay the course, friends.
And, as always, thanks for reading the Best Interest. If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.
This article—just like every other—is supported by readers like you.
If you’re one of the millions of workers whose home is now doubling as office space due to COVID-19, you may be wondering whether that means a sweet deduction at tax time. Hold up, though: The IRS has strict rules about taking the home office deduction — and they changed drastically under the Tax Cuts and Jobs Act, which passed in late 2017.
7 Essential Rules for Claiming a Work From Home Tax Deduction
Thinking about claiming a home office deduction on your tax return? Follow these tips to avoid raising any eyebrows at the IRS.
1. You can’t claim it if you’re a regular employee, even if your company is requiring you to work from home due to COVID-19.
If you’re employed by a company and you work from home, you can’t deduct home office space from your taxes. This applies whether you’re a permanent remote worker or if your office is temporarily closed because of the pandemic. The rule of thumb is that if you’re a W-2 employee, you’re not eligible.
This wasn’t always the case, though. The Tax Cuts and Jobs Act suspended the deduction for miscellaneous unreimbursed employee business expenses, which allowed you to claim a home office if you worked from home for the convenience of your employer, provided that you itemized your tax deductions. The law nearly doubled the standard deduction. As a result, many people who once saved money by itemizing now have a lower tax bill when they take the standard deduction.
2. If you have a regular job but you also have self-employment income, you can qualify.
If you’re self-employed — whether you own a business or you’re a freelancer, gig worker or independent contractor — you probably can take the deduction, even if you’re also a full-time employee of a company you don’t own. It doesn’t matter if you work from home at that full-time job or work from an office, as long as you meet the other criteria that we’ll discuss shortly.
You’re only allowed to deduct the gross income you earn from self-employment, though. That means if you earned $1,000 from your side hustle plus a $50,000 salary from your regular job that you do remotely, $1,000 is the most you can deduct.
3. It needs to be a separate space that you use exclusively for business.
The IRS requires that you have a space that you use “exclusively and regularly” for business purposes. If you have an extra bedroom and you use it solely as your office space, you’re allowed to deduct the space — and that space alone. So if your house is 1,000 square feet and the home office is 200 square feet, you’re allowed to deduct 20% of your home expenses.
But if that home office also doubles as a guest bedroom, it wouldn’t qualify. Same goes for if you’re using that space to do your day job. The IRS takes the word “exclusively” pretty seriously here when it says you need to use the space exclusively for your business purposes.
To avoid running afoul of the rules, be cautious about what you keep in your home office. Photos, posters and other decorations are fine. But if you move your gaming console, exercise equipment or a TV into your office, that’s probably not. Even mixing professional books with personal books could technically cross the line.
4. You don’t need a separate room.
There needs to be a clear division between your home office space and your personal space. That doesn’t mean you have to have an entire room that you use as an office to take the deduction, though. Suppose you have a desk area in that extra bedroom. You can still claim a portion of the room as long as there’s a marker between your office space and the rest of the room.
Pro Tip
An easy way to separate your home office from your personal space, courtesy of TurboTax Intuit: Mark it with duct tape.
5. The space needs to be your principal place of business.
To deduct your home office, it needs to be your principal place of business. But that doesn’t mean you have to conduct all your business activities in the space. If you’re a handyman and you get paid to fix things at other people’s houses, but you handle the bulk of your paperwork, billing and phone calls in your home office, that’s allowed.
There are some exceptions if you operate a day care center or you store inventory. If either of these scenarios apply, check out the IRS rules.
6. Mortgage and rent aren’t the only expenses you can deduct.
If you use 20% of your home as an office, you can deduct 20% of your mortgage or rent. But that’s not all you can deduct. You’re also allowed to deduct expenses like real estate taxes, homeowner insurance and utilities, though in this example, you’d only be allowed to deduct 20% of any of these expenses.
Be careful here, though. You can only deduct expenses for the part of the home you use for business purposes. So using the example above, if you pay someone to mow your lawn or you’re painting your kitchen, you don’t get to deduct 20% of the expenses.
You’ll also need to account for depreciation if you own the home. That can get complicated. Consider consulting with a tax professional in this situation. If you sell your home for a profit, you’ll owe capital gains taxes on the depreciation. Whenever you’re claiming deductions, it’s essential to keep good records so you can provide them to the IRS if necessary.
If you don’t want to deal with extensive record-keeping or deducting depreciation, the IRS offers a simplified option: You can take a deduction of $5 per square foot, up to a maximum of 300 square feet. This method will probably result in a smaller deduction, but it’s less complicated than the regular method.
