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Does Your Spending Personality Match Your Credit Cards?

It’s easy to get caught up in credit card incentives, such as cash back, travel perks and sign-up bonuses. But if your credit cards don’t match your spending personality, you might not get the rewards you expect, or you might end up paying too much in fees.

One in five consumers carries a card that “has fees or rewards not aligned with their actual purchase habits,” according to J.D. Power’s 2016 U.S. Credit Card Satisfaction study.

And circumstances change. Even a credit card that was once compatible with your spending habits might no longer be the best fit. Identify your spending personality to determine whether the cards in your wallet are offering you the most value right now.

The jetsetter

If you travel in style often and want big rewards for your spending, a premium credit card will go further than a regular travel card. Some premium cards offer credits for airlines, hotels or airport security screening programs, as well as airport lounge access. They come with a large annual fee, but you likely spend enough to earn it back in the form of perks and a generous sign-up bonus.

The explorer

Travel is your hobby, but you’re not loyal to airline brands; you’re loyal to the best deals. General travel credit cards offer flexibility in reward redemption. Some charge annual fees, but you can often make up the cost in rewards, and the best cards don’t charge foreign transaction fees. However, travel rewards might lose value if you redeem them for anything other than travel.

The cash-back connoisseur

You like knowing the exact value of your rewards in cash, and you use plastic at every opportunity to earn more. Tiered and bonus-category cash-back credit cards offer higher rates on certain purchases and 1% on everything else. You could get more value by pairing one of these with a flat-rate cash-back card that pays 2% for all purchases. Minimalists should consider a single flat-rate cash-back card.

The balance carrier

Your paychecks aren’t always steady, so sometimes you lean on a credit card, and it’s not always possible for you to pay the balance in full every month. Still, you make sure you never miss a payment. Cash-back credit cards are tempting, but their high interest charges will outweigh your rewards. A low-interest credit card is more likely to save you money over time.

The self-starter

If you have bad credit or no credit, you probably have limited credit card options. Secured credit cards offer an opportunity for credit building. They require a security deposit that you get back after closing the account or upgrading to a regular, unsecured card. The credit limit is often relatively low, equal to the security deposit.

The survivor

You’re struggling to pay off debt, but if you have good or excellent credit, a balance transfer credit card can provide a way out. It allows you to transfer a balance from an existing credit card to take advantage of a lower interest rate. A card with a low balance transfer fee and a 0% annual percentage rate period can give you time to catch up on payments.

The optimizer

You’ll go to great lengths to get a good deal, including managing multiple credit card bills. Mixing and matching cards can be worth it as long as you save money. Just watch out for annual fees or interest.

If your credit card is no longer a match, it might be time to move on. But unless it charges an annual fee, don’t rush to close the account, because that could impact the length of your credit history — and your credit score.

Keep current cards active with the occasional, small purchase and use a new credit card to swipe your way toward your goals.

Melissa Lambarena is a staff writer at NerdWallet, a personal finance website. Email: mlambarena@nerdwallet.com. Twitter: @LissaLambarena.

Today's Headlines: Where's The Wage Growth?

