The astounding cost of elder care ... Home prices soar to record high ... 401(k) balances slide a little ... And more

Mutual Interest logo

Welcome to MUTUAL INTEREST, the first place to check for all of the news and information you need to manage your money and build financial security. It also helps you understand what's going on in the economy, and how that affects you. This page is constantly updated, so bookmark it and come back often for the latest posts.

The astounding cost of elder care is outrunning retirement savings

The median cost for a private room in a nursing home is now $91,000 a year, according to Genworth Financial. A year of visits from home-health aides is $45,760. There's a widening gap between what people have saved for retirement and the high cost of care. Right now, around 60% of Americans nearing retirement have retirement accounts with a median balance of $104,000, according to the Employee Benefit Research Institute. That can quickly go bust if bills for elder care come into play.

SECOND THOUGHTS: Save, save and save some more. Elder care costs can wipe you out. "Within the first year, most people are tapped out," Joe Caldwell, director of long-term services at the National Council on Aging, tells The Associated Press. "Middle-class families just aren't prepared for these costs." Check out how to save $1 million for retirement.
August 3, 2015

Hunting for hidden treasure can secure your financial future

Carl Richards, a certified financial planner, offered insights in The New York Times on how to secure your future with money you didn't even know you were spending. The plan starts with keeping a close eye on spending and noticing where your money is going. Next is the hard part — finding wasted money. This could be a recurring charge for something you never use or a $5-a-month lottery ticket. Step 3: Automate your savings — set up an automatic investment. And finally, repeat. Treat it like a game or a treasure hunt, Richards writes. How much can you save per month?

SECOND THOUGHTS: It's boring. It's hard. But it works. Some friends of Richards saved over $1 million with this method. You've got to say no to things you really want right now. As Richards puts it, "If you think saying no today is hard, try eating cat food for the last 10 years of your life." Here's our take on how to save $1 million for retirement.
August 2, 2015

Your home might be worth more now than at the peak of the bubble

Homeowners, it's time to celebrate. We can safely say that the housing recovery is complete. Housing prices plunged by about a third after the bubble burst. But the median price for all types of housing reached $236,400 in June, pushing above the peak median sales price of $230,400 that was set nine years ago in July 2006, according to the National Association of Realtors. It’s also 6.5% higher than it was in June 2014. June 2015 marked the 40th consecutive month of year-over-year gains.

SECOND THOUGHTS: With the median national home price at a record high, getting a low mortgage rate is more important than ever. "Limited inventory amidst strong demand continues to push home prices higher, leading to declining affordability for prospective buyers," Lawrence Yun, the association's chief economist, said in a news release. If you’re having trouble selling your home in this market, though, you’re doing something wrong. Here are 5 reasons your home isn’t selling.
August 1, 2015

Stocks pull 401(k) plans down a little, but IRA balances are up

If the most recent statement from your retirement plan's a little disappointing, don't be surprised. The average 401(k) balance dropped from $91,800 at the end March to $91,100 at the end June, according to a new report from Fidelity Ivestments. Year-over-year, balances only increased by $100. Losses in the stock market contributed to much of that quarter-over-quarter decline. Plus, many older account holders were keeping too much of their portfolio in stocks. But individual retirement account balances moved up, hitting $96,300 at the end of June from $94,000 at the end of March.

SECOND THOUGHTS: Contributions helped keep 401(k) retirement account balances afloat, notes Bankaholic.com. Indeed, the average combined employer and employee contribution was $10,180 during the second quarter 2015. That’s the first time contributions have surpassed $10,000, notes Fidelity. Are you taking full advantage of your employer's retirement plan? Our 7 rules for a successful 401(k) can help you make all of the right decisions.
July 31, 2015

Bond guru Bill Gross predicts Fed will raise interest rates in September

"Low interest rates are not the cure — they are part of the problem."
Bill Gross, Janus Capital fund manager

July 30, 2015

Delta is offering a fancy new perk to its high-value customers

Those considered “high-value customers” at Delta will soon be able to upgrade to a flight on a private jet. Passengers who have achieved elite, or Medallion, status in the Delta SkyMiles frequent-flyer program will be able to take advantage of the new program. It’ll cost $300 to $800, depending on the destination, notes Bloomberg. Most of the upgrades will involve travel the next day, but some will offer up to 48 hours’ notice. Private jets through Delta will travel to around 160 destinations.

