The amount of high-net-worth individuals
with $1 million in investable assets increased by 1.76 million people
in 2013, according to the Capgemini and RBC Wealth Management World Wealth Report.
Do you ever wonder what the rich know about money that you don’t? Well,
they know a whole lot and they’re working with trusted financial
planners and advisers to help them keep tabs on their money.
You may have daydreams of rolling around in a pile of cash, but that
dream won’t become a reality if you don’t make smart moves with your
finances. A few financial planners agreed to chat with us and spill the
beans, so sit back and take notes. Here are four ingredients in the
recipe the wealthy use to get rich, stay rich, and build
multi-generational wealth.
The wealthy seek alternative money management strategies
Those who are wealthy stay abreast of little-known ways to grow their
money. When they invest, they look for alternatives that work best for
them. One of these tools is private placement life insurance.
“In today’s rising tax environment, one of the most
popular approaches to growing and protecting wealth among the
ultra-wealthy is using a combination of private placement life insurance
and annuity products. These products are typically designed to meet the
unique needs of the ultra-affluent marketplace (more than $50 million
in net worth) and they allow them to invest in hedge funds of their
choice (as long as they’re on the insurance carrier’s platform) and
avoid all income taxes. The savings can result in hundreds of thousands
of dollars—sometimes even millions—in tax savings over the years as the
assets are distributed and the wealth is transferred to future
generations. This level of asset protection is key to protecting wealth
among the ultra-wealthy,” says David Buckwald, CEO and senior partner at
Atlas Advisory Group.
The wealthy understand the importance of diversification
Wealthy individuals make sure to spread out their investments. They
don’t concentrate their wealth-building efforts in one place. This
ensures that if one income stream starts to run dry, they’ll have
several other sources to serve as a backup.
“The wealthy are aware that their finances and
investments can be cyclical in nature. They most probably have been
through a few of those cycles and have learned to weather them or ride
them out…wealthy individuals don’t fall in love with one form of
investing or investment vehicle. Rather, they make sure they do not keep
all their eggs in one basket. And they constantly make sure that they
are rebalancing along the way so they don’t inadvertently get out of
balance. Sometimes the hardest thing is to know when to move on from
something that is performing. The wealthy know to take their emotions
out of investing,” says certified financial planner and attorney Joseph W. Malka.
The wealthy know how to preserve their cash
You might be surprised to learn that wealthy people who are smart
with their money look for ways to save instead of spending cash
recklessly. That is one of the ways they secure their wealth. While
it’s true there are those who spend money like they’re going to die
tomorrow, those who truly understand how money works know it’s about how
much you can actually keep. There are plenty of stories of wealthy
people living out of their vans (Toronto Blue Jays’ pitcher Daniel
Norris) or buying a home way below their means (Warren Buffett).
It’s important to remember that you can’t just wish you were wealthy;
wishing will get you nowhere. You need to have a plan so that you can
move toward your financial goals. What do you want your money to do for
you?
“The first thing I do with high-net-worth individuals is
discover what they want their money to do for them and their family.
Whether we are looking at $1 million or $100 million, it all starts that
basic question. What we always discover is that it’s not about the
money but rather what kind of impact the money will have on the people
and causes they care about most… The most advanced wealth preservation
strategies in the world are of little value if they don’t help a client
reach their personal goals,” says Martin Hurlburt, registered investment
adviser and founder of T.M. Wealth Management.
You don’t have to wait until tomorrow or next month to get on the
road to wealth. One small step you can take today is saving your money. Even if it’s just $5 a day, every little bit counts.
Says Certified Financial Planner and Attorney Rebecca Walser,
“…start early, pay yourself first in terms of investing in your future
self instead of spending every cent you have on your present self, be
diligent, and stay that course even through the rough times. One day you
will wake up and realize that every seed you planted has bloomed into a
very reapable harvest!”
