Surprise: Your Life-Insurance Rates are Going Up

Daniel Kaler/picture-alliance/dpa/Associated Press

Major insurers are breaking a long-standing industry taboo of raising rates on life-insurance policies they sold to consumers years ago, in the latest fallout from a prolonged stretch of low interest rates.

In recent months, several insurers have notified tens of thousands of people who own a type of coverage known as “universal life” that they are exercising little-used contractual rights to raise costs.

Universal-life policies combine a death benefit with a tax-advantaged savings account. Since the 1980s they have accounted for at least a quarter of all new individual life-insurance sales, and more than a third over the past decade.

The latest moves mean that more people in their 70s and 80s are facing higher annual charges for life insurance they bought as far back as the 1980s. And this could be just the beginning: Industry consultants expect other insurers to follow suit, which could mean higher annual costs for potentially millions of Americans holding various types of insurance.

“If interest rates stay low for another three or four years, all bets are off as to how many follow,” said Lawrence Rybka, president of ValMark Securities, an insurance and brokerage firm in Akron, Ohio.

Depending on the insurer, the extra annual cost ranges from about $150 for people with $250,000 policies to six-figure sums for those whose coverage tops $10 million, financial advisers say. The increases, which relate to the annual charge for the death benefit, stretch from the mid-single digits to above 200% in some instances, according to ITM/TwentyFirst, which provides policy-management services to trustees and institutional clients.

Insurers are under pressure to improve results as years of low interest rates have squeezed investment income, and industry executives say the right to increase rates is clearly disclosed to customers. Consultants and analysts say many insurers have cut expenses and taken numerous other steps to maintain their profitability over the years and are running out of options.

Still, the moves are riling policyholders.

“I find it really challenging that the insurance industry has the ability to institute sharp increases such as this, and the consumer is left with very little option as to what to do,” said Michelle Clements, president of Synergy Trust Co., a private family trust company in Sioux Falls, S.D.

Her family faces a 15% increase next year, amounting to tens of thousands of dollars, for an 80-year-old family member’s multimillion-dollar coverage, with additional increases over the next few years. Among her options: selling the policy to investors in the industry’s secondary market.

Cost increases are permissible under many policies, though the circumstances under which this is allowed varies by contract. “Contractual maximum charges are clearly disclosed at the inception of the policy,” said Paul Graham, an official with trade group American Council of Life Insurers.

However, exercising any right to boost costs on older policies “used to be taboo,” said Henry Montag, a principal with TOLI Center East in Long Island, N.Y., an adviser to trusts on insurance issues.

“Insurers feared doing so would create mistrust” among agents and consumers and adversely affect future sales, he said. “But now the insurers feel the [cost] increase is worth the risk.”

Life insurers rely heavily on interest from bonds bought with premium payments, and dollars they invest today yield less than anticipated when insurers sold the policies.

The 10-year Treasury peaked at 15% in the 1980s, and declined gradually until 2008, when it fell sharply as the Federal Reserve sought to rev up the economy. It currently yields 2.328%.

The Fed is expected soon to boost a key rate, but likely only by a quarter of a percentage point. It is uncertain when rates would move high enough to make a measurable difference to life insurers.

The policy owned by the Clements family was bought in 2006 from a U.S. unit of AXA SA. The insurer doesn’t comment on individual instances. As for the increased charges, a spokeswoman said the company had concluded one of its older life-insurance products wasn’t performing as expected because policyholders were dying sooner and investments were earning less than forecast when the policies were sold.

AXA’s changes affect about 1,700 policies sold between 2004 and 2007.

With universal-life policies, owners deposit money into the policy’s “cash-value account,” where tax-deferred interest accrues. From this account, the insurer deducts for expenses, including the annual cost of the death benefit.

“Many people who own this type of contract wrongly believe they locked in the rates” for the death benefit at the time of purchase, said Ted Bernstein, chief executive of agency Life Insurance Concepts Inc.

Higher costs aren’t the only problem. Consumers typically buy universal life with the goal of using the tax-deferred savings to pay some, or all, of the policies’ future costs as they age. But many cash-value accounts contain far less interest income than was projected at the point of purchase because insurers reduced interest payments as Treasury yields declined.

Financial advisers estimate hundreds of thousands of policyholders will have to use other resources to pay those future costs.

