When –and why—to Cash Out Your 401k

by Lynn B. Johnson on July 25, 2013

401k401(k) plans are a great vehicle for saving for retirement. Typically, an employee can choose to allow an employer to contribute a portion of his or her salary to the plan. Some employers might even match those contributions. The 401(k) contributions are invested in funds that might include money-market, mutual, or bond funds.

You are not taxed on 401(k) funds until you withdraw money from your plan. And, while it is your money, there are consequences to withdrawing money from your 401(k) before you reach age 59 and ½.

Laid off = Back to School? Not so fast…

by Lynn B. Johnson on March 12, 2013

Back to SchoolGoing to school is a typical fallback position when you’ve lost a job. My dad always says, “Time spent pursuing education is never wasted.” And a few new initials after your name will make you more desirable once you’re back on the job market, right?

Maybe, maybe not.

How to Adjust Your Student Loan: Income Based Repayment (IBR) Plans

by Lynn B. Johnson on January 16, 2013

My husband and I are typical of a lot of married Americans: we both have student loans and I lost my job last year. We realized pretty quickly that a $500 monthly student-loan payment simply would not jibe with our new one-income budget. That’s when we started investigating what to do next, because we have two small children and homelessness is not an option.

If you lose your job, the first call you should make, that very day, should be to your state’s Unemployment office. If you have a student loan repayment plan that is now outside your budget, the minute you’re done registering for an unemployment claim you should call your student-loan holder, to determine a new repayment option.

AIG Shareholders Give U.S. Taxpayers the Middle Finger (And Other Unbelievably True Stories from the Week in News)

by John Kiernan on January 9, 2013

AIG shareholder suitHold on – is this the news, a dream, or some sort of Oscar Wilde-type satire?  That’s along the lines of what I was thinking last night while watching Anderson Cooper and Erin Burnett report a pair of stories seemingly straight out of The Twilight Zone or Ripley’s Believe it or Not.

I mean, could AIG actually be SUING the U.S. government (as well as you, me, and every other taxpayer by extension)?  Are U.S. politics really so flawed that rape is actually LEGAL in California if the victim is single and the perpetrator impersonates her boyfriend?

Tips On Getting Home Loans For People With Bad Credit

by Guest on July 9, 2012

Buying a home is not an easy process, especially with the current economic climate. For people with good credit scores, it is however, easier to seal home loan deals compared to those with bad credit. Getting a home loan if you have a bad credit can be almost impossible depending on your credit situation. Fortunately, you can get loans with bad credit provided you are able to convince lenders that you will adhere to the repayment schedule.

Below are some tips on getting home loans for people with bad credit.

5 Reasons To Consider Creditor Insurance

by Guest on January 12, 2012

If you have a mortgage, loan, line of credit, or a credit card, it may be in your best interest to accept the creditor life and disability insurance that goes along with it. Although it will cost you extra money out of pocket, it may just be worth your while.

1. It can give you peace of mind. If something were to happen that drastically changed your ability to earn income, you want to know that you and your family would be protected. Without insurance, you would still be expected to make payments to your credit products. But, with insurance, you would know that it would be paid of in full in the event of your death and that your disability insurance would kick in if you were unable to work due to an accident or injury.

Usury Laws, Anyone?

by Odysseas Papadimitriou on September 28, 2011

usury interest ratesEvery so often, talk of curbing excessive lending practices by instituting usury laws at a federal level resurfaces, and speeches are made, hearings are held and editorials are written, but nothing ever comes of it. This begs a couple of questions: For starters, what are usury laws exactly, and—perhaps more importantly—do we need them?

Usury laws are those that prevent high interest rates, and as a result typically garner popular support, especially in times such as these when the economy is fledgling and anger toward financial institutions is running high. However, you cannot truly evaluate the merit of these laws, which at their basis are a means of forcing lenders to serve the greater public good, without understanding their practical effect.

College and Future Earnings: What’s the Connection?

by John Kiernan on September 16, 2011

Help for College StudentsWe’ve all heard about the statistics that show that people with college degrees earn more than people who only have a high school education or who dropped out of high school without receiving their diploma. But, does having a framed piece of paper on your wall necessarily mean you are destined for a bigger payday? Why don’t we take a closer look at what exactly these oft-quoted stats reveal?

Income rises and unemployment falls
First, information from the U.S. Bureau of Labor Statistics clearly shows that median income does indeed rise in accordance with education level.

Save 25% on Life Insurance Premiums

by Guest on May 12, 2011

InsuranceYou’re not going to believe how easy it is to cut your life insurance costs by as much as 25%.  You can easily save a bundle just by eliminating unnecessary or duplicate insurance you don’t need!

