December 17, 2018

Your Money: The Simplest Annuity Explainer We Could Write

The last type of annuity is the equity indexed annuity, which is the type that the salesman I met a few weeks ago was selling at a steak dinner he held for people contemplating retirement strategies.

With an equity index annuity, you still receive a guarantee that you’ll get your money back. And if the equity index — say, the SP 500 — goes up, the annuity company will credit a portion of that to your account. Not only is your gain usually just a percentage of the actual gain, the overall amount you get in any year might be subject to a cap and additional costs.

Any decision you make about an annuity is bound to be important, given how much money the person selling it will most likely ask you for. But much of the background reading on the topic is dull and confusing.

So here are three things that I actually enjoyed reading and made me think harder. One of them, “Annuity Insights,” comes from Fisher Investments. They don’t like annuities very much over there, and make money managing other kinds of investments.

The other two come from academics I’ve spoken to who do think certain annuities are worth considering, and both have other jobs that could earn them more money if more people buy annuities.

The first, “Fixed Index Annuities: Consider the Alternative,” by a Yale professor, Roger G. Ibbotson, explains how some index annuities could help people in a rising interest rate environment. He is chairman of an investment firm that could receive compensation for licensing rights to indexes that annuity firms might use.

The second, “Annuity Fables: Some Observations From an Ivory Tower,” appeared in the Journal of Financial Planning and was written by Moshe A. Milevsky of York University in Toronto. It is more of an omnibus piece about the mean things people often say about annuities and whether they are true. Professor Milevsky has a variety of consulting engagements related to the products.

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Wealth Matters: Risky Home Loans Are Making a Comeback. Are They Right for You?

“I fell in love with the house,” Mr. John said. “We saw it, put in an offer and closed in less than 30 days.”

He used an interest-only adjustable-rate mortgage to buy the house, which cost about $1 million. He looked at traditional fixed-rate loans as well, but the interest-only loan was half a percentage point lower, with the rate locked in for 10 years.

“I calculated that I was going to save $25,000 on the adjustable-rate mortgage,” he said. The possible increase in interest at the end of 10 years was capped at 5.25 percentage points. “The worst it could be was 8.75 percent, and saving $25,000, I could put that money somewhere else.”

The family’s plan, Mr. John said, is to make principal payments in addition to the interest, with the goal of reducing his mortgage faster than he would with a 30-year fixed-rate loan.

“We don’t like paying interest,” he said. “Our aim is to pay it off in 15 to 20 years.”

In many ways, this is the ideal strategy for someone taking out an interest-only adjustable-rate mortgage. But even a conscientious borrower faces risks with these types of loans, said Susan M. Wachter, professor of real estate and finance at the Wharton School at the University of Pennsylvania.

One is an unexpected downturn in pockets of the housing market. She said this was happening at the high end of the condominium market in New York, where demand for luxury residences is not keeping up with the supply.

“The supply-demand imbalance leads not to small price changes but to large price changes, even if a market as a whole isn’t showing stress,” Dr. Wachter said. “If you do need to sell to move or get a better job, or your own financial circumstances change, having a mortgage that exceeds the value of the home will put you in a spot.”

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Live-Streaming Your Broke Self for Rent Money

He now makes upward of $4,000 a month, he said, through a mix of social media platforms. In addition to his call-outs on Periscope, he entices followers to pay $1 a month to unlock videos on Patreon, a subscription platform. He has also figured out how to raise funds through Twitter, by posting screen shots of Venmo donations to shame and entice fans to give more.

Viewers occasionally ask him why he doesn’t get a traditional job, to which he replies: “I made this my job.”

Mr. Hill is part of an emerging category of micro-influencers who have discovered there is a paying audience that wants to watch them go about their day-to-day lives. Many have been able to make money on Patreon, where people can sell subscriptions for their content, whether it be about comics, travel or nothing at all.

Riley Whitelum, 34, and Elayna Carausu, 24, for example, have nearly 2,400 patrons paying $3 a month or more to watch them sail around the world on their channel, “Sailing La Vagabonde.”

And then there is Paul Denino, 24, who goes by the avatar “Ice Poseidon” and live-streams for hours a day on Periscope, Twitch, YouTube and other platforms. For this, he can make some $60,000 a month, he said in a recent profile in The New Yorker.