SECOND THOUGHTS: Possibly one of the biggest perks of flying private: no TSA. Of course, Bloomberg notes that this is almost certainly just another way to squeeze a little more out of customers. And most people choosing to upgrade will likely be using their company’s card to do so. But it’s a nice perk for those who are very frequent flyers, especially if it’s on your company’s dime.
July 30, 2015

Fed sets clock ticking toward September

The Federal Reserve’s policy-setting committee shied away from raising interest rates today. That makes 68 straight months -- since December 2008 – that Fed policy has sought to keep interest rates at record lows. But the government bank charged with managing the nation's money supply appears to be approaching a turning point. It doesn’t meet in August, but if the Fed holds to its long-term projections, the pressure to increase rates in September now looms large.

SECOND THOUGHTS: When the Fed stops pushing down interest rates, savers can expect to start earning more on their certificates of deposit, savings and money market accounts. Although it will take years before we see "normal" rates again, this will be the crucial first step back to what we would call reasonable returns on bank deposits.
July 29, 2015

Some new electronic devices can be a serious security threat

The Electronic Privacy Information Center (EPIC) recently sent a letter to the Federal Trade Commission and the Justice Department asking them to take a look at "always on" technology. These are devices from companies like Microsoft, Amazon and Google. The fear, notes The Fiscal Times, is that some of these devices — TVs, gaming systems, security cams — are recording conversations even when the device seems to be off. Companies say the devices are only engaged when triggered by a hotword, but accidental recording could cause serious privacy and security breaches.

SECOND THOUGHTS: Which devices are of concern? The list from EPIC includes Google Chrome, the Samsung SmartTV, Nest Cam, Canary Connect, Microsoft's Kinect, Amazon Echo and Mattel's Hello Barbie.
July 29, 2015

Fewer homes are landing in foreclosure

Only about 1.3% of all mortgaged homes in the U.S. were in foreclosure in May, according to a new report from CoreLogic. That's the smallest share since the end of 2007, when the Great Recession began. In May 2014, the foreclosure inventory rate was 1.7%. The drop is a boon for borrowers. “With 3 million jobs created during the past year, the improving labor market has helped more borrowers stay current on their mortgage loan,” Frank Nothaft, CoreLogic’s chief economist, told MarketWatch.

SECOND THOUGHTS: If you're a homeowner, you've probably dreamed of the day when you send in your last mortgage check. But is it wise to speed up the process? Here's how to know if you should pay extra on your mortgage.
July 28, 2015

AT&T acquires DirecTV for $49 billion

AT&T has completed its acquisition of DirecTV for $49 billion, making it the nation's biggest provider of TV subscriptions. By serving 26 million households in the United States, it beats out cable behemoth Comcast, which serves a little more than 22 million households. AT&T says this will offer consumers more choices for communication and entertainment. The company will soon start offering new ways to watch TV programming on mobile devices, and it will likely pitch a new bundled product – TV, wireless phone and wired broadband.

SECOND THOUGHTS: Existing customers need not worry – you'll still get the NFL Sunday Ticket through DirecTV. But AT&T plans to offer some new bundles that are supposedly more affordable and convenient. Of course, "affordable" and "convenient" options from a cable, wireless and broadband company is somewhat of an oxymoron, so we'll have wait and see how this deal pans out.
July 27, 2015

Two health insurance giants are merging

Health insurance giant Anthem has agreed to acquire insurance giant Cigna in a $54 billion deal. . The merger would cover 53 million members, so there's a good chance that many of us will soon fall under the Anthem/Cigna umbrella. This deal will leave only three big health insurance players – Anthem, Humana and UnitedHealth. The merger is expected to take effect in the second half of 2016 if it passes all of the regulatory hurdles.

SECOND THOUGHTS: There's some concern that an oligopoly like this could give health insurers the power to raise premiums and even reduce the number of hospitals and doctors in network coverage plans. Of course the insurers say that won't be the case. "This will actually improve efficiencies and reduce costs for consumers down the line," Cigna spokesman Matt Asensio told CNN Money. I guess we'll see about that.
July 24, 2015

How one city couple ditched their car — and lived to tell about it

If you live in a city, the sole benefit of owning a car has mostly to do with convenience, writes Kurt Woock at StreetsBlog Denver. Woock and his wife ditched their car in Denver after figuring out that they were paying $4,000 per year simply for the convenience of owning a vehicle. Now they use B-cycle, RTD, Bustang, Lyft, Uber, Car2Go and ZipCar to get around town. To ditch your car, Woock suggests building a pyramid with the most frequent trips at the bottom and the most infrequent at the top. Once you replace the most frequent trips with some other mode of transportation, replacing the trips at the top becomes a lot easier.

