September 26, 2021

Robinhood Hits College Campuses, Where Credit Card Companies Fear to Tread

Caution flags and other guidance could help, and some of Robinhood’s educational materials are pretty good. They reiterate that necessary point that holding on to investments for a long time can earn you piles of compound interest.

Nevertheless, the company doesn’t offer individual retirement accounts, which can help turn small investments into big nest eggs. Roth I.R.A.s come with tax benefits that are of particular use to college-age, lower-income savers.

In July, Robinhood’s chief executive, Vlad Tenev, said it might add such offerings. A company representative had no additional information to add about any decision or timeline.

Still, there is reason to be skeptical of Robinhood. It recently paid about $70 million in restitution plus a fine — the biggest in the history of the Financial Industry Regulatory Authority — to settle charges of misleading millions of customers and letting others trade investments that were not appropriate for them. And late last year, it paid $65 million to settle Securities and Exchange Commission charges that it had misled users about its use of payment for order flow.

In both cases, the company neither admitted nor denied the charges and findings.

“Investing early is important to building wealth long term, but research shows that the vast majority of young adults have never invested in the stock market,” the company said in a statement. “We want to help educate and empower all investors, including college students, about investing.”

According to Robinhood’s own survey data, its customers are already more racially diverse than those of more established brokerage firms like Fidelity and Charles Schwab. Kudos for that.

But Robinhood has gotten a lot of mileage out of portraying itself as the champion of newer investors and its boast of “democratizing” finance. It has even panned critics who question whether it has the best interests of beginners at heart.

Article source: https://www.nytimes.com/2021/09/25/your-money/robinhood-colleges.html

Robinhood Hits Campus, Where Credit Card Companies Fear to Tread

Caution flags and other guidance could help, and some of Robinhood’s educational materials are pretty good. They reiterate that necessary point that holding onto investments for a long time can earn you piles of compound interest.

Nevertheless, the company doesn’t offer Individual Retirement Accounts, which can help turn small investments into big nest eggs. Roth I.R.A.’s come with tax benefits that are of particular use to college-age, lower-income savers.

In July, Robinhood’s chief executive, Vlad Tenev, said it might add such offerings. A company representative had no additional information to add about any decision or timeline.

Still, there is reason to be skeptical of Robinhood. It recently paid about $70 million in restitution plus a fine — the biggest in the history of the Financial Industry Regulatory Authority — to settle charges of misleading millions of customers and letting others trade investments that were not appropriate for them. And late last year, it paid $65 million to settle Securities and Exchange Commission charges that it had misled users about its use of payment for order flow.

In both cases, the company neither admitted nor denied the charges and findings.

“Investing early is important to building wealth long-term, but research shows that the vast majority of young adults have never invested in the stock market,” the company said in a statement. “We want to help educate and empower all investors, including college students, about investing.”

According to Robinhood’s own survey data, its customers are already more racially diverse than those of more established brokerage firms like Fidelity and Charles Schwab. Kudos for that.

But Robinhood has gotten a lot of mileage out of portraying itself as the champion of newer investors and its boast of “democratizing” finance. It has even panned critics who question whether it has the best interests of beginners at heart.

Article source: https://www.nytimes.com/2021/09/25/your-money/stocks-and-bonds/robinhood-college-tour.html

A Push for Social Security to Resume Mailing Annual Updates

“It’s almost impossible, if you’re 65, to correct something that happened 30 years ago,” Mr. Certner said.

The outlook for the legislation is uncertain. A similar measure that was introduced last year failed to advance, and Congress is currently preoccupied with major legislation like President Biden’s infrastructure spending bill.

Here are some questions and answers about Social Security statements:

A discrepancy in your earnings not only can affect your future benefits, but it can also raise a flag about possible identity theft. If earnings are much higher than your records show, it could indicate that someone has been working illegally using your Social Security number.