MoneyTips So Much for Economic Theory How does one accurately predict the future when long-held standards change? Economists must grapple with this challenge when trying to predict relationships between jobs, wages, and inflation. Standard economic theory dictates that as unemployment drops — and fewer workers are available to fill positions — wages should rise as employers compete for the services of remaining workers. Inflation should rise as a result. However, our post-recession economy defies that pattern. Are we in a new economic paradigm, where traditional economic rules may be set to join traditional political rules in America's collective trashcan? Perhaps – or there may simply be other factors we have not been considering. Jobs Strong, Wages Weak Aside from occasional monthly anomalies, job growth has been relatively strong. According to the Bureau of Labor Statistics (BLS), America's unemployment rate was at 4.4% in June, well below the 5% generally considered full employment. Unemployment has been at 5% or below since September 2015, and May's value of 4.3% was the lowest since May 2001. The U-6 unemployment rate, which includes "marginally attached workers and those working part time for economic reasons," is also at pre-recession levels. BLS reported that 222,000 jobs were added in June, and the April and May estimates were increased by 47,000 total jobs. The unemployment rate ticked up slightly because opportunity is bringing more workers back to the job market. While job growth is substantial, wages are stubbornly refusing to follow the playbook. Average earnings in June increased to $26.25 per hour, a 2.5% increase over the previous year. That's a fairly typical 12-month wage increase since the beginning of 2015 – an improvement over the general 2% annual increase between 2010 and 2015, but not by much. The average inflation rate since 2009 is well below 2%, a value consistent with low wages. In an economy that is approximately 70% driven by consumer spending, sustained economic growth requires that workers have sufficient discretionary income. Is our slow recent wage growth just an artifact of a long recovery from a deep recession, or are there more fundamental forces at work? That is subject to debate among economists and policymakers. Maybe It's Productivity Despite the rosy unemployment numbers, the labor pool still contains slack – as millions of "discouraged workers" have exited the labor force in recent years. Economy watchers such as Sean Stannard-Stockton, CFA of Ensemble Capital, view these people as a hidden segment of the unemployed. Economists in this camp contend that the recovery still needs to absorb more workers before traditional economic rules kick in. Other suggestions include that of Cathy Barrera, Chief Economic Adviser at ZipRecruiter, who believes that the larger pool of young workers with limited or no experience allows employers to select these lower-wage workers and train them in lieu of raising wages for others. Government policy also plays a role. The Federal Reserve's policy on interest rates has fostered slow and steady growth in order to prevent inflation from rising – yet inflation has been running at or below the Fed's 2% target for years. To dig deeper, it helps to look at the labor market from a productivity viewpoint. A report from the Economic Policy Institute (EPI) notes that from 1948 to 1973, changes in productivity and hourly compensation were well correlated. That relationship split in 1973 with the cumulative changes in productivity far outpacing compensation, a trend that continues today. EPI suggests lack of compensation equality as a major factor. Increased automation also plays a role, as far fewer people are required in many industries as compared to 1973. EPI's main point is that much of the income created by increases in productivity is not making it back to the average worker – it's either going to capital improvements or to compensation at the highest levels. An analysis by Neil Irwin of the New York Times echoes this point, although Irwin detects a slight change over the last few years. Irwin notes that while wage growth seems weak, workers are actually taking home a greater slice of the income gains given equally weak gains in productivity over the last few years. Irwin suggests this may reflect minimum wage increases and Obama-era government efforts to benefit front-line workers. In essence, we've seen a very slight shift in the productivity and compensation patterns. The issue must be addressed by both increasing growth and finding ways to get a larger share of that growth into worker's pockets to perpetuate the cycle. While labors' slice of the pie is increasing, it hasn't increased by much in historical terms – and the overall pie isn't growing fast enough to feed all the new workers coming to the table. The Takeaway While it appears traditional economic relationships between unemployment rates and wages don't apply at present, you are more likely concerned about the effects on your own employment situation. Regardless of the macroeconomic situation, you can improve your chances of maximizing income by making yourself as valuable as possible in your existing job and planning for your next one – whether it's with a same employer or a different one. If one of the underlying problems is a mismatch between your skills and available jobs, lay out a plan to improve those skills over the coming months (or years, if required). Which job are you targeting? Do you need more specific training? Is a new college degree required? It won't be easy to execute this plan, but few worthwhile things in life come easily. If you are content where you are, that's great – not many workers have their dream job. Just don't forget to ask for a raise occasionally, and make sure that the quality and quantity of your work merits one. Also make certain that you are preparing sufficiently for the next phase of your life. Let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle. Photo ©iStockphoto.com/TheaDesign Originally Posted at: https://www.moneytips.com/todays-headlines-wheres-the-wage-growth/224Costs Rising, Income FallingToday's Headlines: Frustrating GDP NumbersWages For Top Earners Growing