SECOND THOUGHTS: Ditching your car can save you some serious cash. Woock writes that they can rent a car for one weekend every month and still come out ahead. And that extra savings opens up the opportunity to put more money away for retirement. See what adding an extra $4,000 a year can do to your 401(k) balance with our 401(k) calculator.
July 23, 2014

GE starts offering unlimited paid vacation to some employees

General Electric, one of America's largest corporations, recently started offering unlimited vacation time. The company will no longer set a limit on the number of vacation, sick and personal days that executives and those in the "senior professional" band take. That's assuming they're getting their work done and have their manager's approval. It will affect 43% of GE's workforce, notes CNN Money. Only 2% of employers currently offer unlimited paid time off to workers, according to a survey by the Society for Human Resource Management.

SECOND THOUGHTS: These policies can certainly be beneficial if employees feel free to take advantage of them. But experts are concerned that employees actually end up taking less time off than if they had been allotted a fixed number of days, notes CNN Money. Of course, surveys show that Americans usually don't take the vacation days they've earned anyway.
July 22, 2015

New seat configuration sure to make flying even more uncomfortable

Never underestimate the airline industry's ability to make things even more uncomfortable for travelers. Now, you can add awkward to that. Zodiac Seats France, an industry supplier, just patented the Hexagon seat layout concept that would have you staring right into the eyes of a stranger. The middle seat is flipped around in this design so that passengers face one another. It’s designed to “increase cabin density while also creating seat units that increase the space available at the shoulder and arm area.” You'll also get more face time with talkative neighbors, notes MarketWatch.

SECOND THOUGHTS: This idea has to be one of the worst the industry has had in a while. Thankfully, no plans have been made to implement the Hexagon yet. And if they are, the seats probably won't be used in planes anytime soon, notes MarketWatch.
July 21, 2015

Does your 401(k) measure up?

Do you have a worthwhile 401(k) plan? A new report from Vanguard helps 401(k) participants measure their 401(k) against what's consider a worthwhile plan. The report says that means getting at least a 3% match (37% of companies do this), saving 6% of pay to get the match (44% of companies) and being able to contribute on the first paycheck (58%). It also helps if your employer lets you keep your match immediately (47%) and offers additional profit sharing or company stock (37%). More than half of companies in the report (56%) offer a Roth 401(k) option, and 52% of plans provide at least four low-cost index funds — also pluses.

SECOND THOUGHTS: If you want a fighting chance at a secure retirement, you're going to have to become a smart investor. You'll have to master a few key concepts. Here's how to be a smarter investor in your retirement plan.
July 20, 2015

Wait for the best deals on new vehicles

If you're in the market for a new vehicle, keep your cool until the end of summer. According to MarketWatch, that's when you'll find the best deals. That's because most carmakers have come out with next year's models by August or early September, and plenty of current-year models still remain on the lots. Dealers are more willing to bargain on their older models to get rid of inventory. Look for cash-back deals or low interest rates on those models. The trade-off is that there's generally less of a selection, and you could get stuck with a color or trim that isn't your ideal, notes MarketWatch.

SECOND THOUGHTS: Americans are leasing a record number of new cars and trucks. That's not encouraging. Sure, leasing offers lower monthly payments than traditional auto loans and allows you to buy a more expensive, more luxurious car. But you're better off buying what you can afford. After all, leasing creates the illusion, not the reality, of wealth.
July 19, 2015

Shorter routes don't necessarily mean cheaper flights

Flying a shorter distance doesn't mean you'll pay less for your seat. In some cases, you could end up paying a lot more per mile. For example, the worst route to take is from Atlanta to Charlotte, where you'll pay around $1.27 per mile, notes The Washington Post (the U.S. median is $0.23 per mile). Routes from Austin to Houston, Chicago to Indianapolis, Chicago to Cincinnati and Portland to Seattle make up the next four costliest routes — all are above $1 a mile. So what's the best route? A flight between Las Vegas and Philadelphia. It's less than a dime a mile and the best bang for your buck, notes The Post.

SECOND THOUGHTS: Why are those short routes so pricey? "Airline Economics 101 is that prices are set by origins and destinations, not by the cost structure, so cost plays a very small role in the actual setting of the price," Joshua Schank, president of the Eno Center for Transportation, told The Post. "That's why you get all those crazy pricing things in the airline industry where sometimes a shorter flight will cost you way more than a longer flight." Keep in mind that you can drive some of those costly short routes nearly as fast as you can fly them. Chicago to Indianapolis, or vice versa, is a quick three-hour shot down or up I-65.
July 17, 2015

How does your retirement balance compare to your peers'?