7. Relax. You probably won’t get audited if you follow the rules.
The home office deduction has a notorious reputation as an audit trigger, but it’s mostly undeserved. Deducting your home office expenses is perfectly legal, provided that you follow the IRS guidelines. A more likely audit trigger: You deduct a huge amount of expenses relative to the income you report, regardless of whether they’re related to a home office.
It’s essential to be ready in case you are audited, though. Make sure you can provide a copy of your mortgage or lease, insurance policies, tax records, utility bills, etc., so you can prove your deductions were warranted. You’ll also want to take pictures and be prepared to provide a diagram of your setup to the IRS if necessary.
As always, consult with a tax adviser if you’re not sure whether the expense you’re deducting is allowable. It’s best to shell out a little extra money now to avoid the headache of an audit later.
The Penny Hoarder Shop is always stocked with great deals, including technology, subscriptions, courses, kitchenware and more. Check it out today!
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to [email protected].
If you haven’t checked car insurance rates in a few months, you could be overspending and not even know it.
And while it’s probably not something on the top of your to-do list, you should set a reminder to get a few quotes every six months. And if you do it through a website called SmartFinancial, you could be getting insider-level rates as low as $22 a month.
SmartFinancial is a digital marketplace for insurance. It has unique relationships with many of the top auto insurance providers, making it super easy for you to enter your information once and see all your quotes in front of you — making sure you get the best rate possible, without all the work.
See If You Can Save Up To $715 A Year On Car Insurance
When you fill out a one-minute form on Smart Financial’s website, you’ll be able to get quotes from multiple insurers, so you know you’ll get the best rate. If you want, you can speak to an agent to secure a low rate and finish the process in 10 minutes.
And don’t worry, your info is totally safe. Smart Financial has bank-level security and guarantees you won’t be spammed when you trust them with your phone number and email.
Rates start as low as $22 a month and can save you up to $715 a year — that’s some major cash back in your pocket. And if you bundle it with home insurance, you can save even more.
So if you haven’t checked car insurance rates in a while, you are doing yourself a disservice. Get started here to see how much money you can save today with a new policy.
Kari Faber is a staff writer at The Penny Hoarder.
Taking out a life insurance policy is a great
way to protect your family’s financial future. A policy can also be a useful
financial planning tool. But life insurance is a notoriously tricky subject to
tackle.
One of the hardest challenges is deciding
whether term life or whole life insurance is a better fit for you.
Not sure what separates term life from whole
life in the first place? You’re not alone. Insurance industry jargon can be
thick, but we’re here to clear up the picture and make sure you have all the
information you need to make the best decision for you and your family.
Life Insurance = Financial
Protection for Your Family
Families have all sorts of expenses: mortgage payments, utility bills, school tuition, credit card payments and car loan payments, to name a few. If something were to happen and your household unexpectedly lost your income or your spouse’s income, your surviving family might have a difficult time meeting those costs. Funeral expenses and other final arrangements could further stress your family’s financial stability.
That’s where life insurance comes in. Essentially, a policy acts as a financial safety net for your family by providing a death benefit. Most forms of natural death are covered by life insurance, but many exceptions exist, so be sure to do your research. Death attributable to suicide, motor accidents while intoxicated and high-risk activity are often explicitly not covered by term or whole life policies.
If you die while covered by your life
insurance policy, your family receives a payout, either a lump sum or in
installments. This is money that’s often tax-free and can be used to meet
things like funeral costs, financial obligations and other personal expenses.
You get coverage in exchange for paying a monthly premium, which is often
decided by your age, health status and the amount of coverage you purchase.
Don’t
know how much to buy? A good rule of thumb is to multiply your yearly income by
10-15, and that’s the number you should target. Companies may have different
minimum and maximum amounts of coverage, but you can generally find a
customized policy that meets your coverage needs.
In addition to the base death benefit, you can enhance your coverage through optional riders. These are additions or modifications that can be made to your policy—whether term or whole life—often for a fee. Riders can do things like:
Add coverage for disability or deaths not commonly
covered in base policies, like those due to public transportation accidents.
Waive future premiums if you cannot earn an income.
Accelerate your death benefit to pay for medical bills
your family incurs while you’re still alive.
Other
riders may offer access to membership perks. For a fee, you might be able to
get discounts on goods and services, such as financial planning or health and
wellness clubs.
One
final note before we get into the differences between term and life: We’re just
covering individual insurance here. Group insurance is another avenue for
getting life insurance, wherein one policy covers a group of people. But that’s
a complex story for a different day.