We’ve covered America’s most notorious con men, discussed massive pyramid schemes, and even a few Ponzi schemes —
but there’s a whole slew of smaller scams that you’re more vulnerable
to. In fact, you’re more likely to fall victim to these smaller
shakedowns than to any of the bigger ones, despite the prevalence of
multi-level marketing pitches clogging up your news feed.
These scams exist for a reason: they work. At least some of
the time. While it’s hard to believe that anyone is actually sending
money to those faux Nigerian princes, evidently people are. Otherwise,
the scammers would try something else. Clearly, many of these low-level deceits are successful.
What does “success” mean, in this circumstance? Well, we can measure
it in terms of monetary damage, but that’s not the only type of damage
inflicted by these schemes. There is a certain level of psychological
damage done as well, an uneasiness that comes about after being
victimized — or even seeing it happen to other people. You become more
wary, less trusting, and overall, a bit more curmudgeonly (think about
how some people react to homeless people, or panhandlers). This is
especially true when it comes to money. And nobody can really hold that
against anyone else; after all, we’re all just trying to protect what’s
ours.
With that said, we’ve all become keenly aware of many scams, as they
have been ingrained into our culture. Plus, we know what to look for. In
the next few pages, we’ve listed four of the most famous and successful
schemes devised to separate us from our money or belongings. Read on to
see them.
While these seem to be less common today, phone scams have been very
successful over the years. You occasionally still hear about them on the
news — typically preying on the elderly. And they take many different forms: some involve tricking unsuspecting people into calling 900-numbers, others prey upon people’s gullibility or curiosity,
and trick them into parlaying over personal information, or even bank
account or credit card information. Again, this all seems like pretty
tame stuff, but for a few decades, these kinds of scams were rampant.
A popular way scammers still use the phone to get people to fork over money is by posing as utility workers,
or something similar. Basically, they will call you up, say you owe
money on a bill, and threaten to shut off power or water service unless
you pay right now. It sounds ridiculous, but a lot of people fall for
it.
Ponzi schemes may seem like a modern invention, but they go back nearly a century by now — to when Charles Ponzi devised the very first one.
A lot of Americans are wary of them these days as well, as names like
Bernie Madoff have made the news for pillaging tens of billions from
investors. Ponzi schemes basically work by taking in investments,
promising big returns, and then keeping the money. Investors do see some
return, as new money comes in from new investors and gets shuffled
around.
The scams have also become connected with pyramid schemes
and multi-level marketing companies, which insist that you recruit
“employees” under you who owe you dues. Many big businesses take this
form as well, including Amway and Herbalife, but people still get
involved with them in large numbers.
You probably see these so often that you don’t even think about it anymore. The most famous, perhaps, is the ‘Nigerian prince‘
scam that we mentioned previously. You may find yourself on the
receiving end of an email from someone who apparently needs your bank
account to store some funds — and they’re willing to give you a cut.
Obviously, it’s nonsense. But people fall for it. And that’s why you
keep seeing those emails come in.
There are a ton of other ways that email fraudsters can get your information, or exploit your email security. Phishing scams are quite common, and you can unwittingly download and install viruses or malware through emails as well.
There’s a reason people get sketched out by sites like Craigslist and
Ebay — they’re rife with scam artists and con men. Have you ever won an
item in an Ebay auction, then instructed by the seller to send a money
order to Romania? That’s the kind of thing you need to look out for.
Like email and phone scams, fraudulent online transactions that are facilitated through sites like Ebay or Amazon can take many different forms.
Even if you’re just agreeing to meet someone over Craigslist to engage
in a transaction, things can go wrong. But making a purchase over the
Internet, without seeing the actual item, can come back to bite you in
the ass. Some people are willing to take the risk — and that’s why this
kind of activity will continue to perpetuate.
New research shows that when workers wear nicer clothes, they achieve more
Dress better, work better?
A number of recent studies suggest that dressing up
for work in a suit or blazer could do wonders for an employee’s
productivity, whether going into a negotiation, making a sales call or
even participating in a videoconference with business associates.
