Health care

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The Federal Reserve already had some tough decisions to make at its meeting later this month and the May jobs report is not making things any easier. Job growth surprised economists yet again in May, with total nonfarm payroll employment rising by 339,000 jobs compared to April, according to data released Friday by the Bureau of Labor Statistics. 

This increase is in line with the average monthly gain of 341,000 jobs over the past 12 months.

However, as more people entered the workforce in May, the unemployment rate ticked up to 3.7%, compared to 3.4% in April, with the total number of unemployed persons rising to 6.1 million. The unemployment rate has remained between 3.4% and 3.7% since March 2022.

“Even though the pace of layoffs has picked up, many businesses, particularly in transportation, healthcare, and hospitality, continue to have strong demand for workers,” Mike Fratantoni, the Mortgage Bankers Association’s chief economist, said in a statement. “Data earlier this week showed that job openings in April increased to over 10 million postings once again.”

The lion’s share of the job growth in April came from gains in the professional and business services sector (up 64,000 jobs), the leisure and hospitality sector (up 48,000 jobs), the government sector (up 56,000 jobs), and the health care sector (up 52,000 jobs).

The construction sector also saw job gains in May, adding 25,000 positions, thanks to a large uptick in heavy and civil engineering construction, which added 10,700 jobs. Residential building construction added 2,400 jobs during the month. Over the past 12 months, the construction sector has added an average of 17,000 jobs per month.

“The Federal Reserve’s monetary tightening has negatively impacted the housing industry, a very interest-rate sensitive sector, but the construction labor market has not experienced a sharp decline,” Ksenia Potapov, a First American economist, said in a statement. “The continued strength is partially due to the years-long struggle that builders have had attracting and retaining skilled construction workers, making them less likely to part with skilled workers, even in a weaker housing market.”

The real estate and rental and leasing sector also added jobs in May, with employment rising by 2,800 jobs. The gains were split fairly evenly, with real estate adding 1,200 and rental and leasing adding 1,500 jobs.

In February 2020, a combined 300,000 were employed in “real estate credit” and as mortgage and non-mortgage loan brokers. As of April 2023, there were roughly 342,100 people in those jobs, up slightly from the 340,800 in March, thanks to a slight in the number of mortgage and non-mortgage loan brokers employed. With the housing market remaining at a much cooler level than last year, there is still the potential for further cuts in these sectors.

But while the number of employed persons rose in May, wage growth held steady for the month prior at a 4.3% year-over-year increase, further complicating things for the Fed.

The Wall Street Journal, citing sources, reported Thursday that the Fed is increasingly likey to pause rate hikes at its June meeting. But that was before the jobs report came out.

“The Federal Reserve may be hoping for a soft landing, but its main priority is bringing down inflation. If the Fed perceives the economy to be too hot, it’s likely to push on the monetary tightening pedal,” Potapov said. “The Fed remains data dependent and April’s FOMC statement did not explicitly state—only hinted—that the Fed would pause rate hikes. The above-expectation job gains in May increases the likelihood that more rate hikes are ahead.”

Industry experts predict that this uncertainty will lead to mortgage rates remaining around their current level.

“For now, mortgage rates, which have already hit an eight-month high last month, will likely stay elevated and continue to constrain housing market activity this summer,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “Home prices will continue to soften though prospective buyers should not expect to see sellers slashing prices, as the inventory of homes for sale remains tight.”

Source: housingwire.com

Apache is functioning normally

As unemployment numbers continue to rise, many employees are stressed about whether they’ll have a job next week or not.  Some have already, some have already lost their jobs and are scrambling to find new employment.   In this time financial planning is crucial.  This is a time when people are feeling and are desperately in need of guidance.  If you think that you are about to encounter a layoff,  you need to be focusing your attention on what can be controlled:  cutting expenditures, figuring out emergency funds, evaluating how to replace lost benefits, and making a game plan for the job search.

1. Save Emergency Cash

For those that are still employed but the future of their job is uncertain, I would encourage them to have at least 12 months of savings in cash.  Unfortunately many will not have enough.  But if they’re still employed and the emergency funds are not there, tapping into their 401(k) might be a viable option.  I know what you’re thinking.  Tapping into your 401k usually goes against all that I stand for.  And with this dismal market,  it might be a dangerous move, but;  if they become unemployed that option might now be available to them.

Typically if you’re still employed you’re allowed borrow up to half of your 401(k) balance, up to a maximum of $50,000.  Running these numbers you can guesstimate the period of how long you think it will take you to find a new job and then how much you would need to borrow to get you by until the new job is made.  If you borrow from your 401k while you are still employed then you avoid the 10% withdrawal penalty.  Sure there is some speculation in this move, but if you’re in a high demand field you may be able to use this move to your advantage.

Warning: If you do this, be sure to double check with your employer when you are due to pay it back.  It tends to vary from employer, but it could be due back immediately, within 60 days or some period greater.

2. Don’t Pay Off Debt

Another common misconception of after being laid-off is that most people want to take their savings or take their retirement savings and pay off debt, such as credit cards or even the 401(k) debt.  But in this type of market, paying off debt should not be the priority especially if you are unemployed.  The priority is to keep get your savings intact and making sure that you have plenty of cash on hand.  Sure credit card debt is bad, but just focus on making the minimum payment until you get your job situation in check.