Term Life Policies Are Flexible
The “term” in “term life” refers to
the period of time during which your life insurance policy is active. Often,
term life policies are available for 10, 20, 25 or 30 years. If you die during
the term covered, your family will be paid a death benefit and not be charged any future
premiums, as your policy is no longer active. So, if you were to die in year 10
of a 30-year policy, your family would not be on the hook for paying for the
other 20 years.
Typically, your insurance cannot be canceled
as long as you pay your premium. Of course, if you don’t make payments, your coverage will lapse, which typically
will end your policy. If you want to exit a policy you can cancel during an
introductory period. Generally speaking, nonpayment of premiums will not affect your credit score, as
your insurance provider is not a creditor. Given that, making payments on your
life policy won’t raise your credit score either.
The major downside of term life is that your
coverage ceases once the term expires. Ultimately, once your term expires, you need to reassess
your options for renewing, buying new coverage or upgrading. If you were to die
a month after your term expires, and you haven’t taken out a new policy, your
family won’t be covered. That’s why some people opt for another term policy to
cover changing needs. Others may choose to convert their term life into a
permanent life policy or go without coverage because the same financial
obligations—e.g., mortgage payments and college costs—no longer exist. This
might be the case in your retirement.
The Pros and Cons of Term Life
Even though term life insurance lasts for a
predetermined length of time, there are still advantages to taking out such a
policy:
Comparably lower cost: Term life is usually the more affordable type of life insurance, making it the easiest way to get budget-friendly protection for your family. A woman who’s 34 years old can buy $1 million in coverage through a 10-year term life policy for less than $50 a month, according to U.S. News and World Report. A man who’s 42 can purchase $1 million in coverage through a 30-year term for just over $126 a month.
Good choice for mid-term financial planning: Lots of families take out a term life policy to coincide with major financial responsibilities or until their children are financially independent. For example, if you have 20 years left on your mortgage, a term policy of the same length could provide extra financial protection for your family.
Upgrade if you want to: If you take out a term life policy, you’ll likely also get the option to convert to a permanent form of life insurance once the term ends if your needs change. Just remember to weigh your options, as your rates will increase the older you get. Buying another term life policy at 50 years old may not represent the same value as a whole life policy at 30.
There are some drawbacks to term life:
Coverage is temporary: The biggest downside to
term life insurance is that policies are active for only so long. That means
your family won’t be covered if something unexpected happens after your insurance
expires.
Rising premiums: Premiums for term life
policies are often fixed, meaning they stay constant over the duration of the
policy. However, some
policies may be structured in a way that seems less costly upfront but feature
steadily increasing premiums as your term progresses.
Young Families Often Opt for Term Life
The rate you pay for term life insurance is
largely determined by your age and health. Factors outside your control may influence the rates you
see, like demand for life insurance. During a pandemic, you might be paying
more if you take a policy out amid an outbreak.
Most consumers seeking term life fall into
younger and healthier demographics, making term life rates among the most
affordable. This is because
such populations present less risk than a 70-year-old with multiple chronic
conditions. In the end, your rate depends on individual factors. So if
you’re looking for affordable protection for your family, term life might be
the best choice for you.
Term life is also a great option if you want a
policy that:
Grants you some flexibility for
future planning, as you’re
not locked into a lifetime policy.
Can replace your or your spouse’s
income on a temporary basis.
Will cover your children until
they are financially stable on their own.
Is active for the same length as
certain financial responsibilities—e.g., a car loan or remaining years on a
mortgage.
Whole Life Insurance Offers
Lifetime Coverage
Like with term life policies, whole life
policies award a death benefit when you pass. This benefit is decided by the
amount of coverage you purchase, but you can also add riders that accelerate
your benefit or expand coverage for covered types of death.
The biggest difference between term life and
whole life insurance is that the latter is a type of permanent life insurance.
Your policy has no expiration date. That means you and your family benefit from
a lifetime of protection without having to worry about an unexpected event
occurring after your term has ended.
The Pros and Cons of Whole Life
As if a lifetime of coverage wasn’t enough of
advantage, whole life insurance can also be a highly useful financial planning
tool:
Cash value: When you make a premium payment on
your whole life policy, a portion of that goes toward an account that builds
cash up over time. Your
family gets this amount in addition to the death benefit when their claim is
approved, or you can access it while living. You pay taxes only when the money
is withdrawn, allowing for tax-deferred growth of cash value. You can
often access it at any time, invest it, or take a loan out against it. However, be aware that anything
you take out and don’t repay will eventually be subtracted from what your
family receives in the end.