Using
a number of measures, including simulated business meetings at which
subjects wore formal and more casual clothing, the studies offer
indications that wearing nicer clothes may raise one’s confidence level,
affect how others perceive the wearer, and in some cases even boost the
level of one’s abstract thinking, the type in which leaders and
executives engage.
Michael W. Kraus, an assistant professor of
organizational behavior at the Yale School of Management, co-wrote a
study for the Journal of Experimental Psychology in 2014 which showed
that clothes with high social status can increase dominance and job
performance in “high-stakes” competitive tasks.
The study put 128
men ages 18 to 32 with diverse backgrounds and income levels through
role-playing exercises—mock negotiations over the sale of a hypothetical
factory—to see whether wearing specific kinds of clothing had an effect
on the outcomes. The “buyer” in each case came from one of three
groups. One group wore business suits and dress shoes. One group wore
sweatpants, white T-shirts and plastic sandals. A third group, referred
to as “neutrals,” kept wearing the clothing they arrived in. A neutral
played the role of “seller” in each negotiation, but no seller also
played a role as a buyer.
The negotiators were each given a
fair-market value for the hypothetical factory, along with other
information that would influence their decisions about opening bids and
asking prices. In the end, the suits proved much less willing to concede
ground during the negotiations, moving off their initial offer by an
average of only $830,000, compared with $2.81 million for those in
sweatpants and $1.58 million for the neutrals.
What these results
show, Prof. Kraus says, is that in competitive, winner-take-all
situations, wearing more formal attire can send others a signal “about
you being successful and real confident in whatever you’re doing.” Those
more casually dressed, on the other side of the table, tend to back
down more easily, he says. The ones in formal attire become aware of the
respect they are receiving and become more forceful as well, he says.
Other research suggests that the effects of wearing nice clothes can be as much internal as external.
In
a study published last year in the journal Social Psychological and
Personality Science, results suggested that people engage in higher
levels of abstract thinking when they dress up, compared with when they
dress casually. When some 361 participants were asked to complete tasks,
the ones dressed more formally engaged in the kinds of abstract
thinking that someone in a position of power, like a senior executive,
would deploy. After being tested in both formal and casual dress,
another 88 subjects were quicker to see the big picture when they
dressed more formally. The casual dressers tended to sweat the small
stuff.
“When you need to think creatively, about the bigger
picture, that’s when dressing formally will increase your productivity,”
says co-author Michael L. Slepian, a postdoctoral research scholar and
adjunct assistant professor at Columbia Business School. “People who
wear that kind of clothing feel more powerful,” he says. “When you feel
more powerful, you don’t have to focus on the details.”
In an
office with a relaxed or business-casual dress code, “when you don’t
need to wear formal clothing, that’s where wearing formal clothing can
have a bigger effect,” he says.
What kinds of clothes qualify as
formal or higher-status dress, of course, can depend on the industry or
whom you talk to. Fashion consultants offer some insights that could be
useful in any number of businesses.
“Put it up a notch, but not
such a big notch that you’re going to make everyone else in the office
uncomfortable,” says Annie Brumbaugh, founder of AB Wardrobe Works, a
personal-wardrobe consulting firm. For women, that could mean a tailored
jacket, especially for an important meeting.
“Say you’re wearing
pants and a top or a skirt and a top, [the jacket] is what gives you
some finish and authority,” she says. Also, “Wear heels when it’s
important,” like when going into a meeting. One option: Those who don’t
want to walk in heels all day can keep a pair at the office.
For
men, a full suit, sport coat, or even a tie can put you in a more
professional mind-set, says Julie Rath, a men’s style consultant and
founder of NextLevelStyle.com, an online style course for men. If
wearing a suit will come off too strong, Ms. Rath recommends focusing on
fit (sleek and close but not tight) and quality (good cashmere, fine
wools or 100% cotton). Wearing a high-quality dress shoe or nice watch
can do the trick as well, she says.
