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Posts from the ‘Consumer Information’ Category

17
Mar

American Rescue Plan Act Provides Relief to Individuals and Businesses

On Thursday, March 11, 2021, the American Rescue Plan Act of 2021 (ARPA 2021) was signed into law. This is a $1.9 trillion emergency relief package that includes payments to individuals and funding for federal programs, vaccines and testing, state and local governments, and schools. It is intended to assist individuals and businesses during the ongoing coronavirus pandemic and accompanying economic crisis.  Major relief provisions are summarized here, including some tax provisions.

Recovery rebates (stimulus checks)

Many individuals will receive another direct payment from the federal government. Technically a 2021 refundable income tax credit, the rebate amount will be calculated based on 2019 tax returns filed (or on 2020 tax returns if filed and processed by the IRS at the time of determination) and sent automatically via check, direct deposit, or debit card to qualifying individuals. To qualify for a payment, individuals generally must have a Social Security number and must not qualify as the dependent of another individual.

The amount of the recovery rebate is $1,400 ($2,800 if married filing a joint return) plus $1,400 for each dependent. Recovery rebates start to phase out for those with an adjusted gross income (AGI) exceeding $75,000 ($150,000 if married filing a joint return, $112,500 for those filing as head of household). Recovery rebates are completely phased out for those with an AGI of $80,000 ($160,000 if married filing a joint return, $120,000 for those filing as head of household).

Unemployment provisions

The legislation extends unemployment benefit assistance:

  • An additional $300 weekly benefit to those collecting unemployment benefits, through September 6, 2021.
  • An additional 29-week extension of federally funded unemployment benefits for individuals who exhaust their state unemployment benefits.
  • Targeted federal reimbursement of state unemployment compensation designed to eliminate state one-week delays in providing benefits (allowing individuals to receive a maximum 79 weeks of benefits)
  • Unemployment benefits through September 6, 2021, for many who would not otherwise qualify, including independent contractors and part-time workers.

For 2020, the legislation also makes the first $10,200 (per spouse for joint returns) of unemployment benefits nontaxable if the taxpayer’s modified adjusted gross income is less than $150,000. If a 2020 tax return has already been filed, an amended return may be needed.

Business relief

  • The employee retention tax credit has been extended through December 31, 2021. It is available to employers that were significantly impacted by the crisis and is applied to offset Social Security payroll taxes. As in the previous extension, the credit is increased to 70% of qualified wages, up to a certain maximum per quarter.
  • The employer tax credits for providing emergency sick and family leave have been extended through September 30, 2021.
  • Eligible small businesses can receive targeted economic injury disaster loan advances from the Small Business Administration. The advances are not included in taxable income. Furthermore, no deduction or basis increase is denied, and no tax attribute is reduced by reason of the exclusion from income.
  • Eligible restaurants can receive restaurant revitalization grants from the Small Business Administration. The grants are not included in taxable income. Furthermore, no deduction or basis increase is denied, and no tax attribute is reduced by reason of the exclusion from income.

Housing relief

  • The legislation allocates additional funds to state and local governments to provide emergency rental and utility assistance through December 31, 2021.
  • The legislation allocates funds to help homeowners with mortgage payments and utility bills.
  • The legislation also allocates funds to help the homeless.

Health insurance relief

  • For those who lost a job and qualify for health insurance under the federal COBRA continuation coverage program, the federal government will generally pay the entire COBRA premium for health insurance from April 1, 2021, through September 30, 2021.
  • For 2021, if a taxpayer receives unemployment compensation, the taxpayer  is treated as an applicable taxpayer for purposes of the premium tax credit, and the household income of the taxpayer is favorably treated for purposes of determining the amount of the credit.
  • Persons who bought their own health insurance through a government exchange may qualify for a lower cost through December 31, 2022.

Student loan tax relief

For student loans forgiven or cancelled between January 1, 2021, and December 31, 2025, discharged amounts are not included in taxable income.

Child tax credit

  • For 2021, the credit amount increases from $2,000 to $3,000 per qualifying child ($3,600 for qualifying children under age 6), subject to phaseout based on modified adjusted gross income. The legislation also makes 17-year-olds eligible as qualifying children in 2021.
  • For most individuals, the credit is fully refundable for 2021 if it exceeds tax liability.
  • The Treasury Department is expected to send out periodic advance payments (to be worked out by the Treasury) for up to one-half of the credit during 2021.

Child and dependent care tax credit

  • For 2021, the legislation increases the maximum credit up to $4,000 for one qualifying individual and up to $8,000 for two or more (based on an increased applicable percentage of 50% of costs paid and increased dollar limits).
  • Most taxpayers will not have the applicable percentage reduced (can be reduced from 50% to 20% if AGI exceeds a substantially increased $125,000) in 2021. However, the applicable percentage can now also be reduced from 20% down to 0% if the taxpayer’s AGI exceeds $400,000 in 2021.
  • For most individuals, the credit is fully refundable for 2021 if it exceeds tax liability.

Earned income tax credit

For 2021 only:

  • The legislation generally increases the credit available for individuals with no qualifying children (bringing it closer to the amounts for individuals with one, two, or three or more children which were already much higher).
  • For individuals with no qualifying children, the minimum age at which the credit can be claimed is generally lowered from 25 to 19 (24 for certain full-time students) and the maximum age limit of 64 is eliminated (there are no similar age limits for individuals with qualifying children).
  • To determine the credit amount, taxpayers can elect to use their 2019 earned income if it is more than their 2021 earned income.

For 2021 and later years:

  • Taxpayers otherwise eligible for the credit except that their children do not have Social Security numbers (and were previously prohibited from claiming any credit) can now claim the credit for individuals with no qualifying children.
  • The credit is now available to certain separated spouses who do not file a joint tax return.
  • The level of investment income at which a taxpayer is disqualified from claiming the  credit is  increased from $3,650 (as previously indexed for 2021) to $10,000 in 2021 (indexed for inflation in future years).
17
Dec

How COVID-19 Has Changed Consumer Behavior and the Future of Retail

U.S. retail sales suffered in the spring of 2020 due to safety concerns, government-mandated lockdowns, and economic uncertainty wrought by the coronavirus pandemic. Sales — including purchases at stores, restaurants, and online — plunged from $483.95 billion in March to $412.77 billion in April, a record 16.4% drop.1)

Fortunately, retail sales rebounded sharply after the economy began to reopen in May, matched pre-pandemic levels in June ($529.96 billion), and continued to rise steadily from July through September. But sales softened in October, ticking up just 0.3% to $553.33 billion.2)

The arrival of an effective vaccine could inspire some holiday cheer, though it probably won’t be widely available until next spring.3)  Until then, consumers will likely spend more time at home.

U.S. consumer spending accounts for about two-thirds of all economic activity, so it’s good news that many businesses and consumers have adapted quickly to the new normal created by the pandemic.4) Here’s a look at recent changes in consumer behavior, the state of the retail industry, and what these trends could mean for the broader U.S. economy.

Stay-at-home spending shifts

Some workers with stable incomes have been able to save money they would normally spend on transportation, gym memberships, restaurant meals, and expensive “experiences” such as vacations, concerts, sporting events, and other live shows. On the other hand, many households are spending more on home improvements, household goods, fitness equipment, and other lifestyle purchases that make sheltering in place more tolerable.5)

For example, huge demand for bicycles resulted in surprising shortages.6) And with offices closed and most special events cancelled or postponed, a preference for casual and comfortable clothing has decimated consumer demand for more formal attire like business suits and dresses.7)

A swift expansion of e-commerce was also unleashed. New online habits were created in the first three months of the pandemic, accelerating the adoption of digital technologies that might have taken 10 years to achieve otherwise.8)

When lockdowns and social distancing measures were put in place, many consumers were compelled to shop online and use other digital services (e.g., video chat, virtual doctor visits, and online classes) for the first time. Surveys suggest that a vast majority of new users found online services to be useful and convenient; many said they will continue to use them permanently.9)

But anxious consumers have also been boosting their savings. The personal saving rate — the percentage of disposable income that people don’t spend — hit a record 33.6% in April before falling to 14.1% in August, far above February’s 8.3% rate.10) When consumers prioritize saving, it may help individual households build financial stability and prepare for retirement, but it can also hold back the nation’s economic growth.

Traditional retailers on the ropes

Big-box retailers that sell groceries and other goods in one place and home-improvement stores were deemed “essential” in the spring. Regardless of local virus conditions, these businesses have remained open for a steady flow of customers eager to stock up on food and other necessities. As a result, they have generally been able to book healthy profits.11)

Meanwhile, temporary closures, capacity limits, and a drop-off in overall customer traffic have taken a toll on nonessential retailers that couldn’t offer a convenient online shopping experience with home or curbside delivery. The pandemic may land the blow that knocks out some familiar brick-and-mortar retailers, many of which were already buckling under excessive debt and fierce competition from e-commerce giants.

Retail bankruptcies and store closings are on track for a record year in 2020. By mid-August, 29 U.S. retailers had filed for Chapter 11 protection, including several long-standing department-store chains. More than 10,000 permanent store closings have already been announced in 2020, vacating roughly 130 million square feet of physical retail space.12)

A holiday season like no other

Higher unemployment and wage cuts might have had a more severe impact on consumer spending from March to October were it not for the expanded unemployment benefits and stimulus checks delivered to consumers by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. At the time of this writing, Congress had not passed a follow-up stimulus package, and consumers were facing new challenges going into the holiday season.

More than 11 million U.S. workers were still unemployed in October, before a nationwide surge in virus cases and hospitalizations sparked a new round of business restrictions and closures in mid-November.13-14) CARES Act provisions that offer financial support for affected consumers and small businesses expire by the end of December.

Holiday sales figures are often considered an economic barometer, reflecting consumer confidence and funds for discretionary spending. In 2019, holiday spending in November and December rose 4.1% over 2018, suggesting that economic growth was picking up steam.15) But holiday shoppers were blissfully unaware that a pandemic was on its way.

Black Friday holiday deals are designed to create a frenzy and lure throngs of shoppers into stores. But retailers seemed to agree that a different approach was needed in 2020: Promotions were offered online and earlier; store hours were shortened and capacity was limited; and unlike in past years, most stores stayed closed on Thanksgiving.

The prospects for holiday retail sales in 2020 are murky, but consumers are expected to purchase more gifts online than ever before — and possibly too many for shipments to be delivered on time. To be on the safe side, the National Retail Federation is recommending that consumers get their shopping done early and take advantage of curbside pickup.16

1) The Wall Street Journal, May 15, 2020

2) U.S. Census Bureau, 2020

3) The New York Times, November 17, 2020

4) U.S. Bureau of Economic Analysis, 2020

5) The Wall Street Journal, November 17, 2020

6) The New York Times, June 18, 2020

7) The Wall Street Journal, August 27, 2020

8-9) The Wall Street Journal, November 15, 2020

10) The Wall Street Journal, October 25, 2020

11) The Wall Street Journal, November 18, 2020

12) The Wall Street Journal, September 29, 2020

13) U.S. Bureau of Labor Statistics, 2020

14), 16) Associated Press, November 11 and 17, 2020

15) National Retail Federation, 2020

20
Nov

The Jobs Recovery: More Work to Be Done

In April 2020, the U.S. economy lost an astonishing 20.8 million jobs, by far the largest loss recorded in a single month dating back to 1939. To put this in perspective, the second largest monthly job loss was about 2 million in September 1945, when defense industries reduced production at the end of World War II.1

The April unemployment rate spiked to 14.7%, the highest official rate on record (though unemployment has been estimated as high as 25% during the Great Depression). Just two months earlier, it was 3.5%, a 50-year low.2-3

As these numbers indicate, the impact of the COVID-19 recession on U.S. employment is unprecedented. As we approach the end of a very difficult year, this might be a good time to look at the state of the jobs recovery so far and consider its future prospects.

Measuring unemployment

The headline unemployment rate for October was 6.9%, a 1% improvement over September and less than half the rate in April. The rate is moving in the right direction but has a long way to go, and the headline rate — officially called U-3 — is not always the best indication of the state of employment. The U-3 rate only measures those who are unemployed and have actively looked for work during the previous four weeks.4

The broadest measure, U-6, includes discouraged and other “marginally attached” workers — those who are not currently looking for a job but are available to work and have looked in the last 12 months — and part-time workers who want and are available for full-time work. By this measure, the unemployment rate in October was 12.1%, suggesting that almost one out of eight Americans who want to work full-time cannot do so.5

Among the positive news in the October report was that almost 750,000 people age 20 and older — including 480,000 women — joined the labor force (meaning they are either employed or actively looking for work). This came after 1.1 million left in September — about 80% of them women — suggesting they may have dropped out to care for children attending school remotely or because they lacked child care. Women are also more likely to work in jobs that have been especially hard-hit by the pandemic. Since February, almost 2.2 million women have left the labor force compared with just 1.4 million men.6-7

Diminishing job gains

Prior to March 2020, the U.S. economy added jobs for 113 consecutive months dating back to October 2010. With the beginning of lockdowns in March, followed by the April collapse, more than 22 million jobs were lost over a two-month period.8

About 12 million jobs returned over the next six months, but that leaves the economy down 10 million jobs, and growth has slowed substantially since almost 5 million jobs were added in June during the first wave of reopenings. September and October saw gains of 672,000 and 638,000, respectively — great months during a healthy economy, but not nearly enough to catch up.9 If job creation continues at that pace, it would take about 15 months to get back to pre-pandemic levels, and that may be optimistic. In the October Economic Forecasting Survey of The Wall Street Journal, more than 40% of economists projected that payrolls would not return to pre-pandemic levels until 2023, and about 10% thought it would take even longer.10

An uneven recession

Different industries respond differently during any recession, but the pandemic has created big disparities that have led to large-scale layoffs. The leisure and hospitality industry has been hit the hardest, with total payrolls still down 20% from a year ago, despite more than 4.8 million employees returning to work over the last six months. By contrast, payrolls in the financial industry are down just 0.9%. Manufacturing is down 4.5%, and professional/business services is down 4.9%. Driven by demand for housing, the construction industry added 84,000 jobs in October and is down just 2.6% over October 2019.11

The retail industry added more than 100,000 jobs in October and is down only 3.0% from a year ago, aided by the strength of building supply stores, warehouse stores, and food and beverage stores, which have added almost 300,000 employees over the past year. Even with many locations reopening, employment in clothing stores is still down almost 25%, while sporting goods and hobby stores are down 16%. Online retailers, which have flourished during the pandemic, added 54,000 employees over the last six months, but payrolls are flat over a year ago.12 In 2019, retailers hired more than a half million temporary employees during the winter holiday season, but with so many brick-and-mortar stores struggling, the holidays may not provide as much of a boost this year.13

Imagining the future

In the near term, the employment picture will depend in large part on controlling the coronavirus. The spike in cases going into the winter cold and flu season suggests that the return-to-work process may slow down. Recent news regarding a vaccine is encouraging, and some high-risk groups might be inoculated by the end of the year. However, a vaccine may not be widely available until spring 2021.14

While an effective vaccine could be a game changer, it will not instantly open businesses or return all employees to the same jobs they had before the pandemic. For example, the shift to online retailing, which requires fewer employees, will likely continue. On the other hand, pent-up demand for travel and dining in restaurants could lead to a surge in hiring. A recent survey of frequent travelers found that 99% are eager to travel again, and 70% plan to take a vacation in 2021.15

In the best case, the pandemic might inspire changes that will strengthen the American workforce. In October, more than 21% of U.S. workers were still working remotely due to COVID-19, and many companies are making remote work a permanent option — a paradigm shift that may open new jobs for workers living outside of urban centers.16 The combination of remote work, remote learning, cheap technology, and low interest rates might offer opportunities to rethink broad business, employment, and education models. In the long term, the jobs recovery could depend on innovation as much as a vaccine.

1-2, 4-6, 8-9, 11-12, 16) U.S. Bureau of Labor Statistics, 2020

3) The Wall Street Journal, May 8, 2020

7) Associated Press, November 8, 2020

10) The Wall Street Journal Economic Forecasting Survey, October 2020

13) National Retail Federation, 2020

14) MarketWatch, November 13, 2020

15) Travel Leaders Group, October 16, 2020

22
Apr

Watch Out for Coronavirus Scams

Fraudsters and scam artists are always looking for new ways to prey on consumers. Now they are using the same tactics to take advantage of consumers’ heightened financial and health concerns over the coronavirus pandemic. Federal, state, and local law enforcement have begun issuing warnings on the surge of coronavirus scams and how consumers can protect themselves. Here are some of the more prevalent coronavirus scams that consumers need to watch out for.

Schemes related to economic impact payments

The IRS recently issued a warning about various schemes related to economic impact payments that are being sent to taxpayers under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.(1) The IRS warns taxpayers to be aware of scammers who:

  • Use words such as  “stimulus check” or “stimulus payment” instead of the official term, “economic impact payment”
  • Ask you to “sign up” for your economic impact payment check
  • Contact you by phone, email, text or social media for verification of personal and/or banking information to receive or speed up your economic impact payment

In most cases, the IRS will deposit the economic impact payment directly into an account that taxpayers previously provided on their tax returns. If taxpayers have previously filed their taxes but not provided direct-deposit information to the IRS, they will be able to provide their banking information online at irs.gov/coronavirus. If the IRS does not have a taxpayer’s direct-deposit information, a check will be mailed to the taxpayer’s address on file with the IRS. In addition, the IRS is reminding Social Security recipients who normally don’t file taxes that no additional action or information is needed on their part to receive the $1,200 economic payment — it will be sent to them automatically.

Fraudulent treatments, vaccinations, and home test kits

The Federal Trade Commission is tracking scam artists who are attempting to sell fraudulent products that claim to treat, prevent, or diagnose COVID-19. Currently, the U.S. Food and Drug Administration (FDA) has not approved any products designed specifically to treat or prevent COVID-19.

The FDA had warned consumers in March to be wary of companies selling unauthorized coronavirus home testing kits. On April 21, 2020, the FDA authorized the first coronavirus test kit for home use.  According to the FDA, the test kits will be available to consumers in most states, with a doctor’s order, in the coming weeks. You can visit fda.gov for more information.

Phishing scams

Scammers have begun using phishing scams related to the coronavirus pandemic in order to obtain personal and financial information. Phishing scams usually involve unsolicited phone calls, emails, text messages, or fake websites that pose as legitimate organizations and try to convince you to provide personal or financial information. Once scam artists obtain this information, they use it to commit identity or financial theft. Be wary of anyone claiming to be from an official organization, such as the Centers for Disease Control and Prevention or the World Health Organization, or nongovernment websites with domain names that include the words “coronavirus” or “COVID-19,” as they are likely to be malicious.

Charity fraud

Many charitable organizations are dedicated to helping those affected by COVID-19.  Scammers often pose as legitimate charitable organizations in order to solicit donations from unsuspecting donors. Be wary of charities with names that are similar to more familiar or nationally known organizations. Before     donating to a charity, make sure that it is legitimate and never donate cash, gift cards, or funds by wire transfer. The IRS website has a tool to assist you in checking out the status of a charitable organization at irs.gov/charities-and-nonprofits.

Protecting yourself from scams

Fortunately, there are some things you can do to protect yourself from scams, including those related to the coronavirus pandemic:

  • Don’t click on suspicious or unfamiliar links in emails, text messages, and instant messaging services.
  • Don’t answer a phone call if you don’t recognize the phone number — instead, let it go to voicemail and check later to verify the caller.
  • Never download email attachments unless you can verify that the sender is legitimate.
  • Keep device and security software up-to-date, maintain strong passwords, and use multi-factor authentication.
  • Never share personal or financial information via email, text message, or over the phone.
  • If you see a scam related to the coronavirus, be sure to report it to the FTC at  ftc.gov/complaint.
  • Internal Revenue Service, IR-2020-64, April 2, 2020
26
Feb

The Coronavirus and the Global Economy

As of February 26, 2020, the death toll from COVID-19 — the official name of the coronavirus first reported in Wuhan, China — passed 2,700, while the number of confirmed cases exceeded 80,000. Almost all were in China, most of them in Wuhan and the surrounding Hubei province. But more than 2,500 cases, including 46 deaths, had been reported in almost 40 other countries. A surge of cases and deaths in South Korea, Italy, and Iran caused new concern that the virus may be difficult to contain.1

Cities under lockdown

By mid-February, at least 150 million people in China were under restrictions affecting when they could leave their homes, and more than 760 million — about 10% of the world’s population — lived in communities under some form of travel restriction.2 Most global airlines cancelled service to and from China, disrupting tourism and business travel.3

The Chinese government enacted restrictions around the time of the Lunar New Year celebration, during which many businesses were closed, lessening the immediate impact. However, as factories and other businesses remained closed after the holiday, the loss of Chinese production and consumer spending began to take a toll on global businesses.4

Lost supply and demand

Many U.S. technology companies have manufacturing operations in China while also selling to Chinese businesses and/or consumers. Companies with substantial exposure to the slowdown in China include big tech brands such as Apple, Dell, Hewlett Packard, Intel, and Qualcomm, as well as many smaller tech businesses.5-6

Vehicle manufacturers throughout the world rely on Chinese-made parts, and many have plants in China. General Motors (which sells more cars in China than in the United States), Ford, Toyota, BMW, Honda, Nissan, Tesla, and Volkswagen all suspended operations in China, while Hyundai and Renault closed plants in South Korea, and Fiat Chrysler closed a plant in Serbia, all due to parts issues.7-9

Global retailers including Apple, Ikea, Levi Strauss, McDonald’s, KFC, and Starbucks temporarily closed stores in China.10-11

In addition to disruptions in the global supply chain and Chinese consumer market, the tourism industry in the United States, Europe, and other Asian countries may be hard hit by the absence of Chinese tourists. One estimate suggests a loss of almost $6 billion in U.S. airfares and tourist spending.12

Although it is too early to measure the full effect on global business, a private report released on February 21 indicated that U.S. business activity had slowed in February to the lowest level in six years, with the biggest hit to the service sector, where travel and tourism are major components. The report also indicated a sharp drop in Japanese business due to lost tourism and export orders. Exports were down in Germany, but the initial impact on the eurozone was minimal.13

Oil pressure

China is the world’s largest importer of crude oil, and Wuhan is a key center of its oil and gas industry. The prospect of lower demand drove oil prices into bear-market territory — defined as a drop of 20% from a recent high — in early February. Prices rose later in the month but dropped again with news that the virus may be spreading. Natural gas prices have also been hit by the prospect of lower growth in Asia. While lower prices may be good for U.S. consumers, oil-exporting nations, including the United States, will face lower revenues, and energy companies that are already on rocky ground may struggle.14-17

Market reaction

In late January, the Dow Jones Industrial Average lost 3.7%, due in large part to concerns about the virus, wiping out gains for the year.18 The market bounced back quickly and set new records in February, but weak business news and a rash of cases outside of China sent it plunging, with a loss of almost 8% from February 19 to 25.19-20 This suggests that the market may be volatile for some time and that future direction might depend on the progress of disease control and emerging information on the impact of the virus on U.S. and global businesses.

Global growth outlook

Anything that affects China, the world’s second-largest economy, can have a powerful ripple effect around the globe. An early February report by Moody’s Analytics estimated that every 1 percentage point reduction in China’s real gross domestic product (GDP) will reduce global GDP outside China by 0.4%. The report projected that disruption caused by the virus would cut more than 2 percentage points off China’s GDP growth in the first quarter of 2020 and result in a loss of 0.8% growth for the year. This in turn would cause a loss of about 0.3% in annual global GDP growth outside China and about 0.15% in the United States. Moody’s lowered its projection for 2020 global growth from around 2.8% to 2.5%.21

In a February 16 forum, Kristalina Georgieva, managing director of the International Monetary Fund, was more optimistic, suggesting that the virus might shave 0.1% to 0.2% off the IMF’s 2020 global growth projection of 3.3%. Georgieva cautioned that there was still a “great deal of uncertainty” and emphasized that the economic damage depends on the length of the disruption. If the disease “is contained rapidly,” she said, “there can be a sharp drop and a very rapid rebound.”22

The immediate concerns are to combat the virus on a human level and normalize business activity, but the outbreak could accelerate the shift of U.S. and European manufacturing away from China, creating a more diversified global supply chain.23-24 The situation remains in flux, so you may want to keep an eye on further developments.

All investments are subject to market volatility and loss of principal. Investing internationally carries additional risks such as differences in financial reporting, currency exchange risk, as well as economic and political risk unique to the specific country. This may result in greater share price volatility. Shares, when sold, may be worth more or less than their original cost.

1) South China Morning Post, February 26, 2020

2) The New York Times, February 18, 2020

3-4, 21) Moody’s Analytics, February 2020

5, 23) The Wall Street Journal, February 18, 2020

6, 10) Los Angeles Times, February 4, 2020

7) Forbes, February 12, 2020

8) Car and Driver, February 4, 2020

9) The Wall Street Journal, February 14, 2020

11-12, 14-15, 18) The Wall Street Journal, February 3, 2020

13) The Wall Street Journal, February 21, 2020

16, 20) The Wall Street Journal, February 25, 2020

17) The Wall Street Journal, February 7, 2020

19) The New York Times, February 20, 2020

22) Bangkok Post, February 17, 2020

24) South China Morning Post, February 18, 2020

23
Oct

November 1 Begins Open Enrollment for Health Insurance Marketplaces

Beginning on November 1, 2019, individuals (including families) may apply for new health insurance, switch to a different health-care plan, or re-enroll in their current plan through a Health Insurance Marketplace under the Affordable Care Act (ACA). The open enrollment period for 2020 health coverage ends on December 15, 2019.

Individuals can use Health Insurance Marketplaces to compare health plans for benefits and prices and to select a plan that fits their needs. December 15 is the deadline to enroll in or change plans for new coverage to start January 1, 2020. For those who fail to meet the December 15 deadline, the only way to enroll in a Marketplace health plan is during a special enrollment period. To qualify for special enrollment,  an individual must have a qualifying life event such as a change in  family status (for example, marriage, divorce, birth, or adoption  of a child), change in residence, or loss of other health coverage (e.g., loss of employer-based coverage, loss of eligibility for Medicare or Medicaid).   Also, only plans sold through a Health Insurance Marketplace qualify for cost assistance.

Additional information about Obamacare

While the ACA (commonly referred to as Obamacare) has not been repealed or replaced, there have been changes to the law.   The biggest change is the repeal of the tax penalty for failure to have qualifying health insurance. Though the individual mandate requiring that most people have minimum essential health insurance coverage still exists (unless an exception applies), the tax penalty for failure to have insurance has been reduced to $0, effectively repealing that penalty.

In addition, states have additional flexibility in how they select their essential health benefits. In effect, states may elect to sell short-term health insurance policies with coverage terms of up to one year. These plans may offer fewer benefits compared with the 10 Essential Health Benefits covered under the ACA. Also, California, Colorado, Massachusetts, Minnesota, New York, Rhode Island, and Washington, DC have extended open enrollment dates beyond December 15. Check with the state’s department of insurance for specific open enrollment dates.

The federal government no longer runs the marketplace for the Small Business Health Options Program (SHOP). As an alternative, small business employers may be able to contact insurance companies directly or work with a broker who is certified to sell SHOP policies.

The fate of Obamacare

Currently, the fate of the ACA is somewhat uncertain. At the end of 2018, a Texas federal judge ruled the Affordable Care Act unconstitutional. However, the judge ordered a stay pending appeals, so the ACA remains in place for the time being.

30
May

Retirement Confidence Increases for Workers and Retirees

The 29th annual Retirement Confidence Survey (RCS), conducted by the Employee Benefit Research Institute (EBRI) in 2019, found that two-thirds of U.S. workers (67%) are confident in their ability to live comfortably throughout their retirement years (up from 64% in 2018). Worker confidence now matches levels reported in 2007 — before the 2008 financial crisis.

Confidence among retirees continues to be greater than that of workers. Eighty-two percent of retirees are either very or somewhat confident about having enough money to live comfortably throughout their retirement years (up from 75% in 2018).

Retirement plan participation

Retirement confidence seems to be strongly related to retirement plan participation.  “Workers reporting they or their spouse have money in a defined contribution plan or IRA, or have benefits in a defined benefit plan,  are nearly twice as likely to be at least somewhat confident about retirement (74% with a plan vs. 39% without),” said Craig Copeland, EBRI senior research associate and co-author of the report.

Basic retirement expenses and medical care

Retirees are more confident than workers when it comes to basic expenses and medical care. Eighty-five percent of retirees report feeling very or somewhat confident about being able to afford basic expenses in retirement, compared with 72% of workers. Confidence in having enough money to pay medical expenses in retirement was also higher among retirees than workers: 80% versus 60%. However, 41% of retirees and 49% of workers are not confident about covering potential long-term care needs.

Debt levels

The survey consistently shows a relationship between debt levels and retirement confidence. “In 2019, 41% of workers with a major debt problem say that they are very or somewhat confident about having enough money to live comfortably in retirement, compared with 85% of workers who indicate debt is not a problem. Thirty-two percent of workers with a major debt problem are not at all confident about their prospects for a financially secure retirement, compared with 5% of workers without a debt problem,” said Copeland.

26
Sep

Medicare Open Enrollment Begins October 15

What is the Medicare open enrollment period?

The Medicare open enrollment period is the time during which people with Medicare can make new choices and pick plans that work best for them. Each year, Medicare plans typically change what the plans cost and cover. In addition, your health-care needs may have changed over the past year. The open enrollment period is your opportunity to switch Medicare health and prescription drug plans to better suit your needs.

When does the open enrollment period start?

The Medicare open enrollment period begins on October 15 and runs through December 7. Any changes made during open enrollment are effective as of January 1, 2018.

During the open enrollment period, you can:

  • Join a Medicare Prescription Drug (Part D) Plan
  • Switch from one Part D plan to another Part D plan
  • Drop your Part D coverage altogether
  • Switch from Original Medicare to a Medicare Advantage Plan
  • Switch from a Medicare Advantage Plan to Original Medicare
  • Change from one Medicare Advantage Plan to a different Medicare Advantage Plan
  • Change from a Medicare Advantage Plan that offers prescription drug coverage to a Medicare Advantage Plan that doesn’t offer prescription drug coverage
  • Switch from a Medicare Advantage Plan that doesn’t offer prescription drug coverage to a Medicare Advantage Plan that does offer prescription drug coverage

What should you do?

Now is a good time to review your current Medicare plan. As part of the evaluation, you may want to consider several factors. For instance, are you satisfied with the coverage and level of care you’re receiving with your current plan? Are your premium costs or out-of-pocket expenses too high? Has your health changed, or do you anticipate needing medical care or treatment?

Open enrollment period is the time to determine whether your current plan will cover your treatment and what your potential out-of-pocket costs may be. If your current plan doesn’t meet your health-care needs or fit within your budget, you can switch to a plan that may work better for you.

What’s new in 2018?

The initial deductible for Part D prescription drug plans increases by $5 to $405 in 2018. Also, most Part D plans have a temporary limit on what a particular plan will cover for prescription drugs. In 2018, this gap in coverage (also called the “donut hole”) begins after you and your drug plan have spent $3,750 on covered drugs — a $50 increase over the 2017 initial coverage limit. It ends after you have spent $5,000 out-of-pocket, after which catastrophic coverage begins. However, part of the Affordable Care Act gradually closes this gap by reducing your out-of-pocket costs for prescriptions purchased in the coverage gap. In 2018, you’ll pay 35% of the cost for brand-name drugs in the coverage gap (65% discount) and 44% (56% discount) of the cost for generic drugs in the coverage gap. Each succeeding year, out-of-pocket prescription drug costs in the coverage gap continue to decrease until 2020, when you’ll pay 25% for covered brand-name and generic drugs in the gap.

Medicare beneficiaries who file individual tax returns with income that is greater than $85,000, and beneficiaries who file joint tax returns with income that is greater than $170,000, pay an additional monthly premium or Income-Related Monthly Adjustment Amount (IRMAA) for their Medicare Part D prescription drug plan coverage. In 2018, some of these beneficiaries will see their IRMAA increase by as much as 58%, while other beneficiaries may actually see their IRMAA drop. For more information, visit the Centers for Medicare & Medicaid Services website, https://www.cms.gov/.

Where can you get more information?

Determining what coverage you have now and comparing it to other Medicare plans can be confusing and complicated. Pay attention to notices you receive from Medicare and from your plan, and take advantage of help available by calling 1-800-MEDICARE or by visiting the Medicare website, https://www.medicare.gov/.

13
Sep

The Equifax Data Breach

On September 7, 2017, Equifax, one of the three main credit reporting agencies, announced a massive data security breach that exposed vital personal identification data— including names, addresses, birth-dates, and Social Security numbers on as many as 143 million consumers, roughly 55% of Americans age 18 and older.1

This data breach was especially egregious because the company reportedly first learned of the breach on July 29 and waited roughly six weeks before making it public (hackers first gained access between mid-May and July) and three senior Equifax executives reportedly sold shares of the company worth nearly $2 million before the breach was announced. Moreover, consumers don’t choose to do business or share their data with Equifax; rather, Equifax — along with TransUnion and Experian, the other two major credit reporting agencies  — unilaterally monitors the financial health of consumers and supplies that data to potential lenders without a consumer’s approval or consent.2

Equifax has faced widespread criticism following its disclosure of the hack, both for the breach itself and for its response, particularly the website it established for consumers to check if they may have been affected. Both the FBI and Congress are investigating the breach.3 In the meantime, here are answers to questions you might have.

1. What’s the deal with the website Equifax has set up for consumers?

Equifax has set up a website, www.equifaxsecurity2017.com/, where consumers can check if they’ve been affected by the breach. Once on the site, click on the button “Potential Impact” at the bottom of the main page. You then need to click on “Check Potential Impact,” where you will be asked to provide your last name and the last six digits of your Social Security number — a request that was widely mocked on social media as being too intrusive when the standard request is for only the last four digits.

Equifax has stated that regardless of whether your information may have been affected, everyone has the option to sign up on the website for one free year of credit monitoring and identify theft protection. You can do so by clicking the “Enroll” button at the bottom of the screen. Note: Just clicking this button does not mean you’re actually enrolled, however. You must follow the instructions to go through an actual enrollment process with TrustedID Premier to officially enroll.

More wrath was directed at Equifax when some eagle-eyed observers noted that enrolling in the free year of credit protection with TrustedID Premier meant that consumers gave up the right to join any class-action lawsuit against the company and agreed to be bound by arbitration. But an Equifax spokesperson has since stated that the binding arbitration clause related only to the one year of free credit monitoring and not the breach itself; Equifax has since removed that language from its site.4

2. What is TrustedID Premier?

Equifax’s  response to the data breach is to offer consumers one free year of credit file monitoring services through TrustedID Premier. This includes monitoring reports generated by Equifax, Experian, and TransUnion; the ability to lock and unlock Equifax credit reports with a credit freeze; identity theft insurance; and Social Security number monitoring.

Consumers who choose to enroll in this service will need to provide a valid email address and additional information to verify their identity. A few days after enrolling, consumers will receive an email with a link to activate TrustedID Premier. The enrollment period ends November 21.  After the one free year is up, consumers will not be automatically charged or enrolled in further monitoring; they will need to sign up again if they so choose (some initial reports stated that consumers would be automatically re-enrolled after the first year).5

3. What other steps can I take?

It is always a good idea to monitor your own personal information and be on the lookout for identity theft. Here are specific additional steps you can take:

  • Fraud alerts: Your first step should be to establish fraud alerts with the three major credit reporting agencies. This will alert you if someone tries to apply for credit in your name. You can also set up fraud alerts for your credit and debit cards.
  • Credit freezes: A credit freeze will lock your credit files so that only companies you already do business with will have access to them. This means that if a thief shows up at a faraway bank and tries to apply for credit in your name using your address and Social Security number, the bank won’t be able to access your credit report. (However, a credit freeze won’t prevent a thief from making changes to your existing accounts.) Initially, consumers who tried to set up credit freezes with Equifax discovered they had to pay for it, but after a public thrashing Equifax announced that it would waive all fees for the next 30 days (starting September 12) for consumers who want to freeze their Equifax credit files.6 Before freezing your credit reports, though, it’s wise to check them first. Also keep in mind that if you want to apply for credit with a new financial institution in the future, or you are opening a new bank account, applying for a job, renting an apartment, or buying insurance, you will need to unlock or “thaw” the credit freeze.
  • Credit reports: You can obtain a free copy of your credit report from each of the major credit agencies once every 12 months by requesting the reports at www.annualcreditreport.com or by calling toll-free 877-322-8228. Because the Equifax breach could have long-term consequences, it’s a good idea to start checking your report as part of your regular financial routine for the next few years.
  • Bank and credit card statements: Review your financial statements regularly and look for any transaction that seems amiss. Take advantage of any alert features so that you are notified when suspicious activity is detected. Your vigilance is an essential tool in fighting identity theft.

4. How can I get more information from Equifax?

Consumers with additional questions for Equifax can call the company’s dedicated call center at 866-447-7559. The call center is open seven days a week from 7 a.m. to 1 a.m. Eastern time. Equifax said it is experiencing high call volumes but is working diligently to respond to all consumers.7

1, 3-5,7) The Wall Street Journal, September 8, 2017, September 10, 2017

2) CNNMoney, September 8, 2017

6) The New York Times, September 12, 2017

16
Dec

What I learned from my grand daughter

Being with the family is generally very enjoyable. This year I received an extra benefit from my 5-year-old granddaughter.  She was telling us what she was going to be doing. It sounded like she was too young to be able accomplish the task. We asked her how she would complete the tasks. She explained that she would visualize what she was going to do.  Her teacher had taught the class to visualize what they want to do.

I realized that is also the approach to planning. If you know what you want to accomplish, you need to see where you are, where you want to be and the steps required to get there. This sets your focus. You need to be aware of your progress. You may need to adjust your course if there are changes in your priorities, what you have or your goals.

If you have postponed your planning, try visualizing.

Wishing you and yours the best for the Holiday’s and the entire New Year!