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Your Money Adviser: How to Get the Most From a Health Savings Account

Accounts from Further, an account administrator formerly known as SelectAccount, and Bank of America were deemed “solid” choices for investors.

(The analysis didn’t include H.S.A.s from Fidelity because the company didn’t begin offering the accounts to individuals outside employer plans until Nov. 15, after the report was completed.)

Eric Remjeske, president of the H.S.A. research firm Devenir, said that it made sense to evaluate the costs of a plan, but that consumers should also consider what they were getting for the extra fees. Some higher-fee accounts, for instance, may offer more services, like the availability of “robo” advisers to help with investment selections.

Devenir offers, a tool that includes more than 500 accounts, to help consumers compare H.S.A.s.

Here are some questions and answers about health savings accounts:

How much can I contribute to an H.S.A. for 2018?

An individual can contribute up to $3,450 for 2018, while the limit for family coverage is $6,900. (Those limits will increase to $3,500 and $7,000 for 2019.) People 55 and older can contribute an extra $1,000. Contributions for this year can be made up until the tax filing deadline in April.

How do I know if my health plan is compatible with an H.S.A.?

Most plans that qualify to have a health savings account will be labeled “H.S.A. eligible.” If you’re not sure, ask the insurance company or your employer. For 2018, criteria include a deductible of at least $1,350 for an individual and $2,700 for a family. (Minimum deductibles won’t change in 2019, the Internal Revenue Service has said.)

What can I buy with my H.S.A.?

You can spend the money on a wide variety of “qualified” expenses, including doctor visits, eyeglasses, fertility treatment and drug addiction treatment. For a complete list, see I.R.S. Publication 502. Be sure to keep receipts, or benefit statements from your insurer, in case you have to document your spending, Mr. Fronstin said. If you spend the money on noneligible items, the withdrawal is taxed as income, plus a 20 percent penalty. (After you turn 65, the penalty goes away, and you’ll pay just income taxes on nonqualified withdrawals.)

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Your Money: A Teacher’s Long Road to Student Loan Forgiveness (and a $4,500 Surprise)

The pool of potential applicants is enormous: About a quarter of all jobs qualify, and roughly two-thirds of college graduates now borrow to complete their degrees. Still, it took many years before large numbers of people heard about the program and tried to figure out how to sign up.

Over the last year or two, many of the early adopters realized that they were doing it wrong. Some (or all) of their payments had not counted toward that total of 120, and they complained — loudly — to the Education Department, their servicers and their elected representatives. Plenty of them say they took the advice of their loan servicers only to discover, years later, that the advice had been wrong.

When I first encountered Mr. Shafer in October 2017, the longtime teacher (he helped 124 dropouts get their general education diplomas last school year) had discovered that years of payments he had made were ineligible, because he was in what’s known as a “graduated” repayment program. All along, various servicers had told him that he was on track, he said.

By March, things had taken a turn for the better. Since I first wrote about him, the Education Department and his servicer reclassified many of his disputed payments as eligible. Moreover, his story and the tales of others like him had helped inspire Congress to set aside $350 million to help similarly situated borrowers. Since March, that figure has grown; now, depending on the circumstances of the various borrowers, there may be up to $1 billion available — albeit on a first-come, first-served basis.

Not every aggrieved public servant is eligible for the loan relief program’s relief program. If you’ve been in the wrong kind of loan all along — like a Perkins loan or a Federal Family and Education (F.F.E.L.) loan — this new Temporary Expanded Public Service Loan Forgiveness program (T.E.P.S.L.F.) won’t help you. But if you were in the wrong kind of repayment plan — a graduated one like Mr. Shafer’s or an extended plan — you may be eligible to seek relief.

There’s a catch, though: Your last payment before you put in for the new temporary program and the payment a year before that generally have to have been higher than what they would have been if you had been enrolled in an income-driven repayment plan.

Got all that?

(If you want to know more, please read the various federal websites and my previous columns before emailing me for help. Of course, the lines remain open for tales of triumph and truly hard-luck stories at I’ve answered hundreds of questions about the program over the past couple of years and will try to keep doing so when I can. I enjoy helping. Please renew your subscription. Thank you.)

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Social Q’s: Can I Ask My Parents for an Advance on My Inheritance?