Sometimes a small fashion
adjustment can have big results. Don’t go looking too far afield if
searching for a model of success to imitate. While Mark Zuckerberg seems
to have done pretty well in business wearing hoodies and jeans, experts
say he’s an outlier.
“Mark
Zuckerberg is in a creative enterprise,” Yale’s Prof. Kraus says.
“People like that are playing around with their status symbols. For most
of us, high status means suit and tie.”
Mr. Smith is a reporter for The Wall Street Journal in New York. He can be reached at ray.smith@wsj.com.
Divorce can be expensive and stressful. One way to make things even more expensive and stressful is to be messy with your finances.
“Money problems can cause terrible stress
in the best of times. When divorce is added to those problems, the mix
is often personally and emotionally devastating,” said Attorney and
Certified Financial Planner Violet Woodhouse.
An important step to take during divorce is to keep a close eye on
your financial health so you can enjoy a stable financial future once
you are out on your own. Failure to tie up loose ends could lead to a
world of trouble down the road. Here are four financial moves that may
help make the transition from divorced to single a little smoother.
1. Change all of your passwords
If you and your partner shared everything, including passwords,
you’ll want to make sure you change the password for each account. This
is especially important when it comes to financial accounts. Don’t
forget to also change your ATM personal identification number
if you have ever given this information to your spouse so that he or
she could withdraw money on your behalf. Although it’s not advised to
share your PIN, some couples do exchange this information. So act
quickly and change all of this information as soon as possible.
2. Close joint accounts
Don’t forget to close joint financial accounts, like credit cards and
bank accounts. If you were an authorized user on your spouse’s credit
card, call the issuer and ask to be removed. If you and your spouse were
joint account holders, you’ll need to close the card and figure out a
plan for the two of you to pay off the debt. Staying on top of joint accounts may help you avoid nasty financial surprises, said Bankrate credit expert Janna Herron:
It’s a good rule of thumb to decouple any credit card
accounts during divorce to protect the credit of both parties. It’s easy
for authorized user credit card accounts. The account holder simply
calls the issuer and asks to remove the authorized user from the card.
If the account holder forgets to call, typically the authorized user can
request to be taken off the account. At the very least, the authorized
user can contact the credit reporting bureaus to dispute the account on
his or her credit report.
Now that you will be living on one income, your financial picture
will look a lot different. There will be less money to spend since your
household income has been reduced by half, so adjustments will be
necessary. You can get a handle on your finances by developing a budget.
Meeting with a financial planner can help you set realistic financial
goals and follow through on them. Just make sure to meet on a regular
basis (for example, quarterly) so you can see if you’re still on track
with your money. You can find a financial professional when you visit
the Certified Financial Planner Board of Standards website and search their online directory.
4. Tame your spending
You may be tempted to stray from your usual financial habits after
going through an emotional divorce. However, resist the urge to engage in retail therapy. You’ll only dig yourself into debt and cause more stress. This is why it is so important to develop—and stick to—a budget.
“Divorce is an emotional rollercoaster…people
tend to make absolutely terrible financial decisions when they’re on
that rollercoaster, feeling ‘up’ one minute and then ‘down’ the
next…It’s no real surprise that you may not be able to think clearly
about financial matters, such as how your assets might get divided, tax
liabilities, and what your living expenses might be 10 years from now,”
said Certified Divorce Financial Analyst Jeffrey A. Landers.
For every age group under 65, the prospects for a financially
sound retirement have diminished over the past 15 years, new research
shows.
Soaring student debt and falling access to
employer-sponsored savings plans are two of the troubling trends putting
a squeeze on younger groups' financial security, according to a study from the Stanford Center on Longevity.
The
hardest hit age brackets have been millennials, in this case defined as
those aged 25-34. The study said that group's financial security
dropped 8%, on average, since 2000. Security for those aged 35-54 fell
7% over the same period, and was down 4% for those aged 55-64.
Only
those age 65 or older have seen their financial security hold steady or
rise modestly, on average, since 2000. Greater prevalence of
traditional pensions in that group may help explain the stability.