Caring for Your Parents as They Age

MoneyTipsSunday, July 23, is Parents' Day, which was established when President Clinton signed a Congressional Resolution into law in 1994 to recognize, uplift, and support the role of parents in raising children. At some point when those children are grown, however, it often becomes their responsibility to care for their aging parents. It is an uncomfortable discussion, but an important one – what sort of financial obligations will you have in caring for an elderly parent, and consequently, how does that change your retirement plans? You cannot answer the second question without fully addressing the first. It is important to have an honest discussion with your parents about their wishes – and financial capabilities -- for their senior years. What sort of care are they comfortable with? Do they want to pass assets on to heirs or liquidate them for their own needs? If they do not have basic paperwork set up such as wills, power-of-attorney, and a healthcare proxy, try to convince them to address this immediately. Next comes the most awkward part – the financial discussion. Ask your parents for permission to go over their net worth, debts and monthly payments, insurance (health, life, homeowners and auto) and income with them. This is important for two reasons: combined with their wishes, this tells you how much financial support you may need to provide, and their income will determine eligibility for tax credits and dependent status. Make sure you have covered all sources. It is easy to forget about safe-deposit boxes, life insurance policies, or similar items. Also, consider their Medicare/Social Security situation to make sure they are taking full advantage of their benefits, and whether supplemental health or long-term care insurance makes sense for them. Make estimates conservative (high on debt/expenses and low on income). If you run into complex estate issues or investment considerations, you may want to consult with a financial planner and/or an elder law specialist. It is also worth visiting www.Govbenefits.gov and similar websites to check for assistance programs for which your parents may qualify. At the end of this awkward conversation (or two), hopefully you will have a good idea of what financial burden you will have. As for the effect on your investments and retirement accounts, consider the following: Budget – Assuming you are adding a new running debt to your budget to care for your parents, can you absorb this without affecting your investments and retirement plans? Try to cut back on expenses before dipping into assets (see below). When your parents pass, keep the expenses low and direct some of those funds toward "catch-up" contributions to your existing IRA's, or consider starting a Roth IRA if you do not have one yet. Assets and Liquidity – If most of your assets are in retirement programs, eldercare bills could put you in a cash crunch. You may have to reduce retirement contributions for a bit and send them into more liquid, lower-return investments. You can borrow against a 401(k) program in some cases, and withdraw IRA contributions for an effective 60-day interest-free loan, but these are short-term solutions. Try to avoid cashing in a 401(k) or an IRA and incurring early withdrawal penalties – especially an employer-matching 401(k). Tax Considerations –There are three primary tax benefits of caring for an elderly parent – claiming them as a dependent (if you can), itemized medical deductions and the Child and Dependent Care tax Credit. See our article "Tax Benefits of Caring for an Aging Relative" for details. Make sure no resources are being left on the table (unclaimed benefits or programs), do what you can through reducing other expenses, and leave any effect on your retirement plans as the last resort – first minimizing contributions if you can, borrow if you must, but never cash in. You owe your parents the best retirement that you can afford, but don't shortchange your own retirement in the process. Let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle. Photo ©iStockphoto.com/yacobchukOriginally Posted at: https://www.moneytips.com/caring-for-your-parents-as-they-ageHow Supplemental Insurance can Help You7 Top Retirement Roadblocks80 is the New 60

Millions Of First-Time Homebuyers Kept Out Of Market

MoneyTipsFirst-time homebuyers are an extremely important part of the housing market. Without new buyers in the housing market, owners of existing starter homes have nobody to sell their home to and therefore cannot afford to buy a larger home. The effects ripple through the entire market and stifle growth. A new study by Genworth Mortgage Insurance focuses on first-time homebuyers and their relationship with the housing market dating back to 1994. By Genworth's definition of first-time homebuyers (those who have not owned a home in any of the prior three years, the same definition used by the Department of Housing and Urban Development), 3 million first-time homebuyers have been excluded from the housing market thanks to the effects of the housing crisis of the last ten years. The loss of potential homebuyers plays a significant part in the slow recovery from the subsequent recession. The study found that from 1994 to 2016, first-time homebuyers accounted for 45% of mortgage originations, averaging annual sales of 1.8 million single-family homes. In the last ten years that encompass the housing crisis and the recovery, the number of first-time homebuyers averaged 1.5 million annually and bottomed out at 1.2 million units in 2011. The aforementioned 3 million potential homebuyers were squeezed out of the market thanks to tightening credit, increasing student loan debt, and other recessionary factors. Government lending programs and homebuyer tax credits began to revive the first-time homebuyer market starting in 2008, providing the low down payment loans necessary for many new consumers to enter the market. Since then, credit has loosened further and the release of pent-up demand has sent first-time home purchases up to pre-recession levels. Sales to first-time homebuyers hit 2 million in 2016 – the highest level since 2006. Now that supply is back, demand is a problem. There are too few starter homes to meet demand, and prices are rising significantly as a result – thus the new surge in first-time homebuyers may be cut short. What do you do if you are ready to enter the market, but rising prices threaten to put a home out of your reach? You do want to act soon if you can to take advantage of low interest rates, as the Federal Reserve has clearly stated that they intend to keep raising rates. However, it's important not to stretch beyond your means. Author Jordan Goodman, known as "America's Money Answers Man," explains the drawbacks: "The biggest mistake people make when they are buying their first home is underestimating the expenses involved. You really have to be realistic because what happens is if you get into a house and you owe, it's sucking you dry ... the house owns you, you don't own the house." Set a realistic budget projecting your first couple of years of home ownership, including all the expenses like insurance, taxes, and maintenance. Put in a contingency percentage to account for emergencies, and then see how much money you have left for a down payment and monthly expenses. Honestly assess if you are buying more house than you need, even within the range of starter homes. If you truly can't afford to buy now, set a plan to reach a new down payment goal for the future. Put yourself in a position to take advantage of fluctuations in the market – because eventually, you will find the house you want at an irresistible price. Then you can join the surge of first-time homebuyers, doing your part to drive the housing market in particular and the American economy in general. MoneyTips is happy to help you get free mortgage and refinance quotes from top lenders. Photo ©iStockphoto.com/llhedgehogllOriginally Posted at: https://www.moneytips.com/millions-of-first-time-homebuyers-kept-out-of-market/855Today’s Headlines: Housing: Supply Down, Prices Up Today's Headlines: Credit Scores Drop For Mortgage RefinancesToday's Headlines: Housing Market: Good Or Bad From Your Perspective?