3. Focus On Crisis Budgeting

If you’re used to going to shopping every weekend or eating out every other night at fancy restaurants, then most likely those changes are just around the corner. You need to sit down and seriously hammer out a budget of things that you need and things that you don’t need.

You may even consider working out two budgets, one for while you’re working and one for when you’re not working, so that way you can truly see how much you’re spending per month. And then, you can contemplate whether you can go on a cheaper cell phone plan, or cut your cable bill services. Sometimes adding that extra payment per month might not seem like a big deal, but $50 here and $50 there will surely add up, especially on a limited budget. Also, too, knowing which expenses you absolutely must be covered will help you realistically search for your future job.

4. Replace Lost Benefits

In the aftermath of a job loss, people should take stock of what benefits have been lost, which ones you are entitled to by law, and which ones may be portable.  how to continue health care coverage, especially if there are dependents.

Typically, employees are eligible to keep the same coverage through COBRA for at least 18 months. But, they may have to pay 102% of the cost of their insurance premium. If there premium have been subsidized by their employer, then that cost will be a rude shock.  COBRA can often be a good bridge choice, but it ends up being a health benefit. Families paying $200 a month for insurance under COBRA, it could be $1,000.  Luckily, the government just passed new law concerning COBRA benefits that qualifying period will be only responsible to pay for 35% of the benefit.  This comes at a time that should be very helpful to many that are facing layoffs ahead.

Many employers offer life insurance, long-term care insurance, disability policies and they may be portable as well. For another person or one who is not in good health, ability to take over the payments on existing $100,000 life insurance policy may save the worry of having to find another carrier. It’s better to keep it for a few months, although make sure they don’t need it, and drop it later.

5. Consider a Career Transition

Many people will be forced by an unforeseen job layoff to reassess what they want in their lives and what is meaningful to them. They may have to craft resumes, cover letters for the first time in years, and feel at a loss especially if they are switching to a new career path, which is an unfamiliar field.

If you haven’t jumped on the social media bandwagon, it’s time.  Consider Facebook, LinkedIn, Twitter and other social media sites to reconnect with old networks and also create new ones.  The more people that know your situation the better.   Also, consider starting a blog to showcase your talents. Need a good blog for inspiration?  Guess what, you’re already here.

by Steve Rhodes

Source: goodfinancialcents.com

Apache is functioning normally

Federal law requires birth control for people who can get pregnant to be free and widely accessible across most insurance plans. In reality, many people wind up paying something out of pocket for birth control.

In 2010, the Affordable Care Act, under its Women’s Preventive Services Guidelines, mandated that all health insurance plans in the public marketplace cover at least one form of the 18 FDA-approved types of contraceptives. Those insurers must also cover appointment costs for in-network providers.

But depending on state law, some employers can refuse birth control coverage in the plans they offer employees and their dependents. And even if that’s not the case, getting free birth control in a person’s desired form can be tough, according to a 2021 NPR report — and plenty of personal accounts on Reddit.

The report shows that private insurers often cover only older or generic forms of contraception. And those “free” appointments? Patients must sometimes challenge their insurance companies over consultation charges that should’ve been waived.

How much is birth control?

In a 2021 study on the real-world costs of birth control pills, the telehealth company GoodRX found the following:

  • Among people with insurance, the average annual cost of birth control pills was $226.

  • For people without insurance, that figure rose to $268 per year.

  • For those paying cash at the pharmacy for birth control, the average cost of a 30-day supply of birth control pills ranged from $22 to $79 for the most popular contraceptives.

  • The average annual, out-of-pocket cost associated with appointments or consultations for birth control was $87, regardless of insurance status. 

Is birth control free …

… at Planned Parenthood? Birth control pills might be free at your local Planned Parenthood health center, depending on whether you have insurance, Medicaid or qualify for certain government programs. Planned Parenthood can help you find low-cost birth control solutions that fit your budget; you can visit a health center to learn more.

And depending on which state you call home, you should be able to get birth control pills prescribed and mailed to you for as little as $20 per pack, via the Planned Parenthood Direct mobile app.

… with insurance? Access to free birth control pills is federally mandated if you’re covered through the ACA or most private insurance plans. Specifically, the ACA requires insurers to fully cover at least one form of each FDA-approved contraceptive, such as pills, patches, vaginal rings and intrauterine devices (IUDs).

However, new forms of birth control for people who can get pregnant aren’t regularly added to the list of covered contraceptives, and some insurance companies refuse to cover certain forms of birth control if they cover an older version of a similar product. An insurance company may also offer only the generic version of a product.

Visit your health insurer’s patient portal or call the company for more specific coverage details.

… without insurance? If you don’t have insurance or coverage through the ACA marketplace, it might be difficult to access free birth control. There are relatively low-cost options through online health care providers like GoodRX, Hers, Lemonaid and others. Those providers typically charge a fee for your appointment, though. (This Medical News Today article lists options for getting birth control online, along with prices.)

How to get birth control

To get birth control pills, you can reach out to your local Planned Parenthood clinic to see what free or low-cost options are available to you. If you have insurance through your employer, you can call your insurance company or access its patient portal to find providers covered under your plan.

Or check out one of those online health care providers and telehealth companies mentioned above, which can prescribe birth control at relatively low costs.

What states have banned birth control?

No states have banned birth control; contraceptives, such as the birth control pill, are still legal and available in all 50 states. However, the U.S. Supreme Court’s overturning of Roe v. Wade in June 2022 has cast uncertainty over broader access to other forms of reproductive health care.

