Air travel
Credit cards
Health insurance
Interest rates

Cars & gas
Home values

YOUR FUTURE 401(k) plans
Career strategy
College costs
Life insurance
Social Security





Vigilance required

>> Credit card companies (maybe yours) are not going to take implementation of the Credit Card Act lying down. They’re busy with a whole bunch of things, like cutting back on rewards programs, inventing new fees, and just plain raising rates.

Self-defense: Call your card company and ask what they’re doing—and planning to do. Let them know if you object. In some cases, the person you speak to may have authority to give you a better deal. Also, keep checking the credit card watchdog sites, which include: and

Goodbye to fixed-rates?

>> The interest rate on your card may still be fixed, but three big card issuers—Bank of America, Chase, and Discover—have switched many of their customers to variable rates. At Chase and Discover, customers can opt out of the changes by paying off their interest-bearing accounts. Not so at Bank of America, which requires customers with open accounts to pay variable rates. The danger? more+Self-defense


Did you get the right code?

>> If your medical insurance covers preventive care, that means going in for a check-up, which costs nothing. Right? Not necessarily. Your doctor might perform an uncovered procedure while you’re there and just report the procedure.  Possible result: You pay. Why? Because insurance payments are governed by a system of codes. If your doctor or staff member forgets to include the code for a check-up, the insurance company is within its rights to refuse payment.

Self-defense: Make it habit to ask your doctor if he or she will code your visit for an examination or procedure that is covered by your insurance.

What to watch out for

>> Buying health insurance is like major surgery—mistakes can be painful and expensive. Here’s a short list of things to watch out for:

• Make sure the company is licensed in your state. Sounds like something you can take for granted. But no. There are dozens of companies selling in states where they have no legal right to sell, and many are fakes pushing fraudulent policies.

Self-defense: Check for a list of companies licensed to do business in your state.

• Check on the company’s financial health. You want your company to be there when you need it, not out of business.

Self-defense: Check on the one you’re considering or already have at

• Don’t just look at the stated price. Check deductibles and co-pay amounts to see how much protection you’re getting for your money. more+Self-defense


Surprising news on jobs: The economy lost only 11,000 jobs in November, a huge change for the better. The unemployment rate dropped from 10.2 percent to 10 percent. But don’t break out the champagne yet. See JOBS

Some community banks and credit unions are now offering up to 5 and 6 percent on cash deposits. There are some restrictions, but they don’t loom large in today’s low interest rate world (see CASH, “Trouble comes to cash.”)

After shrinking four quarters in a row, the U.S. economy has finally changed course: In the third-quarter, gross domestic product (GDP) rose at an annual rate of 2.9 percent, seasonally adjusted. more



National averages at a glance

• 30-year, fixed-rate mortgage: 5.1%
• Home equity loan: 5.3%
• Credit card purchases: 15.9%
• 48-month auto loans (Chicago): 7.1%
• 10-year Treasury notes: 3.65%
• 10-year AAA corporate bonds: 4.8%
• Taxable money market accounts: 1.05%
• Bank CDs:
  12-month: 1.1%
  60-month: 2.4%

Caution: These numbers are national averages. You may be able to do a lot better than average by shopping around. One example: Some credit unions and banks are paying up to 6 percent on special “reward checking accounts." (see CASH, “Trouble comes to cash.”) more+Self-defense


Rates up again.

>> Fourth quarter rates for a 30-year fixed-rate mortgage edged slightly north of 5 percent. The good news is that current rates are still far below the roughly 6.5 percent rate that prevailed a year ago. The bad news: Huge federal deficits and continued spending may send mortgage rates spiraling upward.

 Self-defense: Part of the Federal government’s program to revitalize the home mortgage market will allow some home owners to refinance at below market rates. But be aware: To qualify, you must have loans guaranteed or owned by Fannie Mae or Freddie Mac, owe from 80% to 105% of their home’s market value, and must be current with their mortgage payments. About 5 million homeowners are eligible to benefit

“Can we afford it?”

