November 28, 2020

Bucks Blog: Budget Would Eliminate Taxes on Forgiven Student Debt

President Obama’s proposed budget for the 2014 fiscal year would prevent the taxation of student debt that is forgiven under federal income-based repayment plans, according to the Institute for College Access and Success.

If the provision is approved, it will come as good news to many college graduates who have been relieved to have more manageable monthly payments under the income-based plan and similar programs, which have recently been expanded by the federal government. While they are benefiting from the program now, though, they may end up with a large tax bill years in the future.

Last year, Ron Lieber wrote a Your Money column about the “tax time bomb” that could face some student loan borrowers who have their federal student loans forgiven under government repayment plans aimed at helping those struggling with high education debt.

The income-based plan uses a formula to calculate the monthly payment, based on your income. Then, after 10 to 25 years, the federal government forgives any remaining balance.

The catch is that you generally have to pay income taxes on any debt that is forgiven, unless you’re in a special program for teachers or those in other public service jobs. Depending on how much debt you have, the bill could be hefty — and it is supposed to be paid in full, immediately, when it comes.

The institute, which promotes affordable education and oversees the Project on Student Debt, supports eliminating the tax bill for those students who qualify for the lower-payment programs. Currently, concern about whether forgiven debt will be taxed in the future may discourage those who need help under income-linked repayment plans from participating, said Lauren Asher, the institute’s president.

She said that it was too soon to say if the provision would prevail, given the unpredictability of federal budget negotiations, but that such a proposal had recently had bipartisan support.

Other student debt items, which include keeping interest rates low on subsidized federal loans, are also up for debate.

Are you in an income-based repayment plan, or one of the related plans that lets you make lower payments based on your income? Are you worried about a potential future tax bill?

Article source: http://bucks.blogs.nytimes.com/2013/04/16/budget-would-eliminate-taxes-on-forgiven-student-debt/?partner=rss&emc=rss

Bucks Blog: How Did You Prepare for Your Baby?

Once you have figured out how to put your baby to sleep, and even if you have managed to get some sleep yourself, you’ll probably still be too exhausted to address the many ways your little one is likely to affect your financial life.

So this week’s Your Money column tries to compile the many money-related tasks and decisions you will face as a new parent in a giant guide. We didn’t have the space to print every single item on the to-do list, so we’ve listed some more of them below. Please add your own in the comment section.

  • Budget for Help Consider what kind of support system you’ll have in the early days after you take the baby home. If the father has to go back to work and a new mother doesn’t have family or friends nearby, it may make sense to budget for a doula, night nurse, babysitter or housecleaner for some much-needed relief.
  • Take That Babymoon It may seem like silly or obvious advice, but it may be a while before the two of you can escape as a couple. “You’ll miss this, quickly feel the pull of ‘saving money’ and find yourself three years out without having taken any trips,” said Kristin Harad, a financial planner in San Francisco whose firm, Vitavie Financial Planning, focuses on new parents.
  • Subscribe to Everything If you live near one of the big warehouse clubs, this is probably a good place to start buying diapers and related baby items in bulk. But if you live in a city without a car, think about subscribing to everything. I no longer have time to think about what we’re running low on, so, after much research, I decided to start monthly or bimonthly subscriptions, through Amazon.com, to diapers, baby wipes and a variety of sundries. The deals aren’t going to blow you away, but many items cost about what you would pay at a wholesale club and they’re delivered to your doorstep.
  • More on Estate Planning In addition to the steps laid out in the column, each parent should also create a durable power of attorney, which allows a person to handle your financial affairs if you become incapacitated. Estate planning experts also recommend creating medical directives. These will vary depending on where you live, but they generally include documents that will appoint a person to make medical decisions on your behalf if you cannot make them for yourself, as well as instructions on life support.
  • Letters of Instruction Lauren Lindsay, director of financial planning at Personal Financial Advisors, created a letter of instruction for the guardian and trustee she appointed in her will for her daughter. It essentially outlines how she would like her daughter’s money to be spent.  “This is not binding but made me feel better,” she added.