In a concurring opinion on the court’s overturning of Roe v. Wade, Justice Clarence Thomas wrote that the court should reconsider other legal precedents, including Griswold v. Connecticut, a 1965 ruling that essentially prohibited states from banning contraceptives for married couples. The Griswold v. Connecticut decision led to a constitutional right to privacy in reproductive health care matters, as well as the legalization of contraceptives for people who aren’t married.

In July 2022, The House of Representatives passed a bill that would have cemented the right to birth control, but the measure was blocked in the Senate.

Most recently, in December 2022, a U.S. district judge in Texas ruled that federally funded clinics cannot provide birth control to minors without parental consent. That decision has some reproductive health experts concerned about future attempts to limit access to birth control.

Source: nerdwallet.com

Apache is functioning normally

Financial success can be due to making good decisions or avoiding big mistakes. In many cases, the biggest mistakes happen after good decisions, because the stakes have become higher.

As an example, let’s consider the dilemma of Motley Fool reader Jim, who emailed us this question: “Did I make a substantial error when taking money out of my IRA?”

To help answer that question, Jim sent along some details:

  • He’s retired.
  • His IRA was worth $325,000.
  • He couldn’t get a mortgage.
  • He used $150,000 of his IRA to buy a house.
  • He receives $24,000 annually from Social Security.

Now, that’s not all the information we’d need to determine whether he treated his IRA with TLC. But from what he told us, I’m going to make an initial diagnosis: He made a few mistakes.

As a cautionary tale for all us retiree wannabes, let’s take a look at some important lessons from Jim.

Lesson #1: Crunch your numbers before you retire

The good thing that Jim did was save for retirement. In fact, he had a bigger nest egg than most retirees, according to the Employee Benefit Research Institute’s 2012 Retirement Confidence Survey. Only 15 percent of the participating retirees reported having more than $250,000 saved up.

Unfortunately, being significantly above average still may not be good enough, especially since it’s my opinion — based on studies and anecdotal evidence — that too many people retire too early. (NPR’s series about Americans working longer mentioned a woman in her 90s who had to go back to work.) Having more than most retirees may be like being one of the best players on the practice squad.

Determining whether you have enough to retire can be a complicated analysis, perhaps best done by paying a fee-only financial planner who charges by the hour or by the project — such as many of the folks in the Garrett Planning Network — to help with the ‘rithmetic. However, for the purposes of this article, we’ll use the 4 percent withdrawal rate rule: a rule of thumb that says retirees should withdraw no more than 4 percent of their portfolio in the first year of retirement, and then adjust that amount every subsequent year for inflation. (There’s plenty of debate about whether 4 percent is actually best number, but it’s good enough for this discussion.) So, 4 percent of Jim’s $325,000 IRA is $13,000. Add it to Social Security, and he has income of $37,000.

But wait! He no longer has $325,000. That’s because he didn’t know about Lesson #2, which is…

Lesson #2: Get a mortgage before you retire

Ideally, you kill your mortgage (after all, “mort” is “death” in Latin, and the “gage” part means “pledge”) before you quit your job. However, if you’re in the position of needing a mortgage in your 60s, you’ll be more likely to get one while you’re still working because you’re still earning a paycheck and likely have a higher income. Also, it’s against IRS rules to use an IRA as collateral for a loan.

Lesson #3: Avoid large traditional IRA distributions

Unfortunately for Jim, he didn’t get a mortgage, so he made a $150,000 withdrawal from his IRA. Assuming this is a traditional tax-deferred IRA, that withdrawal was taxed as ordinary income — likely vaulting him from the 15 percent tax bracket to the 28 percent tax bracket. Thus, to have $150,000 to spend on a house, he likely would have withdrawn something closer to $180,000 to cover both the price tag and tax tag.

All still may not be lost

Assuming Jim has $145,000 left in his IRA (i.e., he withdrew $180,000 from the $325,000 he had), applying the 4 percent rule of thumb to that amount (resulting in $5,800), and adding that to his Social Security ($24,000) gives Jim an estimated annual income of approximately $29,800. According to the Department of Labor’s 2010 Consumer Expenditure Survey, the average household led by someone age 65 or older has annual expenditures of $36,802. Jim might be OK if he keeps his retirement modest; he doesn’t have a mortgage, so he just needs to worry about maintenance as well as food, utilities, transportation, taxes (which will be low for him going forward), and health care (not so low, and growing). Also, if he needs extra funds, he can get a reverse mortgage, which could add another few thousand dollars of annual income, depending on his age. However, this doesn’t leave much room for unexpected big-ticket home repairs or health repairs.

Even though he’s retired, it’s not too late for Jim to crunch his numbers to determine whether he can be reasonably sure that his portfolio will last the rest of his life. If it looks like that isn’t likely, then he has to change one of the key variables – income (i.e., go back to work), expenses (lower them further), or life (shorten it — the least-attractive option). Even working for a few more years, even part-time, can have a powerful impact on your retirement security. And it’s better to do it now rather than wait until your 90s.

Source: getrichslowly.org

Apache is functioning normally

On any given night in America, more than 600,000 people experience homelessness, according to USA Today.

A recent 5-part New York Times feature places a face on the horrors of homelessness.