>> Even though home prices are lower now, you still have to be careful about buying more house than you can afford. American home buyers have landed hard after a run of “nothing down,” and a new conservatism has taken hold. For a conventional mortgage, most banks now want you to put 20 percent down. Federal Housing Authority (FHA) loans require only 3.5 percent, but there are advantages and disadvantages to both types of mortgage. more+Self-defense

To refinance

>> With the average rate of a 30-year fixed-rate mortgage still historically low, many homeowners can save thousands of dollars a year by refinancing out of a high-rate mortgage. Quick test to find out if you qualify: Have at least 20 percent equity in your home and a credit score of at least 720. It pays to shop for the best deal, but bear in mind that refinancing with your current bank will minimize your closing costs. Decide up front to invest time in exploring your options. more+Self-defense


The minus and plus of 2009

>> It looks as though Congress will lower rates on middle-class incomes. Not so for tax rates on upper incomes. The higher rates include:
Top marginal rates, which could rise from the current 33 and 35 percent to 36 and 39.6 percent for couples who earn more than $250,000.

Taxes on capital gains and dividends will rise to 20 percent for couples who earn more than $250,000.

Estate taxes, for which Obama’s people have proposed a 45 percent rate when a couple’s more+Self-defense

“It happened to me.”

"It was a terrible shock. My wife and I thought we were on solid ground
when we gave most of our retirement money to a local bank to invest. We felt
a bank would know how to invest conservatively. Instead, they gave our money to Madoff to invest, and you know how that turned out. Our attorney says we'll be lucky to get any of our money back, and we are both in our
late-sixties."  F. and C., Cos Cob, CT

Self-defense: Make sure you know
exactly where your money is being invested--and get it in writing.

Action: If you have a financial loss story you would like to share, please tell us about it in an email. We'll review it for possible publication.


How bad will it be?

>> It depends on whom you listen to. Some experts say we cannot fail to have rampant inflation, if not now, then soon. Others say no; our biggest worry is deflation, the opposite of inflation. Both sides—will and won't—have plenty of ammunition:

“We will have high inflation:”
The Obama administration has put a $787 billion stimulus program in place and forecasts a budget deficit that will grow to over 12 percent of Gross Domestic Product (GDP) in 2009, the highest

The Federal Reserve is keeping interest rates near zero. This encourages borrowing and higher prices.

In another action, the Fed is slated to nourish the credit markets with $1.2 trillion by buying mortgaged-backed securities and longer-term Treasury bonds. The total of this purchase and previous actions comes close to $2 trillion.

China has launched its own giant stimulus program. This increases the global supply more+Self-defense


Fly the gloomy skies

>> Airlines have not been able to rise above the down-in-the-dumps economy. Five of the biggest U.S. carriers reported losses this year , and air travelers will feel the bumps. This fall and winter, expect routes and service to be cut, planes to be grounded, fees to go up, and don’t even think about roomy seating. Despite recent gains, the number of domestic passengers has taken a dive, creating a surplus of airlines. Analysts think some may have to resort to bankruptcy.

Self-defense: If you have air miles (or other rewards), consider using them sooner, rather than later. more


How to spot and avoid investment traps

A Word to the Wise.

>> Suppose someone offered you a 9 percent return on a two-year loan to what appears to be a successful company. Would you bite?

We hope not. Because it’s an obvious trap. We’ll explain why in a moment, but first understand this is no hypothetical case. It’s an actual deal that many Midwestern people fell for. The company behind the deal is under investigation for allegedly running a Ponzi scheme—using money from recent investors to pay back early investors.

The interesting thing is that every person who invested in this alleged scam was probably familiar with the old saying, “If it sounds too good to be true, it is too good to be true.” Yet they put their hard-earned money into it. more


It’s no secret the financial world has become a lot more dangerous—more complex, faster-moving, filled with threats to your financial life.

That’s why Congress is considering the creation of a consumer financial protection agency.

We'd like you to think of as your personal financial protection agency—because it does three things that could save you hundreds, even thousands, of dollars:

First, we sift through dozens of different sources of news, searching for financial threats, so you don’t have to.

Second, we  serve up only the most useful facts in short, easy-to- read articles, all in one place. more

Ready to sharpen your job interview skills?
You don’t want the triumph of meeting with a potential employer only to suffer the agony of failing the interview. Click here to get some foxy tips on how to handle yourself when the pressure is on. It’s FREE.


Note: The purpose of this feature is to warn our readers about the kinds of financial scams they may encounter. Please note: Investigations and indictments do not necessarily mean the named individuals are guilty of wrongdoing.

>> Watch out for a new scam that preys on your fear of bank failure (see “The Trouble With Cash”): You get an inquisitive email from what looks like the Federal Deposit Insurance Corporation (FDIC). It’s not. The FDIC does not send out email asking people for private financial information. All such emails are scams trying to get enough information to steal your identity.