Statements also help you plan for retirement. You can see how much you can expect to receive in monthly benefits, and how much more you would get by waiting until your “full” retirement age, rather than collecting benefits at age 62. For most people born in 1960 or later, their full retirement age is 67. And if you delay taking your benefits until age 70, your monthly payments will be even higher.

If you are 18 or older, you can create an online mySocialSecurity account. When you log on, you can review your statement online or print it out. You can also request an annual email reminder to log on and review your records.

Earnings may be “missing” for several reasons, according to SocialSecurity.gov. Your employer may have reported your earnings using the wrong Social Security number, or you may have married or divorced and changed your name but forgotten to report it to the agency.

The first thing to do is to collect proof of the missing earnings, such as a W-2 wage statement, a pay stub or a tax return. If you don’t have any documents, you can write down the name of your employer, the dates you worked, how much you earned, and the name and Social Security number you used. Then contact Social Security to correct the error. The process “could take some time” and involve contacting former employers, the agency says.

Cindy Hounsell, president of the Women’s Institute for a Secure Retirement, urged people to at least save their W-2 forms, in case they need them to correct their earnings record. If a former employer goes out of business, it may be difficult or impossible to obtain them later.

Article source: https://www.nytimes.com/2021/09/24/your-money/social-security-benefits-mail.html

Pandemic Changes the World of Horse Auctions

Mr. Dunne bought a yearling last year for $50,000 and resold it for $1.2 million as a 2-year-old in the spring. (Across the board, pinhookers made over $36 million buying yearlings last September at Keeneland and selling them in the 2021 spring sales.)

Yet Mr. Dunne has had plenty of losses over the years, he said. “More horses don’t make the 2-year-old sales than the yearling sales because they have to do more to get there,” he said. “Athletic prowess is the differentiator. But it’s guesswork.”

Even with online buyers finding their way into the industry, it’s not as Wild West as it might sound. Many had agents assess the horses in person last year before buying. But as buyers got more used to the process this year, that wasn’t always the case. Some bought the horses online as they would buy a work of art at Sotheby’s or Christie’s.

“We’ve had horsemen doing things the same way for decades,” Ms. Arvin said. “It was getting them comfortable that this was good. A lot of sales, there was hustle and bustle. We were concerned to take it on the internet and lose that excitement. In the end, it’s the love of the horse and the environment.”

And since many of the horses stayed in Kentucky or at least the United States for training, she said, the people on the ground were probably going to advise the buyers, whether they were in person or online, about where to train the horse.

Whether that hobby pays off is still to be seen. After all, wealthy buyers have waded into an area of the horse market that has traditionally been risky.

“As pinhookers, we create a good commercial market in the beginning,” Mr. Woods said. “Then the buyer comes along and gets to see these horses trained and gets a better indication of what the horse will be on the racetrack. Be it good or bad, people can then decide if they’re going to spend a lot of money on a horse or if the horse they thought they liked isn’t that good.”

Those answers are a few years away.

Article source: https://www.nytimes.com/2021/09/24/your-money/horse-auctions-online-buyers.html

La pandemia afectó tu economía. Esto debes hacer

Es bien sabido que los informes de las agencias contienen una buena cantidad de errores. Si encuentras algunos, haz el reclamo. Para empezar, contacta tanto a las agencias de información crediticia como a las empresas de servicios financieros que puedan haber proporcionado la información incorrecta (la CFPB tiene una buena guía al respecto).

Y en cuanto a tu declaración de impuestos, nunca está de más organizar todos los datos fiscales que puedas durante los últimos meses del año de calendario. Es un registro de tu pasado reciente y una ventana a tu futuro a largo plazo (por ejemplo, a través de cualquier anotación sobre ahorros para la jubilación). El proceso también puede servir como recordatorio de que a menudo hay al menos una cosa más que puedes hacer en el presente para ayudarte mientras le entregas menos dinero a varios organismos gubernamentales.