With the holidays approaching, you may feel moved to help the homeless in your own community. If you’re looking for community service opportunities that help provide others with affordable housing, here’s a guide to help you get started.

Homelessness in America
Homelessness is defined as living on the street for more than one year or experiencing four or more short bouts of homelessness over a recent period of time. Of the 600,000 homeless people in America, roughly a third are families. 13 percent are military veterans. 16 percent are considered “chronically homeless,” those who have been homeless over a long period and typically have a disability.

According to the National Coalition for the Homeless, Americans become homeless for a number of reasons. Families often become homeless as the result of an unforeseen financial crisis like foreclosure, medical emergency, death in the family or a lack of good job opportunities. For individuals, homelessness is often the result of a disability, mental illness, domestic violence or a lack of affordable health care.

There are many reasons why a person may become unable to afford housing. Whatever the situation, homelessness is typically the result of complex circumstances that force people to make tough choices between food, housing and other basic needs.

Fight homelessness in your neighborhood
If you’d like to help make a positive impact on the homeless issue in your community, there are many ways that you can help, from making donations to volunteering your time.

Here are a few national volunteer organizations working to help fight homelessness and create affordable housing:

  • Move for Hunger. Working in partnership with professional moving companies in 47 states, Move for Hunger collects non-perishable food items from people who are moving to new apartments. Instead of throwing away your extra food when you move, you can call Move for Hunger and have them come to your apartment to pick up donations.
  • Dress for Success. Providing suits to women who have job interviews, Dress for Success aims to empower women to get back on their feet after hardships like homelessness. You can donate your new or nearly-new professional attire to the organization or give money, which is used for career assistance programs. Whenever you clean out your closet —whether you’re moving or not — you can donate to a local chapter of Dress for Success. They accept donations year-round.
  • National Alliance to End Homelessness. The National Alliance to End Homelessness suggests there are many ways you can work to end homelessness, ranging from writing your lawmakers about policy to participating in fundraising efforts or working for Housing First organizations that provide apartments for the homeless.
  • Mercy Housing. Helping to provide affordable apartments for everyone, Mercy Housing operates apartment communities for low-income tenants. You can volunteer by helping with maintenance around these communities, by tutoring or teaching job assistance or financial education classes, or by providing administrative support.

Looking for more ideas? Search online for opportunities in your neighborhood or surrounding areas. A good resource to consult is Volunteer Match, a website that allows you to search for non-profit organizations in your own backyard. From the main page, you can browse community service opportunities by issues you care about, including homelessness.

Photo credit: Shutterstock / wavebreakmedia

Apache is functioning normally

Generally speaking, value stocks are shares of companies that have fallen out of favor and are valued less than their actual worth. Growth stocks are shares of companies that demonstrate a strong potential to increase revenue or earnings thereby ramping up their stock price. The terms value and growth refer to both two categories of stocks and two investment “styles” or approaches of investing in stock.

Each style has pros and cons. When value investing, investors can buy shares or fractional shares of a company that has strong fundamentals at bargain prices. However, investors must be careful not to fall in a “value trap”—buying stocks that appear cheap, but are actually trading at a discount due to poor fundamentals.

What Are Value Stocks?

When investors hunt for value stocks, they are looking for stocks that are relatively cheap, unfashionable, or that they believe aren’t receiving a fair market valuation. Value investors try to identify value stocks by examining quarterly and annual financial statements and comparing what they see to the price the stock is getting on the market.

Investors will also look at a number of valuation metrics to determine whether the stock is cheap relative to its own trading history, its industry, and other benchmarks, such as the S&P 500 index.

For example, investors often look at price-to-earnings (P/E) ratio, which is the ratio of price per share over earnings per share. Some experts say that a value stock’s P/E should be 40% less than the stock’s highest P/E in the previous five years.

Investors may also look at price-to-book, which is the price per share over book value per share. A stock’s book value is a company’s total assets minus its liability and provides an estimate of a company’s value if it were liquidated.

Value investors are hoping to buy a quality stock when its price is in a temporary lull, holding it until the market corrects and the stock price goes up to a point that better reflects the underlying value of the company.

What Could Make a Stock Undervalued?

There are a number of reasons that a stock could be undervalued.

•   A stock could be cyclical, meaning it’s tied to the movements of the market. While the company itself might be strong, market fluctuations may temporarily cause its price to dip.

Recommended: Cyclical vs Non Cyclical Stocks

•   An entire sector of the market could be out of favor, causing the price of a specific stock to dip. For example, a pharmaceutical company with an effective new drug might be priced low if the health care sector is generally on the outs with investors.

•   Bad press could cause share prices to drop.

•   Companies can simply be overlooked by investors looking in a different direction.

What Are Growth Stocks?

Growth stocks are shares of companies that demonstrate the potential for high earnings or sales, often rising faster than the rest of the market. These companies tend to reinvest their earnings back into their business to continue their company’s growth spurt, as opposed to paying out dividends to shareholders. Growth investors are betting that a company that’s growing fast now, will continue to grow quickly in the future.

To spot growth stocks, investors look for companies that are not only expanding rapidly but may be leaders in their industry. For example, a company may have developed a new technology that gives it a competitive edge over similar companies.

There are also a number of metrics growth investors may examine to help them identify growth stocks. First, investors may look at price-to-sales (P/S), or price per share over sales per share. Not all growth companies are profitable, and P/S allows investors to see how quickly a company is expanding without factoring in its costs.