Dividend payments: Many life insurance
companies offer whole life policyholders the opportunity to accrue dividends
through a whole life policy. This works much like how stocks make dividend
payments to shareholders from corporate profits. The amount you see through a dividend payment is
determined by company earnings and your provider’s target payout ratio—which is
the percentage of earnings paid to policyholders. Some life insurance
companies will make an annual dividend payment to whole life policyholders that
adds to their cash value.
Some potential downsides to consider include:
Higher cost: Whole life is more expensive than
term life, largely because of the lifetime of coverage. This means monthly
premiums that might not fit every household budget.
Interest rates on cash value loans: If you need emergency extra
money, a cash value loan may be more appealing than a standard bank loan, as
you don’t have to go through the typical application process. You can also get
lower interest rates on cash value loans than you would with private loans or
credit cards. Plus, you don’t have to pay the balance back, as you’re basically
borrowing from your own stash. But if you don’t pay the loan back, it will be
money lost to your family.
Whole Life Is Great for Estate Planning
Who stands to benefit most from a whole life
policy?
Young adults and families who can
net big savings by buying a whole life policy earlier.
Older families looking to lock in
coverage for life.
Those who want to use their policy
as a tool for savings or estate planning.
To that last point, whole life policies are particularly advantageous in overall financial and estate planning compared to term life. Cash value is the biggest and clearest benefit, as it can allow you to build savings to access at any time and with little red tape.
Also,
you can gift a whole life policy to a grandchild, niece or nephew to help
provide for them. This works by you opening the policy and paying premiums for
a set number of years—like until the child turns 18. Upon that time, ownership
of the policy is transferred to them and they can access the cash value that’s
been built up over time.
If you’re looking for another low-touch way to leave a legacy, consider opening a high-yield savings account that doesn’t come with monthly premium payments, or a normal investment account.
What to Do Before You Buy a
Policy
Make sure you take the right steps to finding
the best policy for you. That means:
Researching different life insurance companies and their policies, cost and riders. (You can start by reading our review of Bestow.)
Balancing your current and long-term needs to best protect your family.
Buying the right amount of coverage.
If you’re interested in taking next steps, talk to your financial advisor about your specific financial situation and personal needs.
Real estate tech provider SitusAMC has snapped up Assimilate Solutions, a provider of mortgage and title knowledge process outsourcing and information technology outsourcing.
The move, SitusAMC said in a statement, is part of the company’s recent expansion throughout India. It also builds on the extension of the firm’s residential origination offerings, including the launch of its SAFE Act licensed loan processing and fulfillment service. The Assimilate management team will be retained by SitusAMC, according to the release.
“We are excited to gain not only the deep mortgage domain services professionals from Assimilate but also to add a strong bench of information technology outsourcing solutions for our clients, so we can help them implement transformative solutions for their business, including those technologies offered by SitusAMC,” said SitusAMC CEO Michael Franco. “This acquisition provides us with an optimized business model leveraging a combination of onshore and offshore staff that can support our clients’ licensed and non-licensed activity needs in a nimble, technology-enabled environment, which will drive better outcomes for everyone we serve.”
Founded in 2012, Assimilate offers mortgage services offering, including loan origination, closing and post-closing, loan servicing, secondary market activity, and title and settlement support. The company also provides technology support on product development, data intelligence and analytics, integration management, test engineering, application development, and digital acceleration.
“We are thrilled to join SitusAMC and contribute to the vision of transforming the real estate finance industry through innovative technology and best-in-class domain-centric business services,” Amit Gujral, co-founder and CEO of Assimilate said.
The deal comes on the heels of SitusAMC’s acquisition of mortgage tech startup ReadyPrice early this year. SitusAMC said that it would begin to offer integrated solutions for brokers and lenders using ReadyPrice in 2021.
Average mortgage rates edged lower yet again yesterday. And they’re now tantalizingly close to the all-time low.
But early signs in markets suggest the recent run of falls may be ending. And mortgage rates today could rise or hold steady.
Find and lock a low rate (Jan 26th, 2021)
Current mortgage and refinance rates
Program
Mortgage Rate
APR*
Change
Conventional 30 year fixed
2.745%
2.745%
Unchanged
Conventional 15 year fixed
2.362%
2.362%
Unchanged
Conventional 5 year ARM
3%
2.743%
Unchanged
30 year fixed FHA
2.495%
3.473%
Unchanged
15 year fixed FHA
2.438%
3.38%
Unchanged
5 year ARM FHA
2.5%
3.226%
Unchanged
30 year fixed VA
2.25%
2.421%
Unchanged
15 year fixed VA
2.25%
2.571%
Unchanged
5 year ARM VA
2.5%
2.406%
Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.