Jeff Glick, an attorney in Oakland, Calif., learned this fall that his 84-year-old mother’s $250,000 policy is subject to a 5.7% boost in its death-benefit charge. At about $170 a year, he considers it manageable. The policy was bought in 1998 from a unit of Voya Financial Inc.

He believes a bigger problem is that many families bought universal-life policies “without understanding what the scope of the risk could be” from falling interest rates.

A spokeswoman for Voya said its cost increases affect a “small percentage of our customers,” declining to be exact.

The Transamerica unit of Aegon NV, another large insurer that has increased charges, said its move affects about 26,000 people with policies dating to 1987-98. U.K.-based Legal & General Group PLC, the fourth major insurer to make such a move, declined to comment.

Written by Leslie Scism of The Wall Street Journal

(Source: The Wall Street Journal)

How Economies Pick Up and Move On After Terrorist Attacks

People read victims' names at the 9/11 Empty Sky memorial at sunrise in Liberty State Park in Jersey City, N.J., on September 11, 2015.

 

 If there is any good news for France after the horrific violence in Paris on Friday, it’s that terrorists generally aren’t able to destroy the economies of the countries where they strike. Societies are resilient, and people can soon get back to doing business after attacks like this one. The purely economic consequences of recent terrorism have been limited and temporary.

Several researchers at universities and in the private sector have tried to quantify the costs of the terrorist attacks in the United States on Sept. 11, 2001. Their estimates range from about $50 billion to $100 billion, less than 1 percent of the total U.S. economy.

The New York City comptroller put the immediate damage at $21.8 billion in New York, including the destruction of buildings, infrastructure and property and the costs of medical care. The income that those killed in the attack would have brought to the city in the remainder of their careers, had they survived, totaled another $8.7 billion.

The attacks were also costly for specific sectors of the economy. The unexpected claims on insurance companies were largely absorbed by reinsurance firms, such as Swiss Re, which put the total cost to the industry between $30 billion and $58 billion. Following the attacks, insurers generally stopped offering policies that covered losses due to terrorism, and these days, the costs of insuring against terrorism are subsidized by the federal government.

Also, the global airline industry lost $11.8 billion in 2001, canceling out its profits from the previous year, and carriers didn’t start making money again until three years later.

The economy, though, recovered quickly from these immediate costs. A federal report estimated that the rate of economic growth was half a percentage point lower in 2001 than it would have been had the attacks been foiled, and 598,000 more people were out of work. Businesses had adopted a “wait-and-see” attitude, putting off new hiring and investment until after the ramifications of the attack became clear. They made up for lost time the next year, though, aided by the economy’s overall recovery from a recession that had begun before the terrorist attacks when the price of technology stocks collapsed.

In the long term, the Bush administration’s responses to the attacks — increased security at home and the invasions of Afghanistan and Iraq — were far more costly in an economic sense than the attacks themselves, according to economists Adam Z. Rose and Brock S. Blomberg.

“We, rather than the perpetrators, are the major determinant of the consequences of a major terrorist attack,” they wrote.

The attacks on New York City and the Pentagon are also likely to be far costlier financially than last week’s attacks in Paris. Nearly 3,000 died on Sept. 11, 2001, while the toll of Friday’s assault in Paris is currently 129.

The terrorists in Paris did not manage to destroy skyscrapers or passenger jets. Their strategy was a contrast with the attacks on the World Trade Center, which was calculated to cause economic harm, said Walter Enders, an economist who recently retired from the University of Alabama.

“They didn’t go to the heart of Paris,” said Enders, predicting that tourism in Paris would not be affected. “They didn’t hit the Eiffel Tower. They didn’t hit anything on the Champs-Élysées. They didn’t hit Notre Dame.”

An attack more like the one in Paris on Friday occurred in Madrid in 2004, when terrorists bombed commuter trains, killing 191 people. Researchers at the Complutense University of Madrid concluded that the costs of that attack were equivalent to 0.03 percent of Spain’s economy.

Written by Max Ehrenfreund of The Washington Post

(Source: The Washington Post)

What to Expect When You are…Buying a New Home

© Image Source/Rex Features
© Image Source/Rex Features

Buying a house with that front porch and white picket fence is every American’s dream. However, buying your first home is not all what you would expect. Yes, you sign a contract and pay for your deposit. But there is so much more time and effort to the entire home buying process than most would believe!