Prepárate ahora y podrás presentar la declaración de impuestos lo antes posible en 2022 y obtener rápidamente cualquier reembolso que te corresponda. Una advertencia: a Donna Trainor, planificadora financiera y contadora de Atlanta que ha realizado un extenso trabajo pro bono con personas en peligro de perder sus casas, le preocupa que los beneficiarios de los nuevos pagos mensuales de crédito fiscal no se den cuenta de que es una especie de anticipo. Conseguirlo ahora significa que puede que no recibas un reembolso por la misma cantidad de impuestos que lo habitual, por lo que tendrás que restar esa expectativa de tu presupuesto de 2022.

Ahora, hablemos sobre lo que sientes.

Incluso para quienes están acostumbrados a la incertidumbre financiera, la pandemia podría haber incrementado el tipo de pensamiento catastrófico que puede llegar a deteriorar tu capacidad para planificar y establecer prioridades.

En Hollywood, los trabajadores parecidos a la gente de teatro como nuestro mentor financiero Stephen, a menudo terminaban paralizados por el miedo incluso si eran exitosos, dijo Leighann Miko, cuya empresa de planificación financiera suele trabajar con personas que brincan de un trabajo a otro.

“El temor era que la situación tardase mucho más en mejorar”, comentó Miko. “La gente llegó a pensar que iban a tener que buscar otro tipo de empleo”. Lo que en realidad querían evitar era lo que ella calificó de “Plan Z”, es decir, trabajos anteriores en diferentes industrias que esperaban no tener que volver a aceptar nunca más.

Miko ve una especie de cicatriz psicológica en la gente que la rodea, incluso en las personas que ganan 600.000 dólares al año. Sí, lo sé, pobrecitos, pero ellos saben muy bien que incluso sin pandemia, siempre corren el riesgo de tener un año con solo 30.000 dólares en ingresos. Para ayudar a aquellos que no pueden concebir hacer otra cosa que no sea sus trabajos de ensueño, por los que han luchado tanto, Miko hace planes y estrategias y trata de hacer que los sigan.

Article source: https://www.nytimes.com/es/2021/09/20/espanol/finanzas-pandemia-consejos.html

FAFSA Changes Are Coming. Here’s What You Need to Know.

(While there has not been a draft since 1973, men ages 18 to 25 are still required by federal law to register. But FAFSA applicants will now remain eligible for financial aid even if they have not registered, said Mark Kantrowitz, a financial-aid expert.)

The FAFSA collects financial details about students and their families and acts as a portal to grants, scholarships and loans for higher education. Last year, Congress approved changes to the form and the financial aid process, trimming the number of questions by about two-thirds and tweaking its underlying formula for determining who receives aid.

The approved changes include replacing the so-called “expected family contribution,” which applicants found confusing. Instead, a “student aid index” will be used as a guideline for the level of financial help for which a student qualifies. The updated formula broadens access to federal need-based Pell grants and shields more of a family’s income from financial aid calculations. And in a move that has already prompted some opposition, the revised formula eliminates a break for families with multiple students in college at the same time.

Taken together, the changes represent a “significant overhaul” of the student aid process that will take time to put into effect and communicate, according to the student aid office. Most of the changes were supposed to take effect for the 2023-24 academic year. But the office said it would instead take a “phased” approach, delaying some changes by another year, to the 2024-25 school term.

In at least one case, the impact of a future change may be felt sooner. The federal legislation eliminated a question about cash support, so funds taken from grandparent-owned 529 college savings accounts will no longer affect a student’s eligibility for federal aid. That change will probably take effect for the 2024-25 school year, Mr. Kantrowitz said, when the FAFSA would be based on income from the tax year 2022. “So starting next year, 529 plans owned by the grandparents or anybody other than the student or parent will no longer affect eligibility” for need-based federal aid, he said in an email.