>> With the arrest of Raj Rajaratnam, another high-flying hedge fund manager bites the dust. Justice Department prosecutors allege his Galleon Group achieved a substantial part of its apparent success from illegal insider trading. Mr. Rajaratnam is free on $100 million bail.

>> Renters beware: This scam starts online. You see a terrific apartment on Craigslist, for example, and the price is enticingly low. So you call, and you’re asked to put up a deposit of $100 to “borrow the keys.” more+Self defense


A change for the better

>> In news that took experts by surprise, the Bureau of Labor Statistics said the economy lost only 11,000 jobs in November. That compares with an average of 135,000 per month in the three prior months.

There was more good news: The unemployment rate slid down from 10.2 to 10 percent. Employees worked more hours. The weekly wage went up. And employers hired 52,000 part-time workers—often a prelude to hiring people full-time.

All of which does not necessarily mean the employment picture has permanently brightened. A jobless rate of 10 percent is still very high, and there are still over 15 million people unemployed or under-employed.

Beyond that, other problems loom (see “About those rosy forecasts”). Banks are still tight-fisted with loans, which puts a choke-hold on growth. Banks, in fact, are still in trouble because of bad loans made years ago. The FDIC has taken over more than 130 banks in 2009—and has over 400 banks on a watch list. Massive deficits threaten to spark inflation. And we’ve just added to the deficit with a major move into Afghanistan. Bottom line: Keep the party hats in the closet.

Job picture worse than it seems

>> Optimistic analysts say the economy has turned a corner, but many quickly add that it may be a “jobless recovery.” They’re referring to a developing consensus that the employment picture may remain bleak well into 2010. The U.S. Labor Department has provided plenty of ammunition for this gloomy view:

• Total unemployment in this recession is the worst since the Great Depression. According to Labor Department data, roughly 8 million jobs have been lost in a blizzard of pink slips. And there are now 6 times as many people looking for work as there are jobs available.

• The percentage of unemployed people out of work for more than 26 weeks—about one-third—is the highest since 1946.

All of which may sound bad, but the actual picture is worse. Department of Labor statistics do not include at least three groups: People who have part-time jobs, but want full-time. People who didn’t look for work in the four weeks prior to the latest survey and therefore weren’t counted. People who are technically employed, but are on unpaid leave.

Add it all up, and the national unemployment rate may approach 20 percent. As if that weren’t bad more

Newsday’s Walt Handelsman leads a “Recession Sing-A-Long.” Here’s a link to his clever animation.


Housing picture still mostly dark

>> According to S&P/Case-Shiller, the average sale price of a home was about the same in November as in October, which can be seen as a good sign. Sales of existing homes also improved. But sales of newly built homes fell over 11 percent in November to their lowest point in seven months, according to the Commerce Department.

One reason: The number of vacant homes is at a record high—11 percent of all housing units. At the same time, rental vacancies were also at a record level—slightly more than 11 percent of units on the market.

Self-defense: Congress has extended the home buyer tax credit from this November 30 to April 30, 2010, or to June 30, if a buyer is under contract by April 30. The move may ease the pain for owners, as well as buyers, because it makes homes easier to sell.

No longer just for first-time buyers, the new law allows a credit of $6,500 to those who buy a replacement home after November 6, 2009, or 10 percent of the price of the replacement home, whichever is less. First-time buyers still get a credit of $8,000 or 10% of the purchase price, whichever is less. For purchases after 11/6, income limits were raised. more

By Sheldon Jacobs

Jacobs is a former editor and publisher of The No-Load Fund Investor newsletter. He is also the author of
The Handbook for No-Load Fund Investors, and other books on no-load fund investing.

This awful recession we’re having, with millions of people facing financial emergencies, brings to mind what may be the most useful advice I’ve given as a financial author, publisher, and investment manager – advice I still give in my forthcoming book, Lifetime Money Lessons:


The greatest investment strategy the world has ever seen is useless unless you have money to invest, and the only way most people will have that money is to save. Always important, it is now vital, not just for your future, but also to protect yourself in case you become unemployed.

 If you don’t already have savings, START SAVING! If you have some, SAVE MORE! Not “when you make more money,” or “when the recession is over,” but NOW, while you still have a job (if you’re lucky).

Most people don’t realize it, but how long you save can be more important than how much. I took this more


The ten-year train wreck and what's ahead

>> If, on December 31, 1999, you had asked a hundred experts where the domestic stock markets would be in 10 years, nearly all would have said “up.” They would have disagreed on the amount, but not the direction.

We now know the experts would have been wrong. Very wrong. As of December 31, 2009, here’s where three major markets stood after 10 years:

• Dow Industrials: 8.5% down
• S&P 500: 23% down
• Nasdaq: 44% down

And that’s without accounting for inflation. Investors would have done better in bonds. In fact, they would have done better in plain old cash—bank accounts and money markets.

Ahh, but what about the future? The S&P index of 500 large-company stocks went up 23.5 percent in 2009. With all that momentum, won’t it keep going up more+Self-defense

It will take more than prayers.
>> The wave of foreclosures sweeping the country has not spared houses of worship. Hundreds of churches across the country have been hit with foreclosure notices in just the last few months. Donations are also dropping as unemployment— and fear of unemployment—keep rising. Thousands of churches are behind on mortgage payments.

Self-defense: Check wth your congregtation leaders to see how you can help.


Trouble comes to cash

>> Time was when you could put thousands of dollars into a money market account or a bank certificate of deposit (CD) and never give it a second thought. Cash was safe. That time stopped when big banks started going bankrupt, beginning with Countrywide Financial in 2007 and IndyMac in 2008, followed by trouble at the money market fund, Reserve Fund, which reported a per-share value of 97 cents in September, 2008. It was only the second time in history that a money market fund had “broken the buck.”

And the trouble continues: Early in the fourth quarter, the number of banks taken over by the Federal Deposit Insurance Corporation rose to over 130. That works out to an average of 2.7 banks a week for 10 months.

Is your bank next? Is nothing safe anymore? Well, big banks seem to be better off now than in the early months of the year. Wells Fargo and Bank of America reported respectable second quarter profits. But some analysts are unimpressed, noting that at least some of the profits came from banks being allowed to value their dubious assets at whatever level the banks themselves considered fair.

Somewhat like Humpty Dumpty, banks are telling us their numbers mean whatever they want them to mean.

Self-defense: As usual, the answer is to shop around. A good place to start is There you’ll see a list of banks and credit unions that offer rates up to 6 percent on FDIC-insured “reward checking accounts.” more

401(k) PLANS

Don’t depend on matching contributions

>> If you’re one of those lucky people whose employer still matches your 401(k) contribution, prepare for a potential hit. Dozens of big companies, desperate for cash, have already stopped or reduced their contributions. They include Eastman Kodak, Motorola, Federal Express, Inter-Mountain Health Care, and (no surprise), GM and Ford. Coming on top of plummeting stock and bond values, this trend significantly weakens the retirement plans of millions of Americans. Those affected may have to work more years and retire with less money.  

Self-defense: Consider putting every cent you can into your 401(k). Even if your company has reduced or eliminated its contribution, a 401(k) is still an excellent way to build assets for your future. Here’s why:

Greenwich Financial Management - Raise after tax returns; Lower risk

1. The amount you contribute is tax-deductible. That puts you ahead in two ways: You don’t pay federal income tax on the money that goes into your account, so 100 percent of your money can grow to increase your nest egg. And depending on your tax bracket, the tax saving liberates money you would otherwise have paid to the IRS.

2. The accumulated earnings in your plan are tax-deferred. That means you can postpone taxes on both the income and capital gains earned by your plan. You will have to pay taxes when you withdraw from the plan, after you retire. But at that point, you’ll probably be in a lower tax bracket.

3. Your employer’s contributions to your plan, if any, are also tax-deferred. Which means they earn the investment return on your portfolio without current taxes.

4. As the cost of living increases, so do the limits on contributions to your plan. In 2009, the limits are $16,500 if you’re 49 or under, and $22,000 if you’re 50 or over. No question that it’s hard to take that much money out of your income. But just the sheer arithmetic is so much in your favor, it’s a shame not to do it.

Another important issue is what investments to choose from those available in your plan. It’s no secret that the editors of favor broad-based index funds, like an S&P 500 index fund. These funds offer diversity, low costs, more


• Tax collections by 44 states fell by 11 percent in the third quarter, according to the Nelson A. Rockefeller Institute. The impact on residents: Jobs and hours are being cut, while school taxes are going up, because municipalities are getting less state aid.

• The continuing housing crisis is hurting even the Federal Housing Administration. An audit shows that its capital reserves have fallen far below the minimum level it is supposed to have. One Congressman introduced a bill to raise down payments on home purchases.

• The Labor Department reported that the unemployment rate for October rose to 10.2 percent. A rate that high was not expected until 2010. more


Term rates rise

>> Check with your life insurance company to see if it has raised rates on term life insurance. Many companies have already hiked up rates by 5 to 15 percent. If yours hasn’t--and you want more term insurance--move fast, and you may be able to beat the increase. Companies blame the higher rates on the higher cost of maintaining adequate cash reserves in an environment of tight credit and rising interest rates.

Self-defense: If your company raised its rates in 2009, shop around to see if you can find one that still has lower rates. Go to for a quick review of who’s charging what.

Is your life insurance assured?

>> Dredge your memory, and you may recall that in 1991, a big, top-rated insurance company called Executive Life failed, costing its policyholders $4.5 billion. Through state associations of insurance companies, some policyholders got their money back, but it took over two years to start receiving payments.

Today, insurance companies are asking regulators to cut their capital requirements. (You know how well that worked for banks.) Also, insurance companies own large amounts of blue-chip stocks and corporate bonds, both of which have obviously dropped in value. At one point in April, 2009, shares of more+Self-defense


The beat goes on

>> A recent study by Patrick Callan’s National Center of Public Policy and Higher Education confirms what everybody knows: The cost of getting a college education keeps going up, while its affordability keeps going down.

In New Jersey, for example, the average New Jersey family in 2000 had to spend 19% of its income to pay for college. Today the figure is 34%. That’s a 44% increase in just eight years. In 2008, average total costs for New Jersey residents rose about 6% at state schools (to $13,589) and 6% at private schools (to $32,307). Fortunately, about 75% of students get some form financial aid, but rarely does it cover the bulk of total costs – and student loans can leave graduates with staggering debt.

According to the College Board, the average annual cost of tuition and fees for a public four-year college in 2009 is $6,585 more+Self-defense


The limits of loyalty

>> A FinancialThreats Opinion: Your parents may have found it pays to be loyal to their employer. That was then. Now all loyalty is strictly conditional. Thousands of decades-old companies, big and small, have already gone bankrupt; more are on the way.

Even apart from the recession, things are too loose, too fragile, too fast-moving to plan on working for the same company for a decade or more. Instead, think bigger. more


  • Water, water, where?
    Why you'll be paying more for water.
  • Index vs. actively-managed funds. Finally decided?
  • The invisible risks of Target-Date funds.
  • More scams that threaten your home.


Stay the course

>>Things are bad. No question about it. Your 401(k) is way down. Your company may be planning to reduce or eliminate its contribution to your plan. You may have lost your job, or, if not, you’re worried that you might. Your home is worth less. And interest rates and prices may soar when the recession is finally over. It seems like you must do something to prepare for retirement, but what?

Self-defense: At, we think the most important things are what you should not do. They include:

• Don’t try to predict the markets. You can’t. Nobody can.

• That simple fact is the foundation of index investing. In the current recession, active investment managers proved once again that they cannot reliably beat the markets.

• Don’t give up on stocks and bonds. The U.S. population is growing; more

“What worries me.”

"What worries me is that my programming job will be exported, just when the economy is in the pits. I don't feel I'm lucky to have a job--I have a lot of experience in Java, C#, and application architecture. But I still feel threatened. My company has already shipped a bunch of jobs to Eastern Europe and India. I have to wonder if mine is next. I keep in touch with headhunters and read the trade press, but there just isn't much out there. How can I protect my job?"
— D.G., Boston, MA

Action: If you have any ideas on what DG should do—or if you have a financial worry of your own you'd like to share—email us. We'll review your response for possible publication.


Expect less from Social Security

>> The folks at the Social Security Administration tell us your payments in 2010 may stay the same or actually go down, for two reasons: First, there hasn’t been much in the way of inflation, so there’s no reason for your payments to go up. Second, Medicare Part B premiums, which are deducted from your payment, will probably rise. So if you have Part B, you can expect a slightly smaller check. more+Self-defense

Caution: If you are inclined to change any of your financial arrangements because of something stated or implied on, please read Legal Disclaimer first.