Wondering how your retirement balance stacks up? According to an analysis of 25.8 million individual retirement accounts (IRA) by the Employee Benefit Research Institute, people under age 25 have a median IRA balance of $3,708. That increases to $5,000 by the late 20s. By the early 30s, the median hits $7,661; late 30s, $12,325; early 40s, $17,745; late 40s, $24,264; early 50s, $31,692; late 50s, $41,149; early 60s, $55,807; late 60s, $75,277; and 70s, $75,627 across the board.

SECOND THOUGHTS:The earlier you start saving, the better off you'll be in retirement, notes U.S. News and World Report. IRAs are supposed to be easy. And generally speaking, they are. But make sure to avoid these 7 IRA mistakes.
July 16, 2015

More workers are choosing independence

Companies are hiring more workers again, but many might find that people don't want a traditional full-time gig. A new report from business services company MBO Partners finds that more workers are opting for independence. In fact, the independent workforce grew by 12% over the past five years — faster than the 7% growth rate of employment, MBO says. There are now 17.8 million full-time independent workers; one in every seven traditionally employed workers are considering going independent; and four of five independents plan to stay that way.

SECOND THOUGHTS: Why are so many saying no to traditional employment? For starters, the pay is good. The number of independent workers earning $100,000 or more has jumped 45% over the past five years, and more than a quarter earn more than $75,000 a year. It also comes with an independent lifestyle and a feeling of job security — around 40% say they feel more secure working independently. But you've still got to think about retirement. If you're an independent, here are 5 good reasons to open a Roth IRA right now.
July 15, 2015

Paying people to be healthy can work

Would you adopt a healthier lifestyle if you were getting paid to do so? According to The New York Times, there's a good amount of evidence that you would. We're not talking wellness programs that offer reductions in premiums; we're talking cold, hard cash in exchange for changes to your behavior or health. For instance, one recent study by the New England Journal of Medicine found that cash incentives encouraged more people to quit smoking than methods such as prizes, vouchers, lottery tickets and meals. Other studies have found similar results, notes The Times.

SECOND THOUGHTS: Why aren't we doing this? In part, it's that the public isn't too keen on paying people to do what they should already be doing to stay healthy — quit smoking and harmful drugs, for example. But it might cost less in the long run to offer financial incentives for better all-around public health, notes The Times.
July 14, 2015

European leaders reach deal for new Greek rescue

Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an 86 billion euros bailout to keep the near-bankrupt country in the single currency. The terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged leftist Prime Minister Alexis Tsipras to abandon promises of ending austerity and could fracture his government and cause an outcry in Greece. "Clearly the Europe of austerity has won," Greece's Reform Minister George Katrougalos said. "Either we are going to accept these draconian measures or it is the sudden death of our economy through the continuation of the closure of the banks. So it is an agreement that is practically forced upon us," he told BBC radio.

SECOND THOUGHTS: The euro-area deal with Greece has been denounced as blackmail, an attack on national sovereignty and an end to the European dream. But Bloomberg says all of those critics agree on one thing: the chief culprit is Angela Merkel.
July 13, 2015

The priciest cities for hotels in the world

Avoid getting a hotel room in California. According to a recent report from Bloomberg, San Francisco is the most expensive place in the world to rent a hotel room — an average of $397 per night — while Los Angeles is the ninth-most expensive, at $237. Chicago and Miami tied for the seventh-most expensive for hotels in the world ($240), and New York took 16th place ($202). Bloomberg ranked the world's top 100 financial centers on average hotel costs. It also ranked the top 10 most expensive places for five-star stays. Geneva, Switzerland is No. 1 ($622), followed by Los Angeles ($582) and Miami ($430). New York ($393) is seventh.

SECOND THOUGHTS: Hotel costs can really eat into your budget. But remember, hotels aren't the only options out there anymore. Aside from staying with family or friends, using sharing-economy sites like Airbnb and VRBO may get you more bang for your buck. If you have to frequent cities like San Francisco, Chicago, Miami, Los Angeles and New York, make sure you check out all of your options.
July 11, 2015

Say hello to checked baggage fees on JetBlue

On July 1, JetBlue started charging for checked baggage, leaving Southwest Airlines alone among large U.S. carriers who don't charge for checked cargo, according to Bloomberg. JetBlue now charges $20 for the first checked bag if you pay online or at the airport kiosk, $25 at the airport desk and $35 for a second bag. If you're going to one of 10 international destinations, you still get the first bag for free. The airline is also slimming down its seats, but it will still have the most legroom of any U.S. airline, according to JetBlue.