Here are some questions and answers about the FAFSA and financial aid:

As soon as possible after it becomes available on Oct. 1, financial aid experts say. Many states and colleges use the form to determine scholarship aid, and some programs award the money on a first-come, first-served basis until available funds are depleted. A list of deadlines for both federal and state aid programs is available on the federal student aid website.

And note: While the federal deadline for filing a FAFSA extends into the summer after a given academic year, waiting until then means you will probably be eligible only for loans. The FAFSA for the current academic year, for instance, has a federal filing deadline of June 30, 2022.

Article source: https://www.nytimes.com/2021/09/17/your-money/fafsa-changes-2022.html

Proposed Tax Changes Focus on the Wealthy

“All of this legislation is focused on the individual and upping the ante for the wealthy,” said Michael Kosnitzky, a partner at the law firm Pillsbury Winthrop Shaw Pittman. “Increasing the corporate tax rate does not get at the wealthy because corporate taxes are paid by the shareholders, who get less dividends, the employees who get less salary, and the consumer, who pays more for goods and services. These proposals get at personal income tax.”

The proposed top income tax rate of 39.6 percent looks like the old top rate of 39.6 percent from 2017. It kicks in at $400,000 of income for an individual and $450,000 for a couple, which is slightly lower than the income level in 2017. Currently, the highest income tax bracket, at 37 percent, starts at $523,600 for an individual and $628,300 for a couple.

But those affected by the new rate would also pay more because there are fewer deductions than there were in the tax code before the 2017 changes.

“You have to look at the effective rate,” said Pam Lucina, chief fiduciary officer and head of trust and advisory services at the financial services firm Northern Trust. “We have far fewer deductions, so that 39.6 percent rate is a much higher rate.”

The one that affected many people was the loss of the full deduction for state and local taxes, or SALT. In the 2017 changes, the deduction was limited to $10,000 and primarily affected people who lived in Democratic-controlled states in the Northeast and on the West Coast, where state income and property taxes are high.

Article source: https://www.nytimes.com/2021/09/17/your-money/tax-changes-wealthy.html

What’s Changing in the New FAFSA and What’s Not

(While there has not been a draft since 1973, men ages 18 to 25 are still required by federal law to register. But FAFSA applicants will now remain eligible for financial aid even if they have not registered, said Mark Kantrowitz, a financial-aid expert.)

The FAFSA collects financial details about students and their families and acts as a portal to grants, scholarships and loans for higher education. Last year, Congress approved changes to the form and the financial aid process, trimming the number of questions by about two-thirds and tweaking its underlying formula for determining who receives aid.

The approved changes include replacing the so-called “expected family contribution,” which applicants found confusing. Instead, a “student aid index” will be used as a guideline for the level of financial help for which a student qualifies. The updated formula broadens access to federal need-based Pell grants and shields more of a family’s income from financial aid calculations. And in a move that has already prompted some opposition, the revised formula eliminates a break for families with multiple students in college at the same time.

Taken together, the changes represent a “significant overhaul” of the student aid process that will take time to put into effect and communicate, according to the student aid office. Most of the changes were supposed to take effect for the 2023-24 academic year. But the office said it would instead take a “phased” approach, delaying some changes by another year, to the 2024-25 school term.

In at least one case, the impact of a future change may be felt sooner. The federal legislation eliminated a question about cash support, so funds taken from grandparent-owned 529 college savings accounts will no longer affect a student’s eligibility for federal aid. That change will probably take effect for the 2024-25 school year, Mr. Kantrowitz said, when the FAFSA would be based on income from the tax year 2022. “So starting next year, 529 plans owned by the grandparents or anybody other than the student or parent will no longer affect eligibility” for need-based federal aid, he said in an email.

Here are some questions and answers about the FAFSA and financial aid:

As soon as possible after it becomes available on Oct. 1, financial aid experts say. Many states and colleges use the form to determine scholarship aid, and some programs award the money on a first-come, first-served basis until available funds are depleted. A list of deadlines for both federal and state aid programs is available on the federal student aid website.