If you spot any damage to the house that you are about to purchase, be aware that the seller is not at all obligated to fix these issues before you buy the house! It makes sense that the seller should fix their home just so they could sell it at a higher value, but it is not a requirement for them to do so. However, as the buyer, you can rescind your offer if these required repairs are too costly for you. So if you hire a home inspector and are presented with a long list of issues with the house, you may need to reevaluate the worth of your purchase. Since the seller isn’t forced to fix these problems, the money that is needed for these repairs will just be an added cost to your purchase! Therefore, if you are setting a budget for the maximum amount you are willing to pay for a house, you need to factor in the costs for repairs to that total as well!

In addition to that, if you do not fix the crucial parts of the house that is in need of repair, you may even be dropped from your homeowners insurance! This is serious because sometimes they give you a limited timeframe where you need to finish your repairs, and you might not be able to afford the costs of these repairs just yet. So be sure that you read the fine print when you are applying for a homeowner’s insurance and are aware of all of the policy measures. But first, before you even settle on a specific homeowners insurance provider, make sure that they will cover the basic but important things that you will need. These may include, floods, break-ins, earthquakes, etc.

Another thing you might not be expecting is that even if you get an inspector to check for needed repairs in your potential home, which is pretty costly, it won’t even be as thorough as you would prefer. Home inspections are pretty expensive. Usually, most buyers are so eager to speed up their timeline that they fail to do their research and compare the fees between inspectors. So the opt for the first one that they find, which may not be the cheapest. And even if a regular home inspector completes a sweep-through of the house, you might need specialized inspectors to check the more detailed parts of the house. However, just because a home inspector said your house doesn’t have any significant issues, doesn’t mean that you are free from any worries, especially if the house is an older one. These inspectors have a limited scope as to what they can see since they are not allowed to break through the walls to check the internal structure. Therefore, you need to consider the fact that the projected worth and safety of the house is not a guarantee.

When buying a house, there will be many aspects in this process that you will not be expecting. Overall, it will be very time consuming and you will face many obstacles if you are not prepared. So before you decide to accomplish every American’s dream of buying your own house, make sure you do your research and have the proper amount of money that it realistically entails!

(Source: HSH, Select Underwriters)

Millions Facing a Hefty Increase in Medicare Premiums in 2016

A Medicare patient shakes hands with his doctor after an appointment in Grants Pass, Oregon.
© Jeff Barnard/AP Photo

Under mounting pressure from seniors and labor groups, congressional leaders and the Obama administration are rushing to find a way to avert a huge Medicare premium increase of 50 percent or more for nearly a third of the 50 million elderly Americans who are reliant on Medicare for their physician care and other health services.

House Speaker John Boehner (R-OH), House Minority Leader Nancy Pelosi (D-CA) and White House officials have been scrambling behind the scenes to spare millions of seniors the expense of huge Medicare Part B premium hikes. While the problem pales in comparison to the larger budget issues, including highway spending and debt ceiling challenges, lawmakers are super sensitive to the concerns of seniors heading into the crucial 2016 election year.

“Congress has a responsibility to act,” Pelosi said in a statement this week. “If we do nothing, millions of American seniors will suffer. Democrats continue to press the Republican leadership to bring a fix to the floor so we can prevent the serious harm this increase will have on states and low-income seniors across the country.”

Some 70 national organizations, including AARP, labor groups and health insurance company trade associations, sent a letter to Republican and Democratic congressional leaders last week urging prompt action to block or mitigate the looming premium increases. “Older adults and people with disabilities cannot shoulder these unprecedented increases,” Joe Baker, president of the Medicare Rights Center, told  The New York Times  .

The pending sharp premium increase, reported in August by The Fiscal Times , was prompted by a strange twist in the law that effectively penalizes wealthier beneficiaries and others any time the Social Security Administration fails to approve an annual cost of living adjustment. This will be only the third time since 1975 that Social Security will not increase the cost of living benefit, simply because the Consumer Price Index used by the government has remained relatively flat.

Medicare Part B and the Social Security trust fund are intertwined, and most seniors on Medicare have their monthly premiums deducted from their Social Security checks. Because the federal law for various reasons “holds harmless” about 70 percent of Medicare recipients from premium increases to cover unexpected rising healthcare costs, the remaining 30 percent of Medicare Part B beneficiaries suffer the consequences by being made to pay higher premiums.