For starters, never – we repeat, never – think of insurance as an investment. Any insurance policy you use as an investment is costing you much more than you need to be paying. You can buy all sorts of investments that will treat you better than an “insurance” investment. We’ll talk more about these later.

Fed Rules Promote Accurate Underwriting, Not Gender Inequity

by Odysseas Papadimitriou on March 2, 2011

HouseholdThere has recently been a great deal of talk about rules proposed by the Federal Reserve that seek to require credit card companies to consider the merits of applicants based on individual rather than household income. These rules, critics contend, stand to significantly affect stay-at-home mothers by preventing them from establishing credit history in their own names, which would be extremely important to garnering a loan, renting or buying a property, and/or landing a job in the case of divorce or the death of a spouse.

Given that 2010 Census figures show men to be the sole breadwinners in 28.2% of couples with children under the age of 18 and women to be the only earners in about 4% of such families, roughly 7.3 million women and 963,000 men would face a difficult time garnering access to credit if the claims made by the rules’ detractors prove to have merit.

How and When to Dispute Credit

by Guest on February 8, 2011

improve-bad-creditKnowing when and how to dispute accounts on your credit report can make a huge difference in getting inaccurate information removed from your credit profile. Despite some promises to the contrary that you might come across, dispute letters are not the be-all-end-all of the credit repair process. There is no special formula to writing a carefully-worded argument that will convince the credit bureaus to drop your bad credit history as soon as they receive it.

Yet this myth continues to persist, so I thought I’d take the time to set the record straight on disputing your bad credit history. The trick to writing dispute letters that work is that there is no trick; it’s about knowing how and when to use them.

Save Money on a Car Purchase

by Lynn B. Johnson on March 23, 2010

car-purchaseWhen I pitched the idea of “how to get a better deal on a car” to the illustrious Wallet Blog editor, he came up with a sneaky strategy to make sure you drive down the price as low as possible.

Get a car loan from the dealer, even if you don’t need one. Allow the dealer to sell you a loan with a ridiculously high interest rate, but MAKE SURE that there is no penalty for paying off the loan ahead of schedule. The dealer will make a higher commission on a loan with a higher interest rate, which will make them more likely to agree to your low-ball offer on the car.

The Mortgage Relief Plan is a Failure

by Brian Johnson on January 12, 2010

failureOur government suffers from a naivete with some of its plans to resuscitate the economy which consumers simply cannot afford.  To be more specific, the current administration needs to come to terms with the fact that business practices are dictated by laws and potential for profit.  Businesses cannot, and should not, be counted on to change their policies out of the goodness of their hearts.

Last March, the Obama administration put into place its Mortgage Relief Plan to help homeowners stay out of foreclosure by urging banks to institute loan modifications for borrowers.  Renegotiation of their loans would allow borrowers to make payments on a more affordable rate, allowing them, in theory, to keep homes that would otherwise go into foreclosure.  Since its launch last March, the plan has provided permanent loan modifications to only 4% of those who have attempted to sign up.  Lenders like Bank of America have helped only .06% of the people who’ve requested a modification.

The 'Shining Virtue' of 2009?

by Lynn B. Johnson on January 3, 2010

2009It’s almost to the point that I don’t want to read the Business section anymore. Are you with me? And cognizant as I am that “if it bleeds, it leads,” it’s time for a feel-good financial-services story. So I emailed Liz Pulliam Weston, nationally syndicated personal-finance writer and author of many books, to “get her thoughts on the best and worst financial products and services of 2009.”

Tell you what: the woman’s smart with a capital MART, but I was surprised by her answer.

Did Washington Learn Anything About Bad Loans?

by Odysseas Papadimitriou on December 17, 2009

bad-loansOn December 14, 2009, President Obama met with CEOs of the largest banks to urge them to approve more loans, to lower interest rates, and to curb fees.  The meeting was obviously in response to Federal lawmakers’ feeling that, having bailed out the banks, the nation has a right to expect concessions from its financial institutions.  This feeling is fueled by the belief that America’s banks, having received federal funds, have since failed to adequately return to the business of loaning money.

To put this in perspective, we should remember that one of the large contributors to the current recession was the practice of giving out home loans to people whose incomes and credit histories did not justify those loans.  The assumption was, of course, that any loan was essentially a good investment since the value of the house was expected to appreciate astronomically.