What steps did you take to get your financial and legal house in order before or after bringing home your new child?

Article source: http://bucks.blogs.nytimes.com/2013/03/08/how-did-you-prepare-for-your-baby/?partner=rss&emc=rss

Bucks: Continuing the Conversation on Paid Parental Leave

Dozens of readers wrote to us with their company’s parental leave polices after reading the Your Money column, which discussed how American public and private organizations offer the least generous paid leave policies in the world.

Some readers were stunned that even the largest companies offered so little paid time off, especially during a newborn’s critical early months when nursing can benefit both mother and child. Several Canadian readers, whose a country has a more liberal policy, chimed in with their thoughts and went as far as calling the American way barbaric. Other readers agonized about how to make sure their infants will be cared for when they return to work, while others viewed child care as the individual parent’s problem.

So we’ve decided to begin a progress report that will highlight employers’ paid parental leave policies (similar to the way we keep track of companies that equalize the cost of health insurance for same-sex couples). We started with responses we received from some of the largest companies, which we’ve listed in a chart.

But we’d like to expand the chart over time so that it becomes a repository of sorts, highlighting the most and least generous policies. So please tell us about your own employer’s policy with the form below, or in the comment section.

Here’s a sampling of recent comments from readers:

Christine, from Toronto, wrote:

From where we stand in Canada, the lack of maternity leave makes Americans look like barbarians. Here we pay a small portion of our pay into unemployment insurance and after a child is born the mother can take up to a year off and earn up to 55% of her pay up to a maximum amount of about $1500 the month. The father can take a portion of this leave instead of the mother if necessary. Guess what — people are still having on average of 2 children per family and our economy is not falling apart…

AnnieOmaha, NE, said:

As one can see by many comments here, this country is dysfunctional when it comes to working and having families. Yes, new parents should be given generous family leave packages, their children are someday going to drive our economy, funding Social Security, Medicare, Medicaid (or what ever form of benefits exist). It’s fine if you don’t want to have children, but who do you think will replace retiring people? The sad, bad joke is the notion, put forward by many conservatives, that the USA cares about “family values.”

And Criordan, from Brooklyn, wrote:

The Walt Disney Company: FMLA unpaid leave only. Zero paid leave. Ironic for a company whose main customer base are families with children.

You can submit your employer’s policy here:

Article source: http://bucks.blogs.nytimes.com/2013/02/25/continuing-the-conversation-on-paid-parental-leave/?partner=rss&emc=rss

Bucks Blog: The Right and Wrong Way to Buy Girl Scout Cookies

Pilar Ruiz chaperones her daughter Mary on most of her cookie-selling expeditions but does not sell cookies on her behalf.Chris Hinkle for The New York Times Pilar Ruiz chaperones her daughter Mary on most of her cookie-selling expeditions but does not sell cookies on her behalf.

In this weekend’s Your Money column, I told the story of Mary Ruiz, who sold 5,007 boxes of Girl Scout cookies last year as a 9-year-old, more than nearly any girl in the United States.

When you sell that many cookies, there are bound to be questions. Some parents in Tucson questioned whether her mother, Pilar, was pushing her too hard. Pilar and Mary Ruiz said this was not the case.

Meanwhile, several readers posted comments and sent me e-mails wanting to know how many cookies Pilar Ruiz sold herself. After all, they said, parents bring order forms to their offices all of the time and sell lots of cookies there without any assistance from their daughters.

But Ms. Ruiz said she did not sell cookies on behalf of her daughter, though she did bring her daughter to the American Airlines call center where she worked before she began working from home. And if she had sold cookies on her daughter’s behalf, it would have been against the Girl Scout rules, something that will probably come as a big surprise to all of the parents who have been selling cookies themselves for years and all of the buyers who have happily bought from them.

