Day: February 24, 2021

Personal Finance Daily: Many Texans face sky-high electricity bills after winter storms and IRS has already received 55 million tax returns ahead of April 15 deadline

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Don’t miss these top stories:

Personal Finance
‘I was just panicking’: Many Texans face sky-high electricity bills after winter storms — what can they do?

Frisco resident Liz Guess’s utility provider, Griddy, charged her credit card 15 times due to an automated debit.

IRS has already received 55 million tax returns ahead of April 15 deadline, a huge increase on last year — here’s why

‘At the peak, we were receiving 335 submissions per second,’ Internal Revenue Service Commissioner Charles Rettig told federal lawmakers.

As Congress prepares to vote on Equality Act, the share of Americans identifying as LGBT rises

22% of LGBT adults experienced poverty vs. 16% for non-LGBT adults, according the Williams Institute.

John Travolta is selling his massive waterfront mansion in Maine for $5 million

The actor John Travolta is selling his massive, oceanfront Maine mansion for $5 million. The star had owned the longtime retreat with his wife, the actress Kelly Preston, who died last year at the age of 57 of breast cancer.

It’s not too late to save on your 2020 tax bill — here’s how

Tax Guy has last-minute tips for your 2020 Form 1040.

Can you claim the home office tax deduction if you’ve been working remotely? Here’s who qualifies

More than eight in 10 people who’ve been working from home anticipate the arrangement will be permanent.

Cruise lines with the most flexible cancellation policies

Booking travel right now can be risky, and bad cancellation policies are easy to come by in the cruise industry. Here are the ones we don’t hate.

Elsewhere on MarketWatch
CEOs for Goldman, Google, Intel among the 160 executives supporting Biden’s $1.9 trillion aid plan

CEOs from more than 160 companies voice support for President Joe Biden’s $1.9 trillion relief plan in a letter out Wednesday.

More than a quarter of homes for sale in America haven’t been built yet

A record 26.4% of new homes for sale don’t even exist yet.

Minimum-wage question is next hurdle for $1.9 trillion Democratic stimulus plan

Congressional Democrats are prepping their legislative package to carry out President Joe Biden’s $1.9 trillion coronavirus stimulus plan with an eye to getting it passed by the middle of next month.

How Joe Biden can reset America’s relationship with China

Given China’s desire to be a respected member of the international community, a more satisfactory U.S. approach would involve seeking cooperation and mutual gain when possible and limiting confrontation to vital issues.

Retire Better: Higher interest rates could mean more cash for seniors

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Here’s a common complaint I hear from seniors all the time: Interest rates are so low that it’s impossible to earn enough cash to supplement Social Security.

“Certificates of deposit don’t earn anything,” writes MarketWatch reader Camille: “Until the mid-2000s, you could easily earn 4% on a certificate of deposit (CD). Today, your money does not earn anything, which penalizes small savers and seniors.”

She’s right. Based on rates as I write this, if you put $500 into a one-year CD, you’d get back about $502.76 in 12 months. Wow! Two whole dollars and 76 cents! Probably enough for a loaf of bread or a gallon of gas, but not much else.

Low interest rates are a double-edged sword. If you’re borrowing money, it’s obviously good, but if you’re trying to make a few bucks, no. And this isn’t likely to change in any significant way, given the Federal Reserve’s recent announcement that it plans to keep its key “Fed Funds” rate low until the economy and jobs market picks up steam.

Since things like money-market funds and certificates of deposits are tied to the Fed, that’s tough news for anyone hoping to squeeze more out of their savings.

Meantime, those paltry returns stand in contrast to things that keep shooting up, like the cost of healthcare. I recently reported that drug prices, for example, are rising much faster than inflation, and much faster than the cost-of-living adjustment that seniors typically get from Social Security.

This one-two punch—more money going out and less coming in—is punishing seniors, pushing many closer to, if not into, poverty.

The need to earn more has nudged some seniors into the stock market, which in and of itself isn’t necessarily bad; financial advisers typically say that given the possibility of decades in retirement, even seniors should have some exposure to equities. But with stocks at nosebleed levels—the price-to-earnings ratio on the S&P 500 SPX, +0.51%  is up 80% from a year ago—caution abounds. As usual, I’ll emphasize that how much a retiree should have in stocks depends on factors like age, risk tolerance and so forth, and is best discussed with a trusted financial adviser.

It’s often tempting when rates are super low like now to put cash into things with fat dividends, but “you have to be very careful,” cautions Andrew Mies, chief investment officer of 6 Meridian, a Wichita, Kansas-based wealth management firm. “Saying I’m going to go buy a high dividend-paying stock or MLP (master limited partnership, an investment vehicle common in capital-intensive businesses, like the energy sector) were disasters in 2020. Buying high-dividend stocks was one of the worst performing strategies you could have had last year, and some MLPs were down 30-40%.”

In other words, what’s the use of buying something that pays a dividend of 8%, 9% or more—only to see the stock itself plunge by a third? One market strategist, the late Barton Biggs of Morgan Stanley, once said “More money has been lost reaching for yield than at the point of a gun,” and he was right. Echoing that is none other than Warren Buffett, who has called reaching for yield “stupid,” but “very human.”