Taxpayers paid once for subprime mortgages and soon they will pay again

by Odysseas Papadimitriou on October 28, 2009

Finance AnyoneThe Federal Housing Administration will be the next financial disaster to fall on the shoulders of American taxpayers.  Created in 1934 to help low income and first time buyers get housing loans, the agency was designed to guarantee a relatively small percentage of mortgages, for instance, two percent in 2005.  Since its inception, FHA’s budget and operational infrastructure have followed this low-ratio model, and have been designed to absorb losses without having to ask for money or help from the Federal Government.  However, the GAO is now projecting taxpayer funded subsidies for the FHA of half a billion dollars over the next three years, if no changes are made to the agency’s program.

With the housing and credit markets in dire straights, private lenders are asking for better credit scores and higher down payments.  This means fewer people are able to qualify for conventional loans.  According to the website for Housing and Urban Development (the parent organization for the FHA), the FHA’s restrictions on the kinds of loans it will guarantee are more lenient relative to conventional loans, and as such, the FHA is being called into service more and more frequently in this particular economic climate.  Up by over 1200 percent since 2005, the FHA is now expected to back one quarter of all new U.S. mortgages.

The Consumer Financial Protection Agency -- A Step in the Wrong Direction

by Odysseas Papadimitriou on September 16, 2009

Wrong WayAs Chair of the Congressional Oversight Panel, which has been charged with reviewing the current state of financial markets and the regulatory system, Harvard professor Elizabeth Warren has been quite vocal in her support of the administration’s proposal for a Consumer Financial Protection Agency (CFPA).  The CFPA would be the regulatory body that ensures that financial institutions provide clear and simple disclosures, which would ostensibly deter consumers from opting for risky and “exotic” financial products, and would be the eighth agency involved in consumer credit regulation.  While I agree that there has been little effectiveness in the regulatory system as far as consumer financial protection is concerned, this is no reason to create yet another agency.  The CFPA, which was actually conceived by professor Warren several years ago, would separate the regulation that provides consumer financial protection from the regulation that ensures the banks that serve these consumers are solvent, and do not introduce toxic products to the market.  If our hope is for a solid financial system, then it must be understood that these two areas of regulation go hand-in-hand.  Warren is right, “the credit market is broken,” but she herself proves that the CFPA won’t fix it. 

Warren lays out her arguments for the CFPA in two articles that appeared recently in Business Week and in The Baseline Scenario.  While she is spot on in her analysis of the nature of the problems that plague our financial system, her solutions do not address the problems that she identifies.  It’s true, traditional financial products cannot compete with “exotic” products whose terms seem attractive up front, but hide surprises and changes that are revealed only after the consumer has committed.  Further, the more complex these “exotic” financial products become, the less able consumers are to make comparisons.  Right now our financial system lacks a level-playing field, transparent in its operation, which encourages competition, and also engenders product innovation. 

Help for Federal Student Loans, starting July 1

by Brian Johnson on May 20, 2009

Help for College StudentsCollege, the key to a better paying career, is not without its financial burden.  The price of tuition around the country is going up.  Plummeting stocks have hurt university portfolios as well as the portfolios of alumni and professors.  Because of this, American universities are receiving fewer contributions from private sources even as they continue to pay for tenured senior professors who, having lost their nest-egg, are stalling their retirement.  Public universities face these dilemmas as well as a dwindling slice of the state budget that funds them.

Of course, students still need to go to school during these hard times, but the rising price of tuition and the absence of job opportunities for graduates just entering the work force has made the once viable option of student loans less and less attractive as there is little guarantee that a job will be waiting after graduation.  Today’s graduating senior can expect to acquire $22,000 in student loans by the time they graduate and have no guarantee of entering into a career just out of school that will help them to pay off this debt.

A Government of Zero Accountability

by Odysseas Papadimitriou on April 30, 2009

ZeroThe barbarians, so the saying goes, are no longer at the gates.  They’ve stormed through.  In many cases, they were practically let in by negligence of the regulators whose job it was to protect us from greedy swindlers, inventive accountants, and fraudulent lenders.  The gatekeepers themselves, the various federal regulators, have not been punished for failing in their duty to protect America.  They remain, even now, at their posts as the country reels from the damage it has taken from the various scandals and crimes committed against its economy and its taxpayers.  Those whose job it was to police against these crimes have failed us and we wonder why they have not been made accountable.

Why, for instance, didn’t Christopher Cox, the head of the SEC, not resign after the Madoff scandal?  Surely the crime was glaring enough to call his competency into question.  Shouldn’t he have taken some responsibility as the scheme was carried out on his watch?  Cox offered no public apology and was never taken to task for the calamity that resulted from his oversight.  He just stayed in, despite the very real complaints of his critics, until he was replaced by the next administration.

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