The
study looked at nine aspects of financial health, clustered in three
groups: cash flow determinants (income, debt, emergency savings), assets
(investments, retirement accounts, homeownership), and insurance
(health, disability, life). Researchers compared data for each age group
in 2000 and again in 2014. They found security had fallen in every
category other than health insurance—and credited the Affordable Care
Act for this one bright spot. Overwhelming Debt
Debt
was a key factor undercutting financial security for young Americans,
the researchers found. About a quarter of Americans under 35 have debts
in excess of 30% of their household income -- a share that's risen 136%
in two decades, the study found. Among college graduates aged 25-34,
student debt has risen five-fold since 1995 to about $24,000.
Many
college graduates can handle the payments, and their degree puts them
in a better position to earn more in the long term. But this debt forces
them to delay savings and homeownership, in turn diminishing their
long-term financial security.
The study also found that in every group under age 65, more Americans are living near or below the poverty line than in 2000.
And
fewer Americans have an IRA or workplace savings plan. That last point
is critical because 70% of folks who aren't eligible for a workplace
plan have no retirement plan of any kind. Even among those approaching
retirement age and participating in a work-based plan, savings rates are
slipping: Just 58% are contributing 10% of their pay, compared to 69%
doing so in 2001. Crisis Ahead?
Taken as a
whole the study illustrates woeful retirement readiness, especially
among the younger generation. And it emerges as Americans are giving scant attention to other retirement issues -- including health and diet -- even though they expect to live to 90 or longer.
Remarkably, the vital issue of financial security is getting almost no airtime
in the presidential debates. Democratic hopeful Bernie Sanders has said
he wants to make college free, and a number of candidates have plans to
help students with their debts -- which, ultimately, will improve the
financial security of younger generations.
But there has been little discussion of Social Security, nor of how to get Americans to save more and secure enough lifetime income to sustain them through two or more decades after work.
Evidently, that’s much tougher than rhetorical bombast and empty promises.
Following the failure by some Nigerian employers to remit their
employees' contributions to their Retirement Savings Accounts, the
National Pension Commission is considering measures to compel
defaulting employers to do so through audits, writes Ebere Nwoji
Recent reports in the media that the National Pension Commission, (
PenCom) would soon commence auditing books of over 200,000 employers in
the country to fish out those who fail to remit the mandatory 18
percent pension contributions of workers to their Retirement Savings
Account( RSA) is a cheering news to Nigerian workers and retirees.
Also, similar reports that the Commission has recovered over N10
billion unremitted pension contributions in principal and interest
penalty has rekindled workers hope in the scheme.
Indeed, the development is an inspiring one to the workers and a boost
to public confidence in the Contributory Pension Scheme (CPS)
considering the fact that many employers, who keyed into the scheme
especially private sector employers are often reluctant to remit not
only their own part of contribution to their workers' RSA Account as
stipulated by law but also fail to remit the eight percent part of
their workers' salary, which they deduct every month.
Currently, there are indications that most employers are owing arrears
of un remitted contributions of their workers to their RSA account as a
result, many workers are expressing fears that the CPS may after all not
solve problem of unpaid pension arrears.
This category of workers have been expecting PenCom and Pension Fund
Managers to compel their employers to remit their money to their RSA.
This cuts across public and private sector employers as there are
indications that federal government is currently owing pension sub
sector over N100 billion being its liability to the sub-sector for past
service under the old pension scheme and non remittances into its
workers' retirement savings accounts under the on going CPS.
Both the immediate past president of the Pension Fund Operators
Association of Nigeria (PenOp), Misbahu Yola, and Chairman, Premium
Pensions Limited , Aliyu Dikko , who confirmed this to journalists said
unless the new administration settles down and offsets the above
liability, it is capable of eroding the confidence built by the
government in the scheme.
Yola, said the above figure, if settled, would boost the performance of
the CPS and grow the economy in general especially for investment
purposes.