Medicare officials are expected to announce a final decision on 2016 premiums later this month after reviewing federal Bureau of Labor Statistics data on consumer prices. However, many are assuming the premiums will go up.

Short of congressional or Department of Health and Human Services intervention at this point, roughly 15 million seniors, first-time beneficiaries or those currently claiming both Medicare and Medicaid coverage will see their premiums jump from $104.90 per month to $159.30 for individuals, according to  an analysis  by the Center for Retirement Research at Boston College. Higher-income couples would pay multiples of that increase.

The cost to Congress of averting such a premium hike is substantial – ranging from $2.8 billion to $7.5 billion, depending on calculations and budgetary baselines used in the computations. An aide to Boehner said on Tuesday that the speaker – who retires from Congress at the end of the month and is trying to complete a lot of budget business – is insisting that the cost of the bailout be offset by cuts in other programs.

Pelosi had urged Boehner to include the funding in the short-term continuing resolution approved late last month that will keep the government operating through December 11, according to a source. Now she is pressing him for a stand-alone bill to pass this week before the premium increase is likely to take effect. According to an aide, the longer Congress takes to act, the more expensive it becomes.

Pelosi has scheduled a press conference with other Democratic leaders on Wednesday to call on Boehner and House Republicans “to take urgent action to keep Medicare Part B premiums and deductibles affordable for millions of America’s seniors.”

Written by Eric Pianin of The Fiscal Times

(Source: The Fiscal Times)

Obamacare is Actually Not So Affordable — Unless You’re Broke

© Michael Jung/Getty Images
© Michael Jung/Getty Images

It’s time for the Affordable Care Act to join a long list of oxymorons. Why? Because rather like “military intelligence,” “cat proof,” “government organization,” and “simple calculus,” the law better known as Obamacare turns out to be an inherent contradiction. For a sizeable part of the population, anyway.

The ACA is just not affordable to a big chunk of those it was most meant to serve: The previously uninsured. In fact, many are worse off than before, according to a new study. That fact could also unravel part of the program’s foundation, which could be a problem for healthcare insurers.

“Many of the non-poor formerly uninsured are estimated to be worse off,” than without insurance, according to a September-dated working paper from the National Bureau of Economic Research titled “The Price of Responsibility: The Impact Of Health Reform On Non-Poor Uninsured.”

How so? The subsidies are not large enough to offset the cost of the insurance premiums and the fact that many previously uninsured will now have to pay part of the cost to see a doctor, the report explains. The authors reached that conclusion after reviewing data for the uninsured prior to Obamacare, including age, gender, earnings and location. Then, they married that information with health-care expenditures for the group and used it to make estimates of out-of-pocket costs before and after the law went into effect.

The group of people whom the authors highlight are the non-poor, or those ineligible for Medicaid but who maybe eligible for various subsidies for premiums or cost-sharing, depending on their income level. It turns out that the more someone earns the worse off they’ll be.

“At higher income levels, small or zero subsidies and currently modest penalties will not be enough to affect the large welfare losses that the middle class uninsured experience were they to buy coverage,” the report says. Those in good health were “consistently worse off from purchasing coverage regardless of the assumptions made,” according to estimates calculated by the researchers.

Is this the fault of healthcare insurers like AetnaUnited HealthcareCigna, or Anthem ? Not really. It’s just the way the law is designed. Will it mess up their actuarial calculations? Probably so, because an important demographic of healthy people may simply not buy coverage.

“Most uninsured will lose and, according to our estimates, will prefer to remain uninsured at the current penalty levels for violating the individual mandate,” the report continues.

Ultimately, people will do what is in their own best interests. In this case, many individuals who realize that signing up for healthcare insurance is a losing proposition financially simply won’t do it.

In this case, it will be those with higher incomes and better health — the population insurance companies need in order for their actuarial assumptions to work.

What happens if the healthy don’t sign up? Either the insurance companies stand to take a loss because overall claims are larger than the revenue from premiums and subsidies, or they raise premiums, making it even more unlikely that the healthy will sign on.

The big question now: Who will bear the financial brunt of this problem, the people buying or the insurance companies or both?