“We know that this happens, and we don’t approve,” said Amanda Hamaker, manager of product sales for Girl Scouts of the USA. “We actively discourage the activity, but it’s not something we can police. I don’t get phone calls in the middle of the day saying, ‘I work for so-and-so corporation, and there’s an unsanctioned order card on the break room table and what are you going to do about it?’”

So what’s a conscientious buyer to do if the parents don’t know the rules or openly defy them?

Ms. Hamaker suggests gently telling the parent that you’ll happily buy if you get a call from the girl herself. I told her I feared that in this day and age, people might wonder if potential buyers were a bit creepy if they made requests like that, but she countered that if colleagues were selling at the office, then presumably they knew your intentions were pure.

When you do get the scout herself on the phone, ask about her goals and what her troop hopes to do with its share of the money. “Make a connection with the girl,” Ms. Hamaker said. “That’s how she’s going to learn.”

How have you handled such situations?

Article source: http://bucks.blogs.nytimes.com/2013/02/12/the-right-and-wrong-way-to-buy-girl-scout-cookies/?partner=rss&emc=rss

Bucks: Playing the ‘Talk About Giving’ Game With Your Family

In this past weekend’s Your Money column, I mentioned the “Talk About Giving” game. It’s a $13 offering (including shipping and handling) from the Central Carolina Community Foundation, and you pick cards from a deck and use the questions as a way to begin a family discussion about values and philanthropy.

Some of my favorite questions are shown above and below. Here are a few more questions:

  • Should we volunteer even if we don’t want to?
  • If we give money, how will we know if our money was used well?
  • Suggest a new family tradition.
  • What do you appreciate most about our town?
  • What does it mean to be charitable?
  • Name a kind act that someone did for you in the past week.
  • How many pairs of shoes do you need?
  • Should children get paid for doing chores?
  • How much did tonight’s dinner cost?

If you like what you see here, get the whole set and test them on your brood.

And if you think of it, please come back and leave a comment letting us all know what you asked and how your family members answered.

Article source: http://bucks.blogs.nytimes.com/2012/12/10/playing-the-talk-about-giving-game-with-your-family/?partner=rss&emc=rss

Bucks Blog: Airbnb Responds to Questions About Hosts Breaking Local Laws

In this weekend’s Your Money column, I consider the case of Nigel Warren, who rented out his bedroom in a two-bedroom apartment via Airbnb only to get threatened with over $40,000 in fines for various violations of New York laws.

Mr. Warren wondered, as did I, why Airbnb didn’t tell its users exactly what the law says in New York City and other major urban areas with strict rules. So I asked the company why it didn’t provide more clear information when hosts register with addresses in these cities. I also inquired as to whether it wants every user now breaking the law (or the terms of their lease or their condominium’s house rules) to take down their listings immediately.

Here’s the statement that I received in response from the company spokeswoman Kim Rubey, along with my comments on what the company seems to be trying to do between (and outside of) the lines.

Thousands of people use Airbnb every day to help make ends meet, travel the world, explore new neighborhoods and make new friends.

No quarrel here. I’m one of them.

The responsible nature of our community results in very few complaints like this, but when they do occur we work diligently to address them.

Actually, when Mr. Warren wrote to Airbnb’s customer service questioning the company’s motives, it did not respond with an offer to pay his $415 an hour in legal bills. Instead he got a note saying that he should have known better. “I am sorry to hear that you are gong through a stressful situation and i home (sic) that a prompt resolution can be reached,”said Maria C., the customer service representative who responded.

We provide a variety of tools to help hosts understand their obligations under local laws, regulations or contracts, and they commit to us that they will comply with those rules and regulations when they sign up.

Airbnb does not put its (12,000 word-plus) terms and conditions squarely in front of new users, as other sites do. Instead, by pressing save on a new listing, they are de facto attesting to the fact that they agree with the terms, which are a hyperlink away. As for those tools that explain the local laws or provide links to them, I could not find them on Airbnb’s site. I asked Ms. Rubey to point them out to me, and she did not respond.