So what to do?

Mies urges something that many people have trouble with: Patience. That’s because rates, all of a sudden, appear to be moving higher, and if you can wait a bit, you just might be able to find safer investments that yield more than you might be able to get now.

He’s right. As of Friday, the yield on the 10-year Treasury bond stood at 1.34%, hardly robust, but up from 1.15% for the week. Two things to remember here: When bond rates go up, bond prices go down; higher bond yields can also make stocks less attractive on a relative basis as well.

Mies thinks rates will continue to climb. “I think you’re going to have a chance in the next 12 months to put money to work at higher interest rates.” Buying or selling are choices, but so is doing nothing, so “I do think that not getting aggressive right now is probably the most prudent action.”

And after rates go high enough, he thinks municipal bonds could become more attractive, corporate bonds could, Treasurys could. “There will be pockets of opportunity that pop up.”

You may want to consider what have long been considered so-called “widow and orphan” stocks: utilities. “Utilities have been trading as if the 10-year (Treasury) is significantly higher than it is. That could be a spot worth dipping your toe in.” Possibilities to consider—preferably in consultation with your financial adviser—include the Standard & Poor’s Utilities Select Sector Fund XLU, -1.06% and iShares’ Global Utilities ETF JXI, -0.40%. XLU currently yields 3.3%, while JXI yields 2.78%, certainly more than those measly rates found in CDs or money-market funds.

The Moneyist: We started a home-schooling pod with another family. They refused to participate or pay 50% for the nanny for 2 weeks after we got back. Who’s right?

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Dear Quentin,

I have presented my/this question to several people among different walks of life and received very different answers, but nothing ever settling enough for me, so I like your input.

At the beginning of the last school year I created a school/classroom pod with another family, who we did not know before. We agreed to have one kid from each family, a total of two kids, be part of a virtual classroom, hosted in my house and using my already established nanny and split the nanny cost 50/50.

Everybody would provide their own kid with school supplies, but beyond that no other investment was required from the second family. We did not have any official agreement or contract, but agreed, if a kid cannot attend during regular school hours due to illness or another appointment, the nanny cost would still be split.

My family went on a two-week vacation out of state/country, and I agreed to continue paying our share of the nanny’s cost during that time as it was during regular school time. The only difference was that I asked the other family to please host the classroom at their house during our absence, which was not a problem for anybody involved.

‘I did not agree with their assessment that they do not have to pay while they isolated from us.’

— Mother from Broken Pod

The other family was not comfortable with us leaving the state/country during COVID-19 as this was exceeding their risk tolerance. Ideally, they would have wanted us to quarantine upon return for two weeks and not attend the classroom pod or use the nanny, which was clearly not an option, as I created the pod in the first place and it was my nanny.

So the other family isolated from us for two weeks after our return. They also declined to pay their share of the nanny cost during this two weeks’ time frame, as we put them in this situation because of our travel and created a hardship for them in the first place, as they now had to make alternative arrangements for their kid during that time.

We still went on our vacation, and I still paid my share of the nanny during our absence and intended to pay the nanny in full after our return, although I did not agree with their assessment that they do not have to pay while they isolated from us.

My nanny quit after we returned from vacation due to another job offer, so the 100% payment on my part never actually happened, but I still would like your input on this situation. It never sat quite right with me, but I can’t seem to get an answer from anybody as to what a fair solution would have been.

Mother from Broken Pod

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.

The Moneyist: We put our spendthrift neighbors in touch with our financial adviser. They called her ‘lousy.’ So how come WE are the ones who retired early?

Dear MBP,

You broke it, you bought it.

If your made an agreement to create a pod with this family so your children could attend home-schooling or remote learning together, and then you breached the pod by going on vacation out of the state or country, you are responsible for paying for the nanny for the two weeks the other family stayed away

There is not one rule for you and another rule for everyone else, especially when it comes to the coronavirus.

— The Moneyist

You can’t have it every which way, and make up the rules as you go along because you were the one who started the pod, and because the nanny for which you share the costs was your nanny to begin with. There is not one rule for you and another rule for everyone else, especially when it comes to the coronavirus.

If you travel out of the state/country, you’re not only breaking the rules of the pod by not quarantining, you’re breaking the rules of your state. Restricting your movements after travel is to ensure that you did not contract COVID-19. Your friends’ child may not show symptoms, but the same is not true for his/her parents or grandparents.

If you are quarantining at home, you can’t expect another family to send your child over to your home and put their own family at risk. I agree with how the other family handled this situation. They did so fairly and responsibly. If you want closure, here is what I suggest: Send the family a card, and make amends for the way you handled it.

The Moneyist:I’m 28, have no debt, 401(k), Roth IRA and $45K. My parents want me to save for a home. I want a Tesla Model 3. Who’s right?

Hello there, MarketWatchers. Check out the Moneyist private Facebook FB, +2.12%  group where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.