Find and lock a low rate (Jan 26th, 2021)
COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.
Should you lock a mortgage rate today?
After eight days without a rise, you may decide mortgage rates are on a roll. And you may be proved right, though that’s not looking so likely right now. Still, nobody could blame you for continuing to float your rate.
But read on for reasons to think twice. Because, if you see yourself as cautious with money, you might well decide to lock now — certainly if you’re due to close within the next 30 days.
So my personal rate lock recommendations, which are little better than hunches, are:
LOCK if closing in 7days
LOCK if closing in 15 days
LOCKif closing in30 days
FLOAT if closing in 45 days
FLOATif closing in 60 days
Still, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So be guided by your gut and your personal tolerance for risk.
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:
The yield on 10-year Treasurysedged down to 1.04% from1.06%. (Good for mortgage rates) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
Major stock indexes were higheron opening. (Bad for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
Oil pricesrose to $52.98 from$52.22 a barrel. (Bad for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.)
Gold pricesnudged down to $1,855 from$1,864 an ounce. (Neutral for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower
CNN Business Fear & Greed index — Fell to 66 from 68 out of 100. Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones
*A change of less than $20 on gold prices or 40 cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic and the Federal Reserve’s interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. The Fed is now a huge player and some days can overwhelm investor sentiment.
So use markets only as a rough guide. Because they have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. But, with that caveat, so far mortgage rates today look likely to inch higher or hold steady.
Find and lock a low rate (Jan 26th, 2021)
Important notes on today’s mortgage rates
Here are some things you need to know:
The Fed’s ongoing interventions in the mortgage market (way over $1 trillion) should put continuing downward pressure on these rates. But it can’t work miracles all the time. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand this aspect of what’s happening
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read How mortgage rates are determined and why you should care
Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the wider trend over time
When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases. But some types of refinances are higher following a regulatory change
So there’s a lot going on here. And nobody can claim to know with certainty what’s going to happen to mortgage rates in coming hours, days, weeks or months.
Are mortgage and refinance rates rising or falling?
Today and soon
I’m expecting mortgage rates to move a little higher or remain the same today. But, as always, that could change as the day progresses.
But you need to recognize that floating presents a risk for three reasons:
Eight days of falls is nothing in these markets. And no professional would discern a trend from such a brief period
If mortgage rates had acted yesterday as they normally do in relation to other bond yields, they’d have risen. They may be playing catch-up this morning
The long-term forces that are trying to push these rates upward haven’t gone away. And they may not lose out forever
For more background on my thinking, read our latest weekend edition, which is published every Saturday soon after 10 a.m. (ET).
Recently
Over the last several months, the overall trend for mortgage rates has clearly been downward. And a new, weekly all-time low was set on 16 occasions last year, according to Freddie Mac.
The most recent such record occurred on Jan. 7, when it stood at 2.65% for 30-year fixed-rate mortgages. But rates have risen since. And in Freddie’s Jan 21 report, that weekly average was 2.77%. However, even more recent falls mean these rates start out this morning very close to that Jan. 7 record.
Expert mortgage rate forecasts
Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their current rates forecasts for each quarter of 2021 (Q1/21, Q2/21, Q3/21 and Q4/21).
Fannie’s were released on Jan. 15, Freddie’s on Jan. 14 and the MBA’s on Jan. 20. The numbers in the table below are for 30-year, fixed-rate mortgages:
Forecaster
Q1/21
Q2/21
Q3/21
Q4/21
Fannie Mae
2.7%
2.7%
2.8%
2.8%
Freddie Mac
2.9%
2.9%
3.0%
3.0%
MBA
2.9%
3.1%
3.3%
3.4%
But, given so many unknowables, the current crop of forecasts may be even more speculative than usual. And there’s certainly a widening spread as the year progresses.
Find your lowest rate today
Some lenders have been spooked by the pandemic. And they’re restricting their offerings to just the most vanilla-flavored mortgages and refinances.
But others remain brave. And you can still probably find the cash-out refinance, investment mortgage or jumbo loan you want. You just have to shop around more widely.
But, of course, you should be comparison shopping widely, no matter what sort of mortgage you want. As federal regulator the Consumer Financial Protection Bureau says:
Shopping around for your mortgage has the potential to lead to real savings. It may not sound like much, but saving even a quarter of a point in interest on your mortgage saves you thousands of dollars over the life of your loan.
Verify your new rate (Jan 26th, 2021)
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
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