We are constantly re-evaluating how to do our job better, because in the end our goals are the same as the goals of the communities in which we have hosts: to create safe, great experiences for our hosts — many of whom depend on our site to make ends meet — to add value to local communities.

There’s that “make ends meet” meme again, echoing the same language from the beginning of the statement. Fast Company picked up on this earlier this year, with a piece titled “Airbnb Saved My Life.”

I have no doubt that this is true, and I admire the company’s partial success in turning the conversation about following the rules into one about sad or struggling people just trying to get by. Some of the struggling people using the site, however, are breaking the law and don’t know it. And they’ll struggle more if they face five-figure fines or eviction by landlords who eventually figure out what they’re up to.

Article source: http://bucks.blogs.nytimes.com/2012/11/30/airbnb-responds-to-questions-about-hosts-breaking-local-laws/?partner=rss&emc=rss

Bucks Blog: The Best Financial Move You Made for Your Special Needs Relative

In this weekend’s Your Money column, I turned to financial advisers and lawyers who were themselves parents to or siblings of people with special needs and asked them to offer basic advice for families who are getting started with their own financial planning in this area.

If you have a close family member with who is disabled, how does their advice square with your experience? And what is the best tip you’d offer to people who are starting the process?

Article source: http://bucks.blogs.nytimes.com/2012/10/05/the-best-financial-move-you-made-for-your-special-needs-relative/?partner=rss&emc=rss

Bucks Blog: On Whether to Use Allowance-Tracking Web Sites

In this weekend’s Your Money column, I write about Tykoon, the newest of a group of Web sites and apps that help parents dole out allowances, track chores and encourage saving.

It’s hard to argue with the goal of teaching good money management. The question is whether technology is the best way to do it. Right now, we’re using the three plastic jars approach in my house. But I can see a possible point in the future where the allowance amounts will get higher and it will simply be easier to keep track of it online. But that means my daughter would be spending even more time in front of a screen, which isn’t a great result either. And it’s no longer quite as visceral.

Who among you is using sites like Tykoon, ThreeJars and My Job Chart to help your children manage tasks and run their money? And have any of you steadfastly steered clear of digital allowance tracking even as your children have aged?

Article source: http://bucks.blogs.nytimes.com/2012/09/07/on-whether-to-use-allowance-tracking-web-sites/?partner=rss&emc=rss

Bucks Blog: The New Rules About Consumer Fees

Does the fee have any relationship whatsoever to the cost of the service? Do companies understand that they don’t have much leeway if we already are angry with them? Is a company telling the whole truth when it imposes a new fee? Are we getting something really neat in return? And are we worrying too much about the wrong types of fees — and not enough about ones that are truly consequential?

These are the five questions I posed in this weekend’s Your Money column. In the wake of the Bank of America debit-card fee fiasco, it sure seems as if we need a new set of standards for what constitutes a reasonable fee. So this week, I asked some of the smartest consumers I know to weigh in on the question.

Given that we have a pretty savvy bunch here on Bucks, too, I’d like to hear what you think about the principles I suggested in the column, the fees you hate (and others that you gladly pay) and about your own big ideas about when to get mad and when to just pay.

Article source: http://feeds.nytimes.com/click.phdo?i=5ca8fbec77b6a2512af39706536f6d7a

Bucks Blog: Why It Shouldn’t Have Been a Lost Decade for Investors

Carl Richards

When people talk about being a buy-and-hold investor these days, they are often confronted by others who declare that the last 10 years were a “lost decade.”

When I wrote about the power of compound interest a few weeks ago, many of the comments focused on this idea that the decade ending on Dec. 31, 2010 was the decade of lost money for most investors. Not surprisingly, people then take the next step and say that it could continue, and the United States could end up looking like Japan — 25 years of negative or flat stock market performance.