Americans More Worried About Vacation Than Retirement Savings

MoneyTipsOf course, you need a vacation. You've worked hard and you've earned the time off – but is that upcoming vacation more important than your retirement savings are? A new survey by Country Financial suggests that right now, your vacation is more important to you. The findings of the Country Financial Security Index® suggest that Americans do worry about being able to afford retirement, but that worry is not great enough to spur them into action. Shorter-term concerns tend to take precedence. Two-thirds of survey respondents said that current events in America make them concerned about their future financial situation, while almost one-third worry that they will need either to delay retirement or simply not retire at all. This should spur people into more comprehensive retirement planning, but the survey found that 51% of respondents do not include any consideration of retirement plans in their long-term financial goals. Perhaps our definition of long-term really is not as long as it should be. When respondents were asked about their concerns for the future given their current financial situation, only 32% mentioned adequate savings for retirement. That came in fourth, behind affording unexpected expenses (44%), affording health care costs (41%), and taking a desired vacation (36%). Attaining a desired lifestyle and making monthly payments were right behind at 28%. The survey highlights an enduring trait of Americans – being more concerned about the here and now than planning for tomorrow. It takes discipline and planning to achieve a comfortable retirement. Do you have that discipline? If not, why not start to gain that discipline today by creating a budget that can help you to achieve all of the things on your list? An income surplus is necessary to build an emergency fund for unplanned expenses and health care costs, as well as building retirement funds. Start by assessing all your expenses with a critical eye. Think of them in terms of value. Are you getting the full value out of a daily stop at your local coffee shop, or could you simply make coffee at home? How much would you save in a year, and would that money be put to better value elsewhere? Keeping track of all your expenses for several months , no matter how small, will help you find places to gain early "wins" in your quest for savings, and build momentum for an overall improved budget. With your expenses clearly outlined, you can break them down into "needs" and "wants", helping you to establish proper priorities while removing temptations in your budget – and, if you're being honest with yourself, you probably already know which expenses you can reduce or eliminate. Leave yourself some small discretionary funds, because you won't stick to a budget that is too severe – just make sure that you are getting value for your purchases. Your improved budget should include a certain percentage of your income going to establishing an emergency fund and contributing to retirement, even if that percentage is very small. The important part is to establish savings as a habit. Direct deposits and alternate accounts that are devoted directly to retirement savings and/or emergency funds can help. If you don't see those funds in your take-home pay, you won't be as tempted to spend them on a short-term purchase that provides less long-term value. Saving is a mindset, whether it's for retirement or any other purpose. Proper budgeting and planning can give you the framework and motivation necessary to meet your goals. In the end, isn't it worth less of a vacation now in order to have an easier time during your more permanent vacation, aka retirement? Let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle. Photo ©iStockphoto.com/davidfranklinOriginally Posted at: https://www.moneytips.com/americans-more-worried-about-vacation-than-retirement-savingsHow to Start Saving for RetirementFamilies Not Saving Enough For RetirementHow Much Income Will You Need For Retirement?