Investors may also look at price-to-earnings growth (PEG), which is P/E over projected earnings growth. A PEG of 1 or more typically suggests that investors are overvaluing a stock, while PEG of less than one may mean the stock is relatively cheap. PEG is a useful metric for investors who want to consider both value and growth investing.

Investors jumping into growth stocks may be buying a stock that is already valued relatively high. In doing so, they run the risk of losing a potentially significant amount of money if an unforeseen event causes prices to tumble in the future.

How Are Growth and Value Strategies Similar?

While growth and value investing are two different investment strategies, distinctions between the two are not hard and fast — there can be quite a bit of overlap. Investors may see that stocks listed in a growth fund are also listed in a value fund depending on the criteria used to choose the stock.

What’s more, growth stocks may evolve into value stocks, and value stocks can become growth stocks. For example, say a small technology company develops a new product that attracts a lot of investor attention and it starts to use that capital to grow its business more quickly, shifting from value to growth.

Investors practicing growth and value strategies also have the same end goal in mind: They want to buy stocks when they are relatively cheap and sell them again when prices have gone up. Value investors are simply looking to do this with companies that are already on solid financial footing, and hopefully, see stock price appreciation should rise as a result. And growth investors are looking for companies with a lot of potential whose stock price will hopefully jump in the future.

Using Growth and Value Strategies Together

The stock market goes through natural cycles during which either growth or value stocks will be up. Investors who want to capture the potential benefits of each may choose to employ both strategies over the long term. Doing so may add diversity to an investor’s portfolio and head off the temptation to chase trends if one style pulls ahead of the other.

Investors who don’t want to analyze individual stocks for growth or value potential can access these strategies through growth or value funds. Because of the cyclical nature of growth and value investing, investors may want to keep a close eye on their portfolios to ensure they stay balanced — and consider rebalancing their portfolio if market cycles shift their asset allocation.

The Takeaway

Growth and value are different strategies for investing in stocks. Investing in growth stocks is considered a bit riskier, though it also may provide potentially higher returns than value investing. That said, growth stocks have not always outperformed value stocks.

As a result, some investors may choose to build a diversified portfolio that includes each style so they have a better chance of reaping benefits when one is outperforming the other.

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Apache is functioning normally

How much do you need to retire? The usual suggestion provided by financial planners and retirement calculators is 75% to 85% (roughly 80%) of your pre-retirement income. But is that really enough money to retire with security? Does the 80% rule-of-thumb work under all circumstances, or is it merely a rough approximation to simplify the retirement planning process? Let’s examine these issues more closely…

Is 80% Of Pre-Retirement Spending A Realistic Budget?

The basis for the 80% spending rule is that your living expenses are expected to decline once you retire thus your spending should decrease without forcing you to lower your lifestyle. For example, you’ll no longer need to purchase expensive professional clothing and your transportation costs will drop without a daily commute to work. Additionally, your children will probably be grown and out of the house, and you will no longer have to fund your retirement savings. You may even have your home paid in full thus eliminating your mortgage payment and you may be in a lower tax bracket. All these factors indicate your spending should drop during retirement.

Unfortunately, the issue is not as clear as it might appear on the surface. The analysis above assumes certain types of spending will decrease while all other spending remains the same. That is not realistic. For example, many new retirees like to hit the open road and see the world thus increasing their travel budgets. Similarly, it is the rare retiree who does not face rising health care costs.

In short, the 80% rule of thumb is a generalization designed to simplify the retirement planning process at the expense of accuracy. It makes many assumptions about your future that may not be true for you. It is no substitute for making a real budget based on your actual plans for retirement, and it could actually jeopardize your financial security. To make this point clear we will examine five reasons why your expenses may actually increase during retirement instead of decrease…

Longer And More Active Retirements

People are living longer and more active retirement lifestyles than ever before. Increasing longevity has made 60 the new 40. If you plan an early retirement so you can sail around the world or take frequent wine-tasting trips to France and Italy, the cost of those leisure activities and travel can easily offset any decrease in work-related expenses. Alternatively, if you are planning an early retirement it will mean you need more money to support a longer life of leisure. A longer retirement means you can’t spend as much investment principal each month, and a more active retirement means you need more savings and income to support a more expensive lifestyle.

Health Care In Retirement

Health care costs have risen steadily and there is every reason to believe that trend will continue. Additionally, your chances of serious illness or need for expensive medications increases with age. A single medical event can be devastating to your retirement savings if you are not prepared, and if you don’t have long term care insurance then assisted living or nursing home expenses can deplete your retirement savings.

Other Ways Expenses Could Rise

Maybe you haven’t paid off your house, or possibly you took out a home equity loan to remodel. The 80% rule-of-thumb assumes you no longer support dependents, but you may still be paying a child’s college expenses. Alternatively, you might be caring for an aging parent who is living in your home. These expenses certainly won’t go away just because you retire.

Lower Taxes May Be Wrong

The assumption that your taxes will drop during retirement could be totally incorrect. After all, if your retirement income level is similar to pre-retirement income then where will the tax relief come from? In addition, growing budget deficits at all levels of government combined with entitlement program problems indicates a greater likelihood of rising tax rates rather than falling tax rates. In short, the idea that your tax rate will decrease during retirement may turn out to be just the opposite.