My biggest reservation here is that many parents I know would go without to help their children (even deep into adulthood). If that sounds like yours, stick with your original plan to pay for the house yourself. There comes a time to put our parents first, after years of the reverse arrangement. That time may have come, Kathy.

CreditChristoph Niemann

When I first began dating my girlfriend, about a year ago, I told her I would always cook for her. (I was a decent cook in college.) She was very into this idea. But every time I cook for her I get something wrong. She’s never had a decent meal that came from my kitchen. And when she’s not around, my meals come out beautifully! What can I do?


Other than relax? This is called performance anxiety, Sophie, and many of us suffer from it. Give me a bucket of balls and a deserted tennis court, and I serve like Serena Williams. Put someone on the other side of the net, and I double-fault all afternoon.

Try turning down the pressure on yourself. On the tennis court, I play points without keeping score. In the kitchen, enlist your girlfriend’s help. A cassoulet made by two may be a less freighted enterprise for you. Once you’ve got a few decent meals under your belt, I imagine you’ll be back to cooking as well as ever. (And a nice glass of Barolo probably wouldn’t hurt.)

My husband, our young son and I have a house in the country, a few hours from our primary residence. We don’t get there often because of our heavy workloads. But when we do, our neighbors (who also have a young child) are at our door within 10 minutes of our arrival. The kids are happy to see each other. But my husband and I would like to settle in and enjoy some downtime together rather than immediately hear stories about our neighbors’ lives since the last time we saw them. How do we maintain a friendly relationship and stop the uninvited visits?

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Your Money: Marriott Hack Adds Passport Headache, but Its Intensity Is in Dispute

To be clear: Thieves probably won’t be making a few million passports. For any one person to become a victim, the thieves would need to be in the business of faking identities in the first place. That may not be their endgame at all. Then, they’d have to pick on your data and be successful in getting a passport in your name. Then, they’d have to choose to use it.

The odds of all that happening are low. In the world of payment cards — where fraud is not nearly as complicated — it’s still a small portion of customers that have to deal with it. A Visa spokeswoman said that as its algorithms improved and companies became more sophisticated, it has seen fraud rates on at-risk card accounts falling below 5 percent.

That won’t keep some people from wanting to do anything they can to avoid even rock-bottom odds of, say, landing in jail when they try to enter another country someday. So they’ll get a new passport, which comes with a new passport number.

For now, Marriott doesn’t want to pay for that peace of mind. Instead, it’s setting up a process to work with guests who may one day experience passport fraud that they believe was a result of this breach. Then and only then will it reimburse people for the costs involved with getting a new passport. On Sunday, Senator Chuck Schumer, Democrat of New York, called on the company to reimburse people who choose to obtain new passports.

Marriott is offering customers free enrollment in a service called Web Watcher from the security company Kroll, which scans the dark web for information that thieves may be trying to sell. You can give the service your passport number and ask it to watch out for those figures out there in the blackness — but the membership expires after a year.

But breach anxiety can be forever, or at least 10 years: the standard renewal period for adults’ passports.

So why can’t a company, just once, say something like the following? “We’re sorry. And we’re going to protect you for as long as you feel like you need protecting.”

Stacy Cowley contributed reporting.

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Wealth Matters: When the Social Mission Comes Before Making a Buck

Philanthropy has long been a big part of business, with chief executives dictating where charitable dollars should go or how employees ought to volunteer their time. But some entrepreneurs are letting their customers drive the giving by how much they spend.

“My research basically shows that companies give back for two primary reasons,” said C. B. Bhattacharya, a marketing professor who holds the Zoffer Chair of Sustainability and Ethics at the University of Pittsburgh’s Katz Graduate School of Business. “It’s the right thing to do — corporations need to give back to society — and they believe it’s the smart thing to do, in terms of stakeholders taking notice of what you’re doing.”

Still, there isn’t a road map to success, and the journey can be full of bumps. When Richard and Ashley Perkin started Gells four years ago to manufacture belts, they thought they had landed on a clever way to link sales to causes they believed in.

The couple, who live in Southport, Conn., selected five small charities that they wanted to help. They also had belts in five colors, each matched to a charity that took a share of 5 percent of sales. The only problem was, most customers bought navy blue belts, which Gells had linked to the Blue Ocean Society for Marine Conservation.

“The Blue Ocean Society was getting a greater share of the 5 percent, and that didn’t seem right to us,” Mr. Perkin said. “It also became an accounting headache as we went into stores.”