And note: While the federal deadline for filing a FAFSA extends into the summer after a given academic year, waiting until then means you will probably be eligible only for loans. The FAFSA for the current academic year, for instance, has a federal filing deadline of June 30, 2022.

Article source: https://www.nytimes.com/2021/09/17/your-money/fafsa-changes-2022.html

Always Pay the Rent? It May Help Your Mortgage Application.

“While credit history is a key element in evaluating a borrower’s ability to make a mortgage payment, building credit in the United States is not an equitable endeavor,” said Hugh Frater, Fannie Mae’s chief executive, in a blog post.

So rent should count for something. But according to FICO, which uses data from credit reports to build scoring systems that are already part of the mortgage underwriting process, only 0.3 percent of the 80 million or so adults who live in rental housing have any mention of rent in their credit files.

How can this be? I wanted to talk to the three dominant bureaus — Equifax, Experian and TransUnion — about renters. Equifax and TransUnion did not reply at all, while Experian sent a statement in lieu of an interview. As is often the case when I ask after their doings, my request somehow ended up at their industry association instead, even though I hadn’t asked to speak with anyone there.

Francis Creighton, who runs the Consumer Data Industry Association, said it, too, was aghast at the fact that, according to FICO, information on rent payments made up less than 1 percent of the data that companies and others sent to the bureaus.

“It’s a really big problem,” he said. “We desperately want that information on file.”

For the credit bureaus to get it, however, landlords — including hundreds of thousands of people who own an apartment here or a three-flat there — would have to hand it over.

“They have no incentive to do it,” said Laurie Goodman, vice president of housing finance policy at the Urban Institute. It’s worth doing only if everyone contributes, because then the landlords could make use of that new collection of data to screen tenants. And everyone is very much not contributing at present.

Given that the credit bureaus don’t have the rental data that Fannie Mae and others want so much, Fannie developed a somewhat abstruse workaround involving a “desktop underwriter” validation engine and orders for “verification of assets.”

Article source: https://www.nytimes.com/2021/09/11/your-money/paying-rent-mortgage.html

Fannie Mae Will Review Borrowers’ Rental Payment History

“While credit history is a key element in evaluating a borrower’s ability to make a mortgage payment, building credit in the United States is not an equitable endeavor,” said Hugh Frater, Fannie Mae’s chief executive, in a blog post.

So rent should count for something. But according to FICO, which uses data from credit reports to build scoring systems that are already part of the mortgage underwriting process, only 0.3 percent of the 80 million or so adults who live in rental housing have any mention of rent in their credit files.

How can this be? I wanted to talk to the three dominant bureaus — Equifax, Experian and TransUnion — about renters. Equifax and TransUnion did not reply at all, while Experian sent a statement in lieu of an interview. As is often the case when I ask after their doings, my request somehow ended up at their industry association instead, even though I hadn’t asked to speak with anyone there.

Francis Creighton, who runs the Consumer Data Industry Association, said it, too, was aghast at the fact that, according to FICO, information on rent payments made up less than 1 percent of the data that companies and others sent to the bureaus.

“It’s a really big problem,” he said. “We desperately want that information on file.”

For the credit bureaus to get it, however, landlords — including hundreds of thousands of people who own an apartment here or a three-flat there — would have to hand it over.

“They have no incentive to do it,” said Laurie Goodman, vice president of housing finance policy at the Urban Institute. It’s worth doing only if everyone contributes, because then the landlords could make use of that new collection of data to screen tenants. And everyone is very much not contributing at present.

Given that the credit bureaus don’t have the rental data that Fannie Mae and others want so much, Fannie developed a somewhat abstruse workaround involving a “desktop underwriter” validation engine and orders for “verification of assets.”

Article source: https://www.nytimes.com/2021/09/11/your-money/fannie-mae-rental-payment-history.html