Longevity and the decline of pension plans have not only reshaped the math of retirement, but also introduced another dilemma: Retirees have greater individual responsibility for managing their financial assets – for a longer time. There may be no cognitive issues at 65 or 70 when someone retires and establishes an income plan, but time and circumstances will almost certainly require adjustments. What if the individual is no longer mentally capable of making good decisions? Spurred in part by several high-profile legal cases where the mental capacity of an elderly customer was a critical issue, the financial services industry is pro-actively moving to improve due diligence protocols. Scores of trade publication articles, seminars, and commentaries are suggesting processes and documentation for financial representatives to use in all customer interactions. These items attempt to address two areas of mental competency, comprehension and memory.
Completing a year-end transaction means not only beating the deadline but also having the money to do it. If your business or personal checkbook is flush with cash, this may not be a problem; in fact, it’s probably one of the reasons you are considering getting something done before December 31. However, quite often the “excess” is no longer constituted as cash, but has already been re-allocated/spent on other needs or opportunities. While a lack of liquidity might preclude a year-end transaction, there are scenarios where borrowing before December 31 might make sense.
It’s an ongoing challenge for American households to delay gratification and save for the future. And it’s even harder when it seems like macro-economic conditions are stacked against them. Right now, saving might be good for you, but no one is making it easy. Among the principal obstacles: inflation and interest rates. There is an eternal tension between spending today or saving for tomorrow, and the manipulations of inflation and interest rates can skew the balance away from saving. Inflation and interest rates may try to convince you otherwise, but buying a toaster you don’t need isn’t the path to lasting financial success. Even when macro-economic headwinds make it difficult, those who are savers make better progress in the long run.
If you are a parent of a child anticipating college, the financial logistics of obtaining a college education can be summarized in two questions: How will we pay for it? And will it be worth the cost? Besides seeking competent career guidance for their children (probably more than “What are your interests?”), parents should also consider how to best arrange their financial assets to minimize education debt and, if possible, maximize eligibility for financial assistance. Delaying college, working and attending part-time, starting at a community college – every possibility should be on the table. Because whatever career path they pursue, your child’s ship will sail lighter if it isn’t dragging an anchor of debt.
The middle class in America is shrinking. A result of The Great Recession is a pullback in prosperity for all Americans, and the subsequent recovery, such as it is, has been unevenly experienced. The lower-income segments of the population have seen a slow return to pre-recession incomes and stability, while the upper-income class has not only recovered, but advanced. Meanwhile, the middle class, once the dominant economic strata in the US, has declined or diminished - the majority of migration moving downward. The result is a more polarized economy comprised of haves and have-nots, with greater barriers for those at the bottom to move up. This condition is both socially and economically damaging for the country. The shrinking middle class narrative has prompted a lot of academic study, attempting to define the participants, verify the decline, and determine the causes. When you dig into the data, it provides interesting nuance to the bigger story.
Providing financial assistance for children (or other family members) is a common practice, one that many households gladly consider because the benefits often extend far beyond financial outcomes. Especially when traditional lenders are unwilling or unable to extend credit, family loans can be a creative solution to financial dilemmas or opportunities. These transactions may be all in the family, but family loans – even interest-free ones – are subject to state laws and Internal Revenue Service regulations. From the government’s perspective, lending money doesn’t make you a bank, and personal loans are not the same as institutional loans. There are limits – both maximums and minimums – to the interest that can be charged, as well as some unique tax issues that do not apply to loans involving traditional lenders.