The couple changed tack and decided to split the money earmarked for charities evenly.

Such logistical problems are not uncommon, particularly for a small entrepreneurial business. Pledgeling, an organization that works with companies on their corporate giving strategies, aims to help with this. As part of its “give and grow” program, it operates the charitable component of a company’s business, vets the recipient groups and aims to make the accounting process smoother.

It also created an impact calculator that can be displayed on a company’s website to show customers how their purchases are helping, said James Citron, chief executive of Pledgeling.

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Your Money: We Went to a Steak Dinner Annuity Pitch. The Salesman Wasn’t Pleased.

Of course, showing the SP 500 with reinvested dividends would also do that.

In any event, Mr. Schwartz said, Mr. Halaby should not be using that chart, because the company has discontinued the annuity it depicts.

“It is expected that our independent producers will use current materials,” Mr. Schwartz wrote in an email, using industryspeak for salespeople who don’t work directly for the insurance companies.

When I asked Mr. Halaby about that, he told me that someone who had not been working for him for very long put the old chart in the pamphlet. He added that the chart behind him at the dinner, which to my eyes looked identical to the one in the pamphlet, was in fact different. He would not tell me what company had created it.

American Equity’s updated chart, which it sent me Thursday, shows the SP 500 — still with no reinvested dividends — doing a bit better than a hypothetical indexed annuity for a period starting in 2006 and ending in 2017. To Mr. Halaby’s credit, he made no outsize promises during the dinner. “The primary thing is not to lose your money,” he told the crowd. “My job is not to make you rich.” It was reasonable, he said, for those in attendance to expect their money to grow 3 to 6 percent annually in an equity indexed annuity. Some people thought it was a compelling pitch; there was a smattering of applause when his presentation ended.

Such annuities may be suitable for some risk-averse retirees who are tired of owning stocks. But as I wrote a decade ago, you can probably get better returns during retirement (and not be penalized for taking too much out too soon) by investing mostly in ultrasafe bonds and adding some stock index fund exposure too.

There are probably plenty of advisers who sell useful products over a steak dinner. But as my experience here demonstrates, you shouldn’t show up for one without doing a couple of things. First, conduct a quick online search about the host, including a check of the central database for stockbrokers’ black marks and the similar ones that state insurance departments maintain. Mr. Halaby’s run-in with the state is right there on the first page of his Google search results.

Then, read any and all fine print, even if it requires a magnifying glass. Ask lots of questions. AARP published a good list several years ago, though I’d add another one: Why aren’t referrals from happy customers alone enough to keep you in business?

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Your Money Adviser: Those Halls Won’t Deck Themselves: Pros Help With Holiday Lights

How much does it cost to have a professional take over the decorations? That will vary by region, the size of your house and the dazzle of the display. Basic décor, like lights that outline your roof and front door, may cost $500 or less if you own a single-story home. But if you have a larger house with lots of gables or want more eye-catching décor, the price can stretch to thousands of dollars.

At Christmas Decor, a professional holiday decorator with locations across the country and in Canada, the average cost of a display in the United States is $1,650, said Brandon Stephens, the company’s president. Pricing tends to be higher on the coasts, he said, and lower in the nation’s interior.

“I’d say there’s a larger group of people more willing to spend on decorations,” he said. The company said its sales last year rose by 14 percent, with a similar increase expected this year.

While classic white lights remain popular, consumers have choices far beyond the traditional. Homeowners may now select tubes of glowing lights that mimic falling snowflakes, giant ornament decorations or app-controlled light strips that blink in patterns synchronized with music.

“People are looking for that showstopper,” Mr. Stephens said. Specialty items include six-foot-tall, three-dimensional snowflakes.

Christmas Decor’s representatives take a photo of your house with a tablet, then superimpose lighting displays on the image. If the suggested display is too costly, the software can adjust the proposed lighting until the represented results fit your budget.

While professional installations are costlier than doing it yourself, the advent of LED lighting, which is much more energy-efficient than traditional incandescent bulbs, means powering the holiday décor doesn’t have to be as wallet-draining as it once was. Some people still prefer the look of incandescent lights, but professionals say the quality of LED lighting has improved significantly in recent years. The bulbs no longer “flicker” and are available in a range of colors.

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