Spending Statistics Misrepresent Real Spending

Many research studies have been conducted on the spending patterns of the elderly. One of the more famous studies comes from Ty Bernicke in the Journal of Financial Planning where he cites numbers from the U.S. Department of Labor’s Consumer Expenditure Survey indicating that retirees spend less as they age. A typical 75-year-old spends about half as much as the average 45-to-54-year-old. Overall, spending declines about 25% each decade from age 55 to 75.

This appears to be conclusive evidence that spending does in fact decline with age during retirement; however, there are a couple of major flaws in the research. The first problem results from these figures failing to include long term care costs. You can solve that problem with insurance but there is no solution to the next problem…

Bernicke’s analysis was based on a snapshot in time thus it only compares nominal dollar spending and does not adjust for inflation. In other words, it compares the spending habits of a 75 year old today to the spending habits of a 45 year old on the same day. It does not track a 45 year old over a period of 30 years to determine if their spending decreases with time as the study would imply. Instead, it compares the two different groups at a single point in time.

The problem with this approach is it fails to adjust spending for inflation. A mere 3% inflation will double spending in just 25 years which will more than offset the expected reduction claimed by Bernicke’s research. In fact, it could potentially cause an increase in spending – contrary to what his research would imply.

A More Accurate Approach For Determining How Much Money You Need To Retire

In summary, you would be wise to forget the oversimplified rules of thumb when trying to figure out how much money to retire. Your financial security is at stake and you deserve better. Instead, it is far more prudent to develop a realistic budget for your retirement spending based on your actual retirement plans. You don’t have to make it perfect because nobody can predict the future, but you do want to make it as accurate as you can.

A personal budget for retirement is necessary because your life situation is unique. Only you know the financial situation facing your maturing children and aging parents that might affect your budget. Only you know about your globetrotting plans to travel the world for a decade or two before slowing down. That means you will need to add that expense into your budget for a decade or two before removing it. If you have long term care insurance then add the premiums as an expense into your budget, and if you don’t then build a cushion into your savings for self-insurance. In short, develop a plan for retirement and then develop a budget to reflect your plan.

When you complete the budgeting process you may be happily surprised to learn you only need 60% of pre-retirement income making you better off than expected – or your dreams could require 140% of pre-retirement income causing a challenge. This is key to your financial security because the difference between these two numbers can either break the back of your retirement savings or make a meager nest egg look plentiful. Because the range of outcomes is so wide and the stakes are so high, the only realistic solution is to replace the rule of thumb with a carefully developed retirement budget based on your unique needs to figure out how much you really need for retirement.

It is the only prudent thing to do.

About The Author

Todd R. Tresidder is a financial coach who blogs about retirement planning, wealth building and investment strategy. He wrote the book How Much Money Do I Need To Retire teaching you how to overcome the hidden problems behind retirement calculators that threaten your financial security.

Source: goodfinancialcents.com

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By Peter Anderson 1 Comment – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited August 25, 2011.

Over the past few years of personal finance blogging one of the companies that I’ve heard recommended time and again as one of the best places to invest is Vanguard. The reasons why people love them so much include the facts that they have low costs as compared to so many other companies, they offer a diverse set of index funds to choose from, and even some of their actively managed funds are super affordable when compared to the competition.

Another thing that a lot of folks like is that it is relatively easy to buy into mutual funds at Vanguard with low initial mutual fund investments. Most vanguard funds with exceptions of one, the Vanguard STAR® Fund (which had a $1,000 minimum) had initial investments of around $3000. This past week Vanguard announced that they were lowering the initial investments for a wider range of funds to $1000 in order to make investing with Vanguard that much easier.  In addition a variety of other funds have had their fund minimum lowered to $3000.

Vanguard Lowers Target Retirement Fund Minimums

Vanguard announced that they were lowering their fund minimums for their Target Retirement Funds last week, as well as reducing and standardizing minimums for other fund types.

To help investors take the first step toward a more financially secure retirement, we’re lowering the minimum initial investment for our popular Target Retirement Fund series from $3,000 to $1,000, effective immediately. Previously, only one of our funds, Vanguard STAR® Fund, had a $1,000 minimum.

“Investing early and investing regularly are two of the most important things investors can do to help ensure their retirement readiness,” said Vanguard CEO Bill McNabb. “By reducing the investment requirements for our target-date funds, we hope to encourage more individuals to participate in the financial markets.”

In addition, Vanguard is standardizing the minimum investment for Investor Shares of nearly all our other funds at $3,000. Previously, fund minimums for the affected funds ranged from $3,000 to $25,000. This change reduces the minimum investment for 15 Vanguard funds, including some of our oldest and largest actively managed funds, such as the Wellington™ Fund, Windsor™ II Fund, and Health Care Fund.

Target Retirement Funds Affected

Here’s a list of the Target Retirement Funds affected by the lowered minimums:

  • Target Retirement 2010
  • Target Retirement 2015
  • Target Retirement 2020
  • Target Retirement 2025
  • Target Retirement 2030
  • Target Retirement 2035
  • Target Retirement 2040
  • Target Retirement 2045
  • Target Retirement 2050
  • Target Retirement 2055

Vanguard Now Even Friendlier For Newer Investors

Vanguard has been known as a friendly place for newer and experienced investors alike, but I think that this move will most likely be one that ingratiates them even more to the newer investors who previously may not have had the $3000 to start an account. $1000 is that much more accessible to newer investors who just want to test the waters and get started investing – even if they don’t have a ton of money to work with.