1 In 3 College Students Don't Know What Their Loan Payment Will Be

MoneyTipsToday, well over half of all college graduates incurs student loan debt in pursuing their degrees. Although seniors may learn a lot, they may not know their monthly payments. According to a new survey conducted by Barnes and Noble College Insights on behalf of College Ave Student Loans, 35% of college seniors are unsure as to what their monthly student loan payments will be. According to studentloanhero.com, the average student loan debt for 2016 college graduates was over $37,000. Such a debt holds you back in life unless you learn how to manage it wisely. Jocelyn Paonita, founder of The Scholarship System, notes that recent graduates "have to put their money to this large loan payment rather than being able to put it to other opportunities that can build their wealth in the long term...I think it's a huge challenge for students and graduates." While the College Insights survey found that many college students were not sure what their student loan payments would be, students were generally good at estimating debt information. Median estimates of student loan debt at graduation were between $30,000 and $40,000. Most seniors had done enough groundwork to know their expected salary, with 49% expecting their starting salary to be over $35,000 annually. If anything, this may be a slightly conservative estimate, with average (not median) starting salaries just under $50,000. It's important to start budgeting now to be able to effectively manage your student loan debt and avoid long-term effects on your wealth. The first step is to estimate your likely income properly, as well as your regular monthly expenses – such as student loan payments. Start with a conservative assumption on budgeting, and lay out a full budget for your first year after graduation. Use a conservative estimate for your starting salary, and unless you already have a job lined up, run some scenarios to find out how long you can handle being without a job after graduation. Check the terms of your student loan for options on grace periods, deferment/forgiveness programs, and alternate income-based repayment plans. Budgeting for both an average outcome and a worst-case scenario provides confidence that you can handle whatever your post-graduate life brings – and the motivation to avoid worst cases. When you do get out on your own, don't forget that budgeting help is still available. Adam Carroll, Founder and Chief Education Officer of National Financial Educators, advises: "If you're not fully educated in your options...just take a step back...There's plenty of information out there online about all the products and programs that are offered and the variety of tools that you can use to either pay your loans off faster or minimize the amount of interest you're paying over the life of the loan." Don’t forget to check your credit score, which can help determine your ability to refinance. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. Find out quickly at what rate you can refinance your student loan. Several online student loan repayment calculators are available to help you estimate your monthly payment. For help calculating repayments under alternative student loan repayment plans, check the Student Loan Website sponsored by the U.S Department of Education. Do some research and don't be afraid to consult with financial experts for help if you are having difficulty with your own financial planning and budgeting. You may have learned a lot in college, but remember that life is a perpetual learning process. Photo ©iStockphoto.com/fotosipsakOriginally Posted at: https://www.moneytips.com/1-in-3-college-students-dont-know-what-their-loan-payment-will-be5 Dos and Don'ts For Managing Student Loan DebtVideo: Cutting College Costs During Your Student YearsStart Paying Student Loans Before Graduating