Section 3, sub section (1) of the Pension Reform Act (PRA) 2014 states
that Nigerian employers with up to three employees in their business
should arrange for pension package for the employees under the CPS for
payment of retirement benefits to the employees. The law requires that
employees should choose a pension fund manager of their choice and open a
Retirement Savings Account (RSA) where his or her employer should on
monthly basis pay in 18 percent of his salary contributed by the
employer and the worker at the rate of 10 percent for the employer and
eight percent for the worker.
Section 4 subsection (1) of the Act states that the contribution for
any employee shall be a minimum of 10 per cent by the employer and a
minimum of eight per cent by the employee.
Section 11 subsection (1) states that every employee shall maintain a
Retirement Savings Account (RSA) in his name with any PFA of his choice.
Subsection (3) states that the employer shall deduct at source the
monthly contribution of the employee; and not later than seven working
days from the day the employee is paid his salary; remit an amount
comprising the employee’s contribution and the employer’s contribution
to the Pension Fund Custodian specified by the PFA of the employee.
Despite these laws, Nigerian employers deduct their employees' part of the contribution and fail to remit it.
Cases of workers who retire under the CPS and fail to access their
retirement benefits abound. This is because for such workers, their
employers have not been remitting their contributions and they failed to
monitor the status of their contributions.
Few years back, PenCom tried to compel such employers to do the needful
by setting up recovery Agents (RAs) that will ensure that such
companies comply in remitting their employees' contributions to their
RSA .
PenCom had engaged 173 Accounting and Legal practitioners as recovery agents (RAs) for the exercise.
From their findings three years back, about 15,427 employers as at
that time failed to remit pension contributions to their employees’
Retirement Savings Account(RSAs)for various periods between January
2010 and December 2011. Subsequently, the defaulting employers were
distributed among the RAs to recover the outstanding contributions.
By September 2013, RAs established outstanding pension contributions
and interest penalties, which amounted to N13.33 billion against 335
private sector employers then.
PenCom granted approval for the RAs to serve demand notices to the
affected employers, which resulted in the recovery of N335.84 million
and an interest penalty of N31.04 million as at end of September 2013.
Sources close to the commission, said that the commission, had planned
to issue notice of intention to prosecute the employers that failed to
remit the outstanding pension contributions and interest penalty.
Since then, nothing much was heard about the RAs and their activities
while workers have continued to complain about non remittance of their
contributions and those of their employers to their RSA.
For now, it is not certain whether the commission has issued the letter before its present bid to audit books of employers.
Speaking on the commission's audit exercise, PenCom's Head, Compliance
and Enforcement, Alhaji Umar said the commission decided to set up the
pension audit system to complement its ongoing processes of ensuring
compliance by employers in the country.
According to him, the processes include engaging employers through
warning letters, imposing two per cent monetary penalty on unremitted
contributions, naming and shaming of erring employers and seeking
litigation against them.
Meanwhile, some workers from both public and private sectors who spoke
to THISDAY on the proposed audit said if effectively carried out would
better the lot of the workers.
One of the workers, who did not want his name in print said his
employer whom he described as worst culprit in the offence of
non-remittance of employees' contributions often threaten the workers
with termination of their appointment whenever the mount pressure on him
for remittance of their contributions.
He said in most cases, those in charge of workers' pensions in various
organisations, for the same fear of sack fail to do their work.
He said this category of employers have been having their way in their
wicked act because both PenCom and the PFAs allow them to do that.
He said if the commission would be serious in the proposed Audi
exercise, employers of labour will sit up and follow the due process of
law in handling their workers' pensions.
Now that credit cards
have been chipped, the banking industry has set its sights on
modernizing another essential financial tool that's stuck in the 1980s —
ATMs.
You might have noticed that the fancy chip-enabled debit
card you received does you no good at the ATM. That means counterfeit
debit cards can still be used to steal cash. Chip-enabled point-of-sale
card readers were expensive for merchants, but nothing like the expense
of replacing cash machines. So old-fashioned card skimming