As Vanguard mentions in their post – investing early and regularly are two very important pieces of the puzzle – and this move will most likely help a lot more people to get started earlier.  I think I’ve mentioned in the past that I wished Vanguard would reduce the minimums on their funds – especially the target retirement funds.  Others including Mike at obliviousinvestor.com has also written about how they wished Vanguard would get rid of minimums to make their funds more accessible.   Now they have, and I’m sure investors everywhere are happy with the change.  I know I am.

What do you think?  Are you more likely to invest with Vanguard now that they’ve reduced their minimums for so many of their account types? Do you use Vanguard? Tell us your experience in the comments!

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Source: biblemoneymatters.com

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If you live in Florida — or are thinking of relocating — the Sunshine State has several prestigious colleges and universities, including Embry-Riddle Aeronautical University, the University of Florida and Rollins College.

Higher education is less expensive in Florida than in most other states. The state also operates several robust financial aid programs, such as the Bright Futures scholarship program, that can make college more affordable for residents.

The cost of education in Florida

Florida’s education system includes 40 public colleges and universities. There are also at least 30 private, non-profit schools throughout the state.

Generally, a college education in Florida is cheaper than the national average. Here’s how much you can expect each year of your degree to cost at different types of institutions, based on 2020-21 average tuition rates as reported by the National Center for Education Statistics:

  • Public four-year, in-state: Nationally, the average cost of a public, in-state university was $21,337 per year. In Florida, the cost was $15,543 per year — a difference of almost $6,000. 

  • Private non-profit: Private colleges and universities are usually more expensive than public schools. The average cost of a year at a private school in Florida was $28,860, about $4,500 less than the national average.  

  • Community college: The average cost of attending a two-year school was $3,501 per year at the national level. In Florida, the average cost was $2,506 per year, nearly $1,000 less. 

Financial aid options in Florida

To qualify for state-based financial aid, you must establish residency. For the purposes of in-state tuition rates and other state aid, you or your parents must live in Florida for at least 12 consecutive months before the first day of the term.

Currently, undocumented and Deferred Action for Childhood Arrivals (DACA) students can qualify for in-state tuition rates at Florida public colleges and universities if they meet the following criteria:

  • Attend a secondary school in Florida for at least three consecutive years before graduating.

  • Enroll in a Florida postsecondary institution within 24 months of graduating from high school.

  • Submit an official Florida high school transcript as evidence of attendance and completion.

However, the 2014 law that allowed those students to qualify for in-state tuition is facing challenges. Current Florida Governor Ron DeSantis has proposed repealing the measure, so this benefit may not be available in the future.

If you are a Florida resident, you may qualify for one or more of the following financial aid programs:

  • 529 plans.

  • In-state tuition.

  • Scholarships.

  • Student loan repayment assistance.

Florida 529 plans

529 plans are tools to save for a child’s future education. In Florida, there are two programs:

  • Prepaid tuition plan: Florida Prepaid College Plans allow you to purchase college credits for future use at today’s prices. The credits can be used in-state or out, and the child can attend public or private schools. The funds are available for up to 10 years after the child’s projected high school graduation date, and plans start at $45 per month. There’s also a $50 application fee. 

  • 529 college savings plan: The Florida 529 Savings Plan is an investment account you can use to save for a child’s education. You can choose from a range of investment options to grow your contributions tax-free as long as you use the money to pay for eligible education expenses.  

While some states offer special benefits, such as state account contributions or tax credits, Florida does not provide the same incentives or benefits.

Florida in-state tuition

Florida participates in the Academic Common Market. This network allows resident students to attend school in other states and pay in-state tuition rates. Through the network, students can qualify for in-state tuition at eligible programs in the following states:

  • Louisiana.

  • Mississippi.

  • South Carolina.

  • Tennessee.

  • West Virginia.

Not all schools or programs qualify, so talk to your selected school’s financial aid office to find out if you’re eligible for in-state rates.

Florida grants

Grants, as a form of gift aid, don’t need to be repaid, and they’re typically awarded based on financial need. Florida has three state grant programs:

First Generation Matching Grant Program

The First Generation Matching Grant Program is for Florida undergraduate students with substantial financial need and whose parents did not earn a college degree. Award amounts vary by year and the needs of the student.

Florida Student Assistance Grant Program

José Martí Scholarship Challenge Grant Fund

Florida scholarships

Students from Florida may qualify for one of nine scholarships.

Bright Futures Scholarship Program

Florida’s best-known and most valuable scholarship is the Bright Futures Scholarship Program. Through Bright Futures, students can qualify for an award for as much as 100% of college tuition and fees.

To qualify, students must be Florida residents, earn a Florida high school diploma or its equivalent, and maintain a GPA of 3.0 or higher in high school. Students must also complete volunteer service or paid work hours to qualify for the Bright Futures program.

Benacquisto Scholarship Program

The Benacquisto Scholarship Program is a merit-based award for high school graduates who achieved National Merit Scholar status. The award amount varies, but it can cover the total cost of attendance at participating schools, minus other financial aid.

Florida Farmworker Student Scholarship Program

The Florida Farmworker Student Scholarship Program is both merit-based and need-based. Each year, up to 50 eligible students can qualify for financial assistance that covers up to 100% of the credit hours required for degree or certificate programs. To qualify for the scholarship, students must be farmworkers or the children of farmworkers.