Don't Risk Your Credit Score In Retirement

MoneyTipsRetirement represents a new stage in your life. It's a time of change and opportunity. To make the most of your opportunities, you must make sure that one aspect of your life does not change – your good credit score. A recent survey by the credit bureau TransUnion found that over 30% of Baby Boomers are making mistakes that can affect their financial fitness during retirement. This finding implies that seniors may underestimate the value of credit after their careers are complete. According to TransUnion data, retirees and near-retirees still maintain significant debt. The average Baby Boomer has just under $100,000 in debt, and understandably, is focused on relieving that debt burden. If you want to reduce your interest payments and lower your debt, try the free Debt Optimizer by MoneyTips. The survey also found that just over one-third of respondents are reducing their dependence on credit cards during retirement. Eliminating debt is a positive sign, and doing so is necessary to improve a credit score – but if seniors are eliminating credit usage at the same time, they may be neutralizing their credit score gains. Cancelling infrequently used credit cards may seem like a good strategy, but your credit score may be adversely affected. Adam Carroll, Founder and Chief Education Officer of National Financial Educators, explains: "When you have a long-standing trade line, which is what a credit card is considered on your credit report, and you cancel that card for whatever reason, your score will actually go down as a result because one of the main impacts on your credit score is the length of credit history." A shorter credit history translates to higher risk in the eyes of lenders. Sean McQuay, Credit and Banking Expert at NerdWallet, agrees – but includes another reason to keep older cards, noting that closing a card account results in "decreasing your overall credit line, which basically signals that a bank trusts you less." In addition to decreasing your overall credit line, closing an infrequently used account raises your credit utilization – your total credit in use compared to your cumulative credit line. High credit utilization suggests a greater chance of falling behind on payments and/or defaulting on debts. To avoid these pitfalls, make periodic small purchases on all your open credit cards to keep them active and pay the balances in full at the end of each billing period. By keeping credit spending low, you can still address debts while getting the full benefits of your credit account. It's okay to concentrate most of your credit spending in one account to maximize rewards. Just use alternate accounts often enough to keep them from being closed for lack of activity. Periodic checking of your credit report can also prevent credit score damage. Whether they occur by mistake or as a result of fraud or identity theft, adverse additions to your credit report can drop your score significantly. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. Without a regular check on your credit report, a successful scammer can drain your resources through fake accounts and charges before you realize there's anything wrong. Protect your personal information in all online activities and financial transactions, and check your report periodically to make sure that your efforts are paying off. In the words of April Lewis-Parks, Director of Education and Public Relations at Consolidated Credit: "The best ways to avoid being a victim of identity theft is to always be aware of what you are doing." Keeping a good credit score in retirement requires the proper mindset, and that mindset is not prevalent among Baby Boomers. The TransUnion survey found that only 16% of survey respondents considered maintaining good credit as a top priority – but you don't have to follow the crowd. Make good credit a priority, and you can enjoy benefits such as reduced insurance rates, great rewards deals on credit cards, and access to loans with reasonable interest rates just in case you need one. The other 84% of your peers will marvel at how you do it. Photo ©iStockphoto.com/alvarezOriginally Posted at: https://www.moneytips.com/dont-risk-your-credit-score-in-retirement5 Reasons Why Retirees Need To Know Their Credit Score 5 Things You Don't Know about Your Credit ScoreFinancial Stability Discounts 101