Written by Simon Constable of TheStreet

(Source: TheStreet)

Entrepreneurship: The Costs aren’t so Black & White

© (Getty Images)
© (Getty Images)

With your own product or service already in mind, starting your own business might seem like a piece of cake! However, in reality, it is not so easy considering how costly getting your own business up and running actually is. Becoming your own boss entails a significant investment. So before you dive into your future as an entrepreneur, make sure that you are aware of all of the expenses that are attached to this life-changing venture.

First, there are the license costs. Depending on what your business is going to be, there will be specific permits that you will have to apply for. For example, there are LLC licenses, fire department permits, county permits, health permits, and even alcohol permits. On top of all of the costs to purchase the permits, you might need to spend money to hire professionals like lawyers or accountants in order to obtain them. So be sure that you are thoroughly educated about what permits and licenses you will need for your particular industry, and factor in the total costs of them into your budget!

Just as a precaution for the unexpected, you will also need to insure your business as well. It is not a must-have, however, it is a good safety blanket just so you don’t lose all of your hard work over a freak accident. And these insurances entail a large chunk of money! Talk to an insurance professional about the specific insurance type that is suitable for your industry and become knowledgeable of the policies of your insurance just so you are not paying for what you don’t need.

Taxes already haunt you enough in your everyday life, however prepare for even more of a burden once you start your own company. As soon as you open your own company, you will be charged with a self-employment tax. And the downside of this tax is that it is required even if there is no revenue funneling into your pockets. Therefore, you need to be aware to deduct the amount of tax you need to pay for your business from your earnings when you are looking at how much money you have profited through your product or service, and allocate that amount to your business’ budget.

Finally, the costliest aspect of starting your own business is: time. As cheesy as it sounds, time is, in reality, money! Being your own boss isn’t all fun and games all the time, but it requires you sitting down and completing tedious tasks as well. In order to be well prepared as you start your venture, you need to develop the patience and willpower to pay your bills on time and keep track of payroll. There will be some give and take with your schedule and it might even interfere with your personal life, so set your priorities early on and allocate your time accordingly.

All of these are just some of the factors that paint a more realistic picture as to the costs of running your own business. Many people may dream of being their own boss. But before you accomplish this dream, be sure you consider all the costs that are needed make your entrepreneur wishes come true!

(Source: U.S.News & World Report, SBA, Entrepreneur)

How Long Will You Live? And Have You Saved Enough?

© AlexRaths/Getty Images
© AlexRaths/Getty Images

Nobody lives forever, which oddly enough may be a comfort when you are planning for a financially secure retirement. The only thing keeping you from needing an infinitely large balance in your retirement account is knowing that you won’t live forever. But before you can realistically plan to have enough money to sustain you for life, you need to have some idea how long you’ll live.

The difficulty of making that kind of projection is part of the reason why half of people polled in a 2014 Wells Fargo/Gallup poll said they were worried about outliving their money in retirement. This is where online lifespan expectancy calculators come in.

Lifespan expectancy or longevity calculators are free online tools that use mortality statistics to generate estimates about the average length of time someone can expect to live. Usually, estimates are modified by risk factors, such as a history of smoking or family medical problems, that are specific to the individual using the calculator.

Lifespan expectancy calculations have long been used for by insurance company actuaries to price life insurance premiums. More recently, corporate pension actuaries employ them to estimate how to pay for defined benefit pension plans. Today, as individuals have become primarily responsible for funding their own retirements through defined contribution plans, they’ve entered individual retirement planning.

Using a lifespan calculator can be as simple as taking your next breath. The Social Security Administration’s lifespan expectancy page tells you in a glance that a man reaching age 65 today can expect to live, on average, to 84.3, while a woman turning age 65 today can expect to live, on average, until age 86.6. If you want a more tailored forecast, you can use the Social Security calculator to enter your gender and birth date. The result is likely to differ little from the overall average.

For a more individualized look, the “How long will I live?” calculator created by a University of Pennsylvania Wharton School computer science professor asks dozens of questions about height, weight, race, education, family medical history and more.

The intended use of the calculator, according to creator Lyle Ungar, is to show effects specific behaviors have on average life expectancy. Ungar’s idea was to help people decide whether or not to, say, quit smoking or start exercising. “In fact,” he said, “most people use my calculator for financial planning.”