Mary McLeod Bethune Scholarship

As a merit- and need-based scholarship, the Mary McLeod Bethune Scholarship provides up to $3,000 in financial aid to academically strong students with financial need. To qualify, students must have a 3.0 GPA or higher and enroll at Bethune-Cookman University, Edward Waters College, Florida A&M University or Florida Memorial University.

Minority Teacher Education Scholars program

Administered by the Florida Fund for Minority Teachers, the Minority Teacher Education Scholars program is a performance-based scholarship for African American, Hispanic American, Asian American and Native American students. Eligible students can receive up to $4,000 per year in financial assistance.

Randolph Bracy Ocoee Scholarship Program

Students who are direct descendants of the victims of the Ocoee Election Day Riots of November 1920 or are current African American residents of Ocoee are eligible for the Randolph Bracy Ocoee Scholarship Program. Eligible students will receive up to $6,100 per year in financial aid.

Rosewood Family Scholarship

The Rosewood Massacre occurred in 1923. Students who are direct descendants of Rosewood families affected by those events can qualify for the Rosewood Family Scholarship. Qualifying students will receive up to $6,100.

Scholarships for Children and Spouses of Deceased or Disabled Veterans

This award is for the children or spouses of deceased or disabled military veterans who were Florida residents. Eligible students can receive funding for up to 110% of the required credit hours for an initial baccalaureate degree or certificate program.

William L. Boyd, IV Effective Access to Student Education Program

Student loan repayment programs in Florida

If you have student loans and live and work in Florida, you may be eligible for help from the state in repaying your loans. Florida has programs for attorneys and health care workers who will repay a portion of your debt if you complete a service obligation in a high-need area. The following loan repayment assistance programs (LRAPs) are available:

Florida Bar Foundation

The Florida Bar Foundation designed its LRAP to encourage attorneys to work for legal aid organizations. Under the terms of the LRAP, eligible lawyers can receive up to $5,000 per calendar year to repay federal or private student loans.

Florida John R. Justice

Florida’s John R. Justice LRAP provides repayment benefits to state and federal public defenders and state prosecutors who commit to remaining as defenders or prosecutors for at least three years. Participants in the program can receive up to $10,000 in loan repayment assistance per year, up to a maximum of $60,000. This program will only repay federal student loans; borrowers with private student loans aren’t eligible.

Florida Reimbursement Assistance for Medical Education program

The goal of the FRAME program is to recruit and retain medical professionals to practice in underserved areas. Through the program, nurses, physicians and physician assistants can receive assistance with their student loans. Award amounts vary by profession, but eligible borrowers can receive up to $20,000 per year in student loan repayment benefits. Federal and private student loans can be repaid through FRAME.

Nursing Student Loan Forgiveness Program

The Nursing Student Loan Forgiveness Program provides up to $4,000 annually in loan forgiveness to nurses working full time at a designated site. Examples include public schools, state-operated medical and health care facilities, and county health departments.

Nurses can participate in the program for up to four years. The program will repay federal and private student loans.

How to apply for financial aid in Florida

Florida has several financial aid programs, including gift aid in the form of grants and scholarships. To ensure you get all of the aid you’re eligible for, follow these steps:

  • Fill out the FAFSA: Need-based programs will determine your financial need based on the information that you submit with the Free Application for Federal Student Aid (FAFSA). The FAFSA can take less than an hour to complete. Fill it out online at FAFSA.gov. 

  • Look up deadlines: Although Florida’s FAFSA deadline is in mid-May, some scholarship or grant programs may have different deadlines and requirements. Review the application materials of each program carefully, and make a note of any deadlines. 

  • Create an account with Florida’s Office of Student Financial Assistance: Some of Florida’s programs require you to have a student account with the Office of Student Financial Assistance. It’s free to create an account, and you can open one at FloridaStudentFinancialAidSG.org. 

  • Fill out the Florida Financial Aid Application: Some grant and scholarship programs require the Florida Financial Aid Application as well as the FAFSA. You must have a student account with the Office of Student Financial Assistance. Once your account is created, you can access and fill out the application. 

Apply for specific programs: Some programs, such as the Benacquisto Scholarship Program or the Minority Teacher Education Scholars program, require separate applications or additional materials. Review each program’s eligibility requirements online so you can fulfill the application requirements.

Frequently asked questions

Is Florida Bright Futures based on income?

No, Bright Futures scholarships are not awarded based on your family’s income. In fact, the FAFSA isn’t required at all. Eligibility is determined by your residency, grades, standardized test scores, and volunteer or paid work hours.

Are undocumented or DACA students eligible for Florida in-state tuition?

Currently, undocumented and DACA students are eligible for in-state tuition rates under Florida House Bill (H.B.) 851, which was passed into law in 2014.

Can Florida residents get help completing the FAFSA?

Yes. Visit the Florida College Access Network for free resources, including detailed videos and tutorials, that can help you fill out the required forms to get the maximum amount of financial aid possible.

What is the FAFSA deadline for Florida?

Florida’s FAFSA deadline for the 2023–24 academic year was May 15, 2023. The application typically opens to students on Oct. 1 each year, so it’s a good idea to fill it out as soon as possible. If you missed this deadline, you can still complete the FAFSA for federal aid through Jun. 30, 2024.

Source: nerdwallet.com