No Simple Solution To The Social Security Deficit

MoneyTipsNothing is as easy as it seems. If life were easy, we could solve the financing gaps in Social Security in five simple words – eliminate the cap, problem solved. Life isn't easy In the words of H.L. Mencken, for every complex problem, there is an answer that is clear, simple, and wrong. Nothing is that easy. Eliminating the cap does not solve the problem. It does not officially even kick the can anymore. According to the Congressional Budget Office and the Social Security Administration, this policy option addresses about 40 to 70 percent of the shortfall. What is the wage cap? Currently, payroll taxes of 12.4 percent apply to the first $127,200 of a worker's annual wages. When a worker earns his 127,201st to infinity dollar, there is no tax. Does limiting the range of payroll taxes make sense? No one can really say whether the concept is achieving its aim, because no one really knows why the limit was incorporated in the original legislation. Since its enactment, this aspect of the program evolved on autopilot into a mechanism to pay the bills. At this point, the maximum amount subject to payroll taxes rises faster than inflation. Social Security is intentionally progressive In the original design of the system, the crafters planned for those with means to pay more for benefits than less-affluent workers do. That feature hasn't changed to this day. On the last $1,000 of wages, everyone pays the same amount of taxes. Yet, the formula gives the lower-wage worker a monthly bump in benefits that is nearly six times larger than the increase given the person who is working for the full taxable amount. Unfortunately, the program has changed so much that these higher-paid workers not only pay more for benefits, but also likely lose money in the process. That was not the intention of the founders. FDR did not want the program to be confused with a public dole because he feared that would put the elderly at the mercy of the politicians. FDR did not want a "damn politician" (his words) like Senator Bernie Sanders or Governor Chris Christie to judge who does and who does not need benefits. At this point, the threshold serves to close out the program's incremental progressivity, a circuit breaker preventing the system from becoming overly dependent on subsidies from the rich. The problem is that no one can tell you where that circuit breaker needs to be. A programmatic dichotomy: welfare or insurance? The reason that we find little consensus on changing the amount of earnings subject to payroll taxes derives from the fundamental ambiguity in perceptions of the system, either as a form of welfare or a form of insurance. People who see the program as welfare assistance see no reason that those most able to pay for the bills should be excused from carrying the cost. On the other end of the spectrum, you find people who want the program to be insurance that is independent of the politics of the day. If Social Security is insurance, it is no more reasonable to ask the rich to pay ever-higher premiums than it is to ask them to pay more for bread, a car, or movie tickets. How would you like to go to the movie theater and be told that the price of the ticket would depend upon how much you make? Complicating the deficit picture Typically, we look at policy for Social Security as though it operates in a vacuum. The fact is that it doesn't. These changes would trigger secondary actions within the broader economy that would exacerbate the nation's deficit, and increase the overall level of debt owed by the country. While Social Security is not "counted" toward the nation's deficit, that truth does not mean that the program does not contribute to the gap in our nation's financing. Most economists believe that payroll taxes are offset by lower wages on a dollar-for-dollar basis. Lower wages reduce the income tax revenue collected. If we increase the payroll tax on wealthier workers, the corresponding reduction in wages will translate into large reductions in income tax collection. Economists call this process behavioral response. In terms of higher taxes on wages, employers respond by slowing wage growth and employees shift compensation to things like stock options or health benefits, which lie outside of the scope of payroll taxes. To illustrate the progression, the Social Security cap in 1984 covered about 90 percent of wages. Today it is around 84 percent. It is simple. Wages subject to a 12.4 percent tax will grow more slowly than wages without such a constraint. Conversation stopper The policy option today serves as a discussion plug, ending the exchange on how we can fix Social Security. A large audience sees the crisis forming, but believes that raising the taxes on someone else will end the problem. They join the conservation just long enough to say: eliminate the cap, problem solved. This answer doesn't solve the problem, and will draw Social Security further into the spotlight of budget negotiations. In total, it largely fixes our headache by giving our children a bigger one. Nothing is easy. Let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle. Photo ©iStockphoto.com/KenTannenbaum Originally Posted at: https://www.moneytips.com/no-simple-solution-to-the-social-security-deficitWhat Is The Social Security Shortfall?How Would You Fix Social Security?Can Social Security Really Go Bankrupt?

Student Loan Refinance Can Save You Thousands

MoneyTipsAre you dealing with thousands of dollars in student loan debt? You are not alone. According to studentloanhero.com, the average graduate from the Class of 2016 owes $37,172 in educational debt. While student debt can be daunting, it's important to take the advice of Millennial Money Expert Stefanie O'Connell: "The best thing you can do about tackling your student loan debt is to be proactive." If you have a decent job lined up and a superior credit rating, you have an extra tool in your proactive repayment arsenal – refinancing. According to Adam Carroll, Founder and Chief Education Officer of National Financial Educators, "The student loan refinance business has absolutely boomed over the last five or six years." The reason for the boom, according to Carroll, is that student loan interest rates are relatively high – up to 9% in some cases. Refinancing becomes a reasonable option for those who can qualify for lower rates based on new income and a relatively clean credit history. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips. According to SoFi, student loan borrowers can save an average of over $22,300. In one case, you can even earn frequent flier miles through refinancing your student loan. Loan refinance group SoFi has partnered with JetBlue to offer one TrueBlue rewards point for every $2 refinanced, up to 50,000 points. However, you must do your homework before refinancing. Carroll suggests, "If you have a significant number of loans and you're just looking to refinance, but you're not doing the math or you're not fully educated in your options... take a step back. There's plenty of information out there online about all the products and programs that are offered." First, it's important to understand your existing student loan terms and the protections that you have. If your student loans are private, it's simply a matter of comparing interest rates and loan terms with your current and expected income – doing the math, as Carroll says. However, Federal Student Loans come with repayment options and protections such as forgiveness, cancellation, and forbearance. Be sure that your income is secure enough that you will not need these options – because once you refinance through a private lender, those options are gone. Debts from medical school and law school are prime targets for refinancing, because both debt loads and post-graduation incomes are usually quite high. However, you can save considerable money regardless of the amount you owe or make, as long as your credit score warrants a lower rate with more favorable terms than your existing loan and those terms result in monthly payments that you can afford. Shop around for vendors and compare your options. At current rates, you may be able to qualify for variable-rate loans below 2.7% and fixed rate loans below 3.4% – but make sure that you include closing costs and fees in your comparison calculations. If you are interested in refinancing but don't have a sufficient credit score to make refinancing viable, make an action plan to bring your score up to a suitable level. Make sure that you are paying all bills on time. Use a budget to control your spending and avoid credit-score killers like high credit utilization and credit balances that are increasing faster than income. Seek counseling from a financial professional if you can't seem to make any progress. Refinancing a student loan is not for everyone – but don't dismiss it out of hand just because you don't make a six-figure salary. It all depends on your financial stability and whether you qualify for a better rate based on current conditions. At lower salary levels, it's even more important to save as much money as you possibly can. Find out quickly at what rate you can refinance your student loan. Photo ©iStockphoto.com/GlobalStockOriginally Posted at: https://www.moneytips.com/student-loan-refinance-can-save-you-thousandsHillary Clinton's 6-Step Student Loan Plan1 In 3 College Students Don't Know What Their Loan Payment Will BeUnique Student Loan Lender Offers Millennials More Than Money

28 Percent Of Non-Retired Adults Have No Retirement Savings Or Pension

MoneyTipsSocial Security was only designed to supplement retirement income, not to replace it – yet a recent report by the Federal Reserve indicates that over one-quarter of Americans will be relying on Social Security to get them through their retirement years. According to the Report on the Economic Well-Being of U.S. Households in 2016, 28% of non-retired adults reported having no retirement savings or pension of any kind. Half of the survey respondents have 401(k) programs, 31% have IRAs, 46% have outside savings such as bank accounts or CDs, 25% have traditional defined benefit pensions, and 25% have other retirement income sources such as real estate or business investments – so clearly a significant number of Americans have multiple retirement savings sources aside from Social Security. Still, 28% report having none of these sources. Who are the folks dependent on Social Security? As you might expect, lower income correlates well to a lack of a retirement program, as does youth. The survey sorted respondents into three annual income levels (less than $40,000, $40,000 - $100,000, and over $100,000) and found that only 44% of respondents with incomes below $40,000 had any type of retirement savings at all. This is not a surprising finding. The less money you make, the more difficult it is to have money left over after expenses – if you can avoid outright deficits. Still, the contrast is striking. For respondents making over $100,000 per year, 95.7% have some retirement savings, with the percentage only varying from 95.5% to 96.6% across all age groups. Ironically, high earners in the 18-29 age group have the highest participation rate. Perhaps acquiring a high salary at an early age indicates responsible fiscal behavior. In the $40,000 - $100,000 income range, 86.7% reported having some form of retirement funds, but there is a clearer difference among the ages. Only 78.3% of those aged 18-29 have retirement funds compared to 92.5% of those aged sixty and above. A similar age discrepancy shows up in the low-income category. Only 39% of low-income respondents age 18-29 have any kind of retirement funds, compared to 57.3% of those aged sixty and above. In essence, when considering the ability to save for retirement, age is a minor factor but income level is a major factor. While it may be a struggle for you as a low-income American to find money to put away for retirement (or as a young American tempted to apply your money to things other than retirement savings), it's extremely important that you do so. By starting late, younger workers miss out on the effects of compounding. Meanwhile, low-income workers have a greater need to supplement Social Security because benefits are based on income levels during working years. A lower salary equates to lower taxes paid in and lower benefits at retirement. If you have no retirement plan, it's never too late to start. Start by estimating your benefits upon retirement using the Social Security Administration's Retirement Estimator. Estimate how much income you will need at retirement – a good rule of thumb is around 80%-90% of your pre-retirement income. Calculate the difference between income and benefits. Then set up a budget to get a surplus to fill the gap in your retirement goals, and decide how best to apply that surplus (IRA, 401(k), or other vehicle). Don't be discouraged by a large retirement savings gap. You have started down the proper path, and by taking any pre-emptive action at all, you are in better shape than you were. Let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle. Photo ©iStockphoto.com/vchalOriginally Posted at: https://www.moneytips.com/28-percent-of-non-retired-adults-have-no-retirement-savings-or-pension/628More Than Half of Americans Making Less Than $40,000 Annually Have No Retirement SavingsHow Much Income Will You Need For Retirement?7 Top Retirement Roadblocks
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