I know this isn’t the first time this issue has been addressed. Allan Roth wrote about it on the CBS Marketwatch Web site in December 2009, and Ron Lieber wrote a Your Money column about it in January 2010. But it seems like we need yet another reminder that the lost decade is a myth.

The lost decade claim starts with the assumption that whenever we talk about investing, we’re talking about owning just American stocks, often using the S.P. 500-stock index as the proxy for our investment experience.

And if that’s your frame of reference, then the lost decade feels very real. If you had invested in just the S.P. 500 over that 10-year period (2000-2010) your annualized return, including dividends, was 1.4 percent per year.

But much of the widely accepted research about portfolio design does not involve putting all your money in an S.P. index fund then letting it sit.

The point of being diversified is that you have a mix of different asset classes included in your portfolio. A properly designed portfolio is not a random collection of individual investments but rather a mix of investments you choose carefully based on the way they interact with the others. If you do it properly, the goal is to have some investments that zig when others zag.

When you view this 10-year period from the perspective of a diversified and balanced portfolio, 2000-2010 was anything but a lost decade. Consider the following (all numbers reflect annualized returns over 10 years and include reinvested dividends):

  • U.S. large stocks (the S.P. 500) = 1.4 percent
  • U.S. small stocks (the Russell 2000 Index) = 6.3 percent
  • U.S. real estate stocks (the Dow Jones US REIT index) = 10.4 percent
  • International stocks (MSCI EAFE Index) = 3.9 percent
  • Emerging markets stocks (MSCI Emerging Markets Index) = 16.2 percent

I’m not recommending that anyone should have all their money invested in a single index. And we also know that no one could have predicted back in 2000 which class would be the best performer.

But let’s assume that we decided to be broadly diversified at the beginning of the 10 years. We didn’t get terribly scientific about it, and since there are five broad asset classes, we simply put 20 percent into each of the five indexes I listed above. This sort of split is standard practice among professionals and amateur investors who know just a bit about how markets tend to work.

Then we just sat there. We did nothing! No rebalancing, no rethinking. Nothing.

The return for this diversified stock portfolio for the same 10-year period was an annualized 8.35 percent. That is a far cry from a lost decade.

It’s also worth noting that earning the 8.35 percent annualized return would have required behaving and not reacting badly during a painful 2008 and early 2009. Resisting the temptation to get out during that period was the cost of earning the 8.35 percent.

That said, most real people wouldn’t (or shouldn’t) have all of their long-term money invested in stocks even if they’re broadly diversified among many different indexes. So what happens if we add bonds to our long-term portfolio to act as ballast to the equity exposure?

Including bonds (sometimes referred to as fixed income) in the portfolio means you’ll have something that’s stable or even gains value slightly when your stocks fluctuate wildly. For our purposes, when I talk about fixed income exposure, I’m referring to intermediate-term bonds with an average maturity of around five years. And for this next example, I use the most widely accepted bond index, the Barclays U.S. government intermediate-term index.

So we build a portfolio that looks like this:

  • 60 percent equities (evenly split among our five categories)
  • 40 percent fixed income (Barclays U.S. government intermediate-term index)
  • The 10-year annualized return for this portfolio was 7.83 percent. Again, that’s a far cry from a lost decade. And of course the purpose of including these bonds would be to make 2008, for example, a little less painful. While it was still painful, this 60-40 portfolio was down 24.06 percent in 2008 versus the S.P. 500, which was down 37 percent. That was still painful, but at least it would have been a little more emotionally manageable.

    Too often when we hear the market report for the Dow, the S.P. 500 and even the tech-heavy Nasdaq, we let those numbers become our investing reference point. We often fail to look past those daily reports to what’s happening in markets and investing as a whole.

    Clearly things were bad for the S.P. 500 during the past decade, but singling out one market to declare a decade of investing as “lost” ignores the reality: a broadly diversified portfolio can deliver respectable returns even if individual classes perform poorly.

Article source: http://feeds.nytimes.com/click.phdo?i=c4ea1ef3075a1a35315a8d26f165f4fe