There is a problem with that — there is no reliable way to tell using population-wide mortality data how long any individual will live. “It’s like the stock market,” Ungar says. “It’s based on history but it’s random. And past performance is no guarantee of future performance.”

Ungar’s calculator will generate one number, say, age 88.2, that an individual can expect to live to with 50% accuracy. A lower number, say, 80.4, has a 25% likelihood of representing the end, while a higher number, say, 96.6, is similarly 25% likely. Although precise, however, these are probabilities, not certainties. And that’s the problem.

“I personally don’t want to spend my last penny on the date of my life expectancy,” Ungar says. “Because at that point I’ve got a roughly 50-50 chance I’ll still be alive for many more years.”

This possibility of planning to die broke only to live a long time broke does not keep financial services companies from providing calculators that give highly specific-seeming answers. Northwestern Mutual Life Insurance has one that lets you see how your life expectancy changes in real time as you change answers. If you stop wearing your seatbelt, you’ll see, you lop several years off your life — probably.

Another thing you need to know about lifespan calculators is that professional retirement advisors don’t use them. Chantel Bonneau, a financial planner with Northwestern Mutual in Los Angeles, says she plans as if every client will live to 100. She’ll modify that if clients insist on planning only to, say, age 85, or there is some other health concern.

Bonneau reasons that every individual is unique, and caution commands that we prepare for a maximal life expectancy when it comes to our finances. No one can say for sure when you personally will run out of life. But she is sure of one thing: “You cannot afford to run out of money.”

Written by Mark Henricks of TheStreet

(Source: TheStreet)

6 Basic Bills You Should Always Negotiate

© Caiaimage/Rex Shutterstock/Rex Features
© Caiaimage/Rex Shutterstock/Rex Features

Does the thought of haggling over your monthly bills make you break out in a cold sweat? You’re not alone because most people don’t like trying to talk their way into a lower price. A 2013 Consumer Reports survey found that less than half of consumers had tried negotiating a better deal on everyday goods and services in the past three years. But if you can get over your fear of negotiating, you’ll see the payoff in your pocketbook — especially when it comes to bills that you pay regularly or even occasionally.

Tai McNeely, a money-saving expert and founder of the His & Her Money blog, said she frequently negotiates with service providers to get a better rate. She’s successful nine out of 10 times. “I don’t have a problem with calling and asking for a discount because they budget for this stuff,” she said. “If you don’t use it, someone else will.”

Find out how to negotiate bills down to a more affordable cost:

1. Medical Bills

A pricey medical procedure can be a big blow to your budget, especially if your insurance policy has a high deductible or your insurer denies your claim. But you shouldn’t assume that you’re on the hook for the full amount you’re being asked to pay. “If you know what the going rate for a procedure is, you can always negotiate,” said Adria Gross, CEO of MedWise Insurance Advocacy, which helps people navigate the medical claims system.

You can use free online source HealthCareBluebook.com to look up the reasonable amount you should expect to pay for a medical procedure, test or service in your area. Or, visit FairHealthConsumer.org, and use the consumer cost look-up tool to get cost estimates of medical and dental services in your area. This information can help you determine whether you’re being charged more than the estimated cost, giving you a starting point for negotiations.

Offering to pay with cash — rather than credit — is another good way to get a discount of at least 10 percent to 50 percent, Gross said. She recently got a medical bill for a client reduced by 75 percent by using this strategy.

McNeely said that by taking the time to understand what her insurance plan will and will not pay for has helped her dispute charges and avoid overpaying for medical care. “You have to know your rights and what is covered,” she said.

2. Wireless Phone Service Bill

Whenever McNeely signs up for wireless phone service, she never expects to pay the price advertised by a provider. She researches what other wireless providers are offering, then uses that information to negotiate a lower price with the provider she wants. “A lot of times, they have flexibility to offer you a better package because they know you can go to their rivals,” McNeely said.

Make sure you research at least three competitors’ prices and have their websites open when you make your call so you can quickly reference their rates, she said. According to the Consumer Reports survey, half of the consumers who negotiated their cellphone planssaved $100 or more.

3. Cable or Satellite TV Bill

You likely got a special promotional rate when you signed up for cable or satellite TV service. But after that promotional period is up after a year or so, the cable company is banking on you not noticing that your rate has jumped, McNeely said. That doesn’t mean you’re locked into paying a bigger bill, however.