SECOND THOUGHTS: Just when you think air travel can't get any more unaffordable or uncomfortable: In addition to pricey checked-baggage fees, the International Air Transport Association is rallying for smaller carry-ons. And while we may not have to worry about buying new carry-ons anytime soon (it's just a guideline for now), it may eventually be another expense and inconvenience we have to deal with when we fly.
July 10, 2015

New rules on who qualifies for overtime pay

President Obama is about to raise the wages of millions of Americans. The administration is creating new rules for overtime compensation, meaning more businesses will be required to pay time-and-a-half after 40 hours of work. Right now, many households are earning as little as $23,660 a year and can't earn overtime pay because they aren't considered managers, notes Bloomberg. Now some officials are pushing for a threshold as high as $56,680 before someone could be considered exempt from overtime pay.

SECOND THOUGHTS: This would be a boon for millions. Even an extra $1,000 a year can really make a difference for many people. Check out these smart things to do with $1,000.
July 9, 2015

Reverse mortgages get new protections but remain risky

The Federal Housing Administration recently announced a new rule to protect surviving spouses of people who entered into a reverse mortgage. Previously, many widows and widowers, who may not have had any idea that their spouse had borrowed against their home for income, were threatened with eviction when they couldn't pay back the loan, notes Consumer Reports. The new policy would allow surviving spouses to stay in their home after the borrower dies. In those cases, lenders now have the option to sign the loan over to the U.S. Department of Housing and Urban Development.

SECOND THOUGHTS: Even with the new rule, reverse mortgages can still be costly and risky. Advertisements for reverse mortgages underplay those risks, according to a recent study by the Consumer Financial Protection Bureau. Loan requirements were often buried in fine print or not mentioned at all. If you're thinking about a reverse mortgage, it's wise to ask for a reverse mortgage worksheet from your lender, notes Consumer Reports.
July 8, 2015

Health insurance reduces financial stress

If you have health insurance, you probably have less financial stress, according to a recent survey from the Centers for Disease Control and Prevention. The CDC analyzed data of more than 370,000 people collected through the National Health Interview Survey. It found that six months after the Affordable Care Act was introduced in January 2014, the percentage of people under age 65 in families having trouble paying medical bills dropped from 19.4% in 2013 to 17.8% in 2014. Health care costs dropped for those who gained coverage and for those who picked up more generous coverage, notes The New York Times. Overall, the expansion of health insurance has decreased financial strain, notes The Times.

SECOND THOUGHTS: Medical debt is one of the single biggest threats to financial security. So it's not a big surprise that having health insurance can reduce financial stress. But remember, just one night in the hospital can mean thousands of dollars in out-of-pocket expenses — even for someone with health insurance. Here are 10 smart moves to save on health care.
July 7, 2015

Too many people don't know how much money their spouse makes

According to a recent survey by Fidelity, 43% of us don't know how much income our spouse brings in annually. When asked about their spouse's income, 4 in 10 people got it wrong. And of those who got it wrong, about 10% were off by more than $25,000. It's not getting any better. The percentage of people who are in the dark about their spouse's salary has shot up about 16% since two years ago.

SECOND THOUGHTS: "We were surprised how many missed the mark," John Sweeney, a retirement and investing expert at Fidelity, told CNN Money. Indeed, knowing your household income is important for saving and planning for the future. Check out the rules for saving $1 million for retirement.
July 6, 2015

One big reason your health care costs are rising

Regulations require health insurance companies to build up a reasonable surplus to cover costs. And part of your health insurance premiums go to building up that surplus. But a recent analysis by Consumers Union, the advocacy and policy division of Consumer Reports, found nine nonprofit Blue Cross Blue Shield carriers with more than $12 billion in surplus funds collectively, including Arizona, California, Tennessee and Wyoming. Meanwhile, premiums are rising. “Plans should not be allowed to justify rate hikes by saying they need to grow their surplus if their surplus is already very large,” said Dena Mendelsohn, a health policy analyst with Consumers Union and the author of the report.

SECOND THOUGHTS: Mendelsohn has a great point. While the surplus is growing, so are our premiums. Something has got to change. Consumers Union suggests putting a maximum, not just a minimum, on surplus funds for carriers. At least that's a start.
July 5, 2015