This Week In Your Wallet: Interest Rates & Back-To-School Specials
If you’re an avid reader of bestseller lists (I am, for the record, as is just about every other writer I know), then you know a little sleeper of a volume called, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” has been a mainstay for the last few months. The subject is Social Security and how to make sure you capture every last dollar that could be coming your way — something the vast majority of people do not do. People, it seems, cannot get enough on this topic these days, which is why I recently wrote a few posts for Today.com on how you can — and should — strategize to boost your benefit take.
File and suspend is one such strategy. It’s a process in which you make a claim for your benefits at your full retirement age (66 or 67 depending on when you were born), but then delay receiving your payments. It can work to your advantage, because your spouse (or eligible children) can receive benefits based on your record of earnings and — at the same time — you can earn an 8% increase to your benefits every year you delay up until age 70.
Here’s an example: Let’s say your wife is 66 and her Social Security benefit is less than her spousal benefit of $1,000. You’re also 66 and eligible for a $2,000 monthly payment. If you file and wait until age 70, that payment will grow to about $2,640. It allows your wife to not only collect the spousal benefit while your benefit grows, but also allows her to qualify for delayed retirement credits on her benefit. (Note: You must apply for benefits in order for your spouse to receive his or her benefits. If you don’t file and suspend your spouse may be leaving money on the table.)
You don’t have to be married to benefit from file and suspend either — continue reading about this and other strategies on Today.com.
Your State’s Back-To-School Special
Back-to-school shopping is on the horizon and — as MONEY reports — U.S. consumers are expected to spend about $68 billion on back-to-school and back-to-college items this year. It’s a pretty penny, but guess what? Spending will be down 9.3% from $75 billion last year, according to the National Retail Federation. More specifically, it looks like many of you will be cutting back in the electronics department after prioritizing them in back-to-school shopping last year. For this spending category, the NRF predicts you’ll put out $207.27, down from $243.79.
Save even more by shopping during your state’s sales tax holiday — at least 17 states offer a tax break on clothing and school supplies. Kiplinger has the list of participating states and when to mark your calendars.
One Thing You Can Control As An Investor
Do you know how much you’re paying in fees and expenses on your investments? Many people don’t. A study by Rebalance IRA, an investment management firm, shows that 46% of baby boomers believe they don’t have investment fees, when in reality, the average employee retirement account expense is 1.5% per year. (Money Rule #64: If you can’t figure out what an investment or financial adviser is costing you, you’re overpaying.) This week on Bankrate.com, I tell you what to ask your advisor and/or where to find out how much you’re paying if you’re a DIY investor.
Dodge Credit Card Fees
On the topic of fees, CreditCards.com released its research on credit cards with the most and fewest fees. The average credit card charges six different fees — the most common ones being late fees (charged by 99% the cards surveyed), cash advance fees (98%) and returned payment fees (81%). Despite the CARD Act’s efforts to eliminate many of the “gotcha” fees (i.e. sneaky fee charging tactics, like automatic over-limit charges), CreditCards.com foresees more (and/or greater) fees to come. Plus, data from bank card advisory firm R.K Hammer shows U.S. credit card issuers earned $90.3 billion worth of income from card fees alone last year — a notable jump from $79.9 billion in 2013.
Reduce your contribution to them by using your credit wisely (i.e. automating bill payments, keeping an eye on your account and reading the fine print). And if you’re applying for a new card, use this list of cards with the most and fewest fees to help guide your search. For instance, you might want to pass on the First Premier Bank Credit Card, which comes with (a whopping) 12 fees, and consider the PenFed Promise Visa Card instead, which has the potential for zero fees.
“A Prudent And Gradual Manner”
ICYMI: Last week Federal Reserve Chairwoman Janet Yellen dropped more hints of higher interest rates by 2016. She spent two days on Capitol Hill, testifying before the House Financial Services Committee and speaking to the Senate Banking Committee. Yellen didn’t specify when the Fed would move the meter, but she did say the U.S. labor market is closing in on a sweet spot, which is why the central bank will likely raise short-term interest rates later this year. Moving too soon could threaten recovery, but waiting too long could overeat the economy and accelerate inflation, she says, which is why her preference is, “…to tighten in a prudent and gradual manner.” The Wall Street Journal has the full recap here.
Until then, USA TODAY offers strategies to increase your yields. Among them, build a bond ladder (which will allow you to capitalize on rising rates, while reducing the fallout from possible losses). With the laddering approach, you buy a variety of bonds with a range of maturities, which means you’ll always have a bond coming due. And if (or when) rates rise, your proceeds from the next maturing bond can be reinvested at the new, higher yields.
Have a great week,
Jean