Call the cable company, and let it know that you’re considering switching providers or dropping your service if it won’t lower your rate. Also, cite a competitor’s offer. With more and more people cutting the cord and opting for online and pay-as-you-go services, cable companies “want to keep your business, and they’ll do whatever it takes,” McNeely said. She typically gets her cable provider to lower her rate back to within $5 to $10 of the introductory rate and throw in a freebie, such as a premium channel.

McNeely schedules a calendar reminder on her smartphone to alert her one month before her rate is due to increase so she can call the cable company and start negotiating. To avoid getting stuck on hold, she always presses the key during the menu options that corresponds to the “change or cancel your service” option. “They won’t leave you on hold because they don’t want to lose you,” she said.

She also negotiates a discount whenever there are problems with her service, such as an outage. She recently got $25 knocked off her bill when she lodged a complaint.

4. DSL Internet Service Bill

Curious to find out how to negotiate internet service? Many consumers get their internet service through their cable company as part of a bundled package that typically offers a discounted rate for a year or two. My household actually gets its internet service through our telephone service provider, AT&T.

When my husband noticed that our rate for our bundled services shot up after what he calls the “bait-and-switch” rate expired, he called our provider and threatened to drop both our internet and landline service. To avoid losing a customer that was paying for two of its services, AT&T lowered our monthly bill by $20 — an annual saving of $240.

5. Rent

The cost of cable, phone and other services might be just a drop in the bucket compared with how much you’re paying each month for housing. Like those services, though, you can negotiate your rent.

According to real estate site Zillow, renters who can demonstrate that they’ll be responsible, reliable tenants because they have a steady job, good credit and plan to stay in an apartment for several years have leverage when it comes to negotiating rent. Also, renters in a market where there’s not as much competition for apartments will have better luck getting landlords to lower their price.

Use a site such as Rentometer.com to find out if your rent is reasonable for your area or whether you’re being overcharged and can negotiate a better deal.

6. School Tuition Bills

“It is a little-known fact that private school tuition rates are rarely set in stone,” writes author Ruth Soukup on her blog Living Well Spending Less. When comparing schools, parents should ask whether their rates can be adjusted — especially if more than one child from the family will be attending, according to Soukup. If the school isn’t willing to budge on its tuition, maybe it will offer a payment plan so you don’t have to pay the entire amount upfront.

Bonus Tip

Consumers who are behind on their utility bills might be able to negotiate payment plans. However, you typically won’t have much luck negotiating a lower rate for water, gas or electricity from the get-go as you can with services such as cable TV, McNeely said. But that doesn’t mean the only way to lower your utility bills is to resort to cost-saving moves such as setting the thermostat lower in the winter or using a low-flow shower head.

Some utility companies — typically water companies — offer discounted rates at certain times of the day, said McNeely. Check with your local utilities to see if they have off-peak rates. Then, take advantage of them by running the dishwasher, washer and dryer as well as watering your lawn during those times.

Written by Cameron Huddleston of GoBankingRates

(Source: GoBankingRates)

Retiring Alone? How Saving is Different

© Stockbyte/Getty Images
© Stockbyte/Getty Images

Are you single? If you are a 20-something, chances are nearly 2 out of 3 that you are. A 2014, Gallup Poll found 64% of 18- to 29-year-olds reported being single and living alone. Gallup also found the percentage of young adults not in a committed relationship has jumped from 52% a decade earlier. And that makes it strange that so much of today’s retirement planning advice ignores the special challenges of the single saver.

Single, unmarried people planning for retirement face a host of differences, including reduced need for life insurance (but higher need for long-term care coverage) compared to their hitched-for-life colleagues. The biggest difference may be lower income, especially since today both members of most married couples are working, notes Beth Lynch, a financial planner with Schneider Downs Wealth Management Advisors in Pittsburgh. Less income, basically, makes it harder to save.

“Single people need to make sure they save a greater amount to their tax-deferred accounts and start early,” Lynch says. “They also need to build a larger emergency savings account than that of a two-person income household. They do not have anyone else to lean on should they lose their job, or have an extended illness.”

Unfortunately, as the proverb suggests, one person can’t live half as cheaply as two.

The biggest single expense for most people is housing, and single people still have to pay rent and mortgage bills, often on a residence that could house two. In fact, married people in their late 20s spend about $7,200 less per person, according to the Bureau of Labor Statistics. And that means singles have that much less left over for saving.

On the plus side, singles will find it easier to decide how to spend what they do have. “Couples may be on two different sheets of music when it comes to money,” notes Larry Rosenthal, a financial planner in Manassas, Va. “One may be a saver, one may be a spender.”

Whether they are savers or spenders, some decisions are likely to be different for singles, because they lack dependents. Life insurance represents one of those. “If somebody passes, you have to ask the question, ‘Is there going to be someone else who will suffer a financial hardship?’” says Rosenthal. “If the answer is ‘No,’ they may not need it.”

On the other hand, singles have greater need for long-term care insurance. Married people can hope that a spouse will help out in case of declining health due to old age or medical issues. “Singles need a plan to take care of themselves mentally and physically as they age, often with long term care insurance,” notes Jacob Gold, a financial planner with Voya Financial in Scottsdale, Ariz.

When it comes to annuities, singles also have different needs and opportunities. Annuities are insurance company products that allow savers to put aside money, usually in a single large lump sum, in return for future monthly payments that are guaranteed for life. Annuity buyers can opt for higher monthly payments that stop when the individual passes away or lower payments that will continue to be paid to a surviving spouse. “A single person may not have anyone else relying on those retirement dollars, so opting for the larger monthly payments may make more sense and increase retirement income,” Gold says.

Additional wrinkles pop up with regard to Social Security. A married, divorced or widowed retiree can opt to get benefits based on a current or former partner’s lifetime earning record, which may allow for higher Social Security payments, notes Lynch.

“The individual who has never been married can only receive benefits on their income record,” she says. “This means more planning on when to retire and when to start taking Social Security benefits.”

Written by Mark Henricks of TheStreet

(Source: TheStreet)

Why Your Family Needs a Household Austerity Budget

© Thinkstock/Getty Images
© Thinkstock/Getty Images

Let’s talk about austerity. No, not the austerity proposed in Greece (although I’m probably the only one not writing about Greece). Rather, I’m talking about personal austerity. I frequently recommend that families develop an austerity budget. Let’s describe what this is and how it might help you.

In a budgeting sense, “austerity” refers to sharply curtailing spending in a time of financial crisis. Your family’s austerity budget is a plan you can put into effect in the event you lose your job or encounter some other financial hardship. Creating an austerity budget involves calculating the minimum amount of money you would need monthly or weekly to live indefinitely. I like to use this definition because it is the most practical minimum budget, as we will see in a moment. Here is what it should include:

  • Rent or mortgage
  • Basic utilities
  • Food
  • Insurance
  • Car payments
  • Debt payments (credit cards or student loans)
  • Any miscellaneous ongoing expenses that can’t be eliminated

Just as important is what it should not include:

  • Savings or investment expenses
  • Vacations or travel
  • Entertainment
  • Dining out

Since your austerity budget is meant to last indefinitely, you need to be realistic about what you will spend. For instance, it does no good to lop out all restaurant expenses if you know you won’t have the willpower to break your daily Starbucks habit. Be realistic — maybe even try living on your austerity budget for a month or two. If you find that life is unbearable without, say, your daughter’s dance lessons, then go ahead and include them in your budget. You might be able to live on a bit less than this budget for a short time, but not indefinitely.

Your austerity budget and an emergency savings account are your sword and shield against financial adversity. When crisis hits, you should know what your austerity budget is and what steps you need to take to get there quickly — such as cutting off cable TV or suspending your kids’ day care. This will maximize the amount of time you can live off your emergency savings.

For some, this might be a relatively straightforward exercise. If you’re single, you might find that your austerity budget is fairly easy to get to. Others with different obligations, such as supporting a family, may find that getting down to their austerity budget requires more action. You may also find that there are issues you should address now, so if there ever is an emergency, the people depending on you won’t be surprised by their circumstances.

I find that there is an added benefit to understanding your austerity budget. As you save and invest over your lifetime, you may find that you have socked away enough money that you could safely withdraw from your accounts an amount equal to your austerity budget. Using simple parameters like the 4% rule, you may find that you already have enough money to live a simple life indefinitely just based on your investments. Many people find peace of mind in knowing this. An austerity budget could be the true start of financial independence.

Written by NerdWallet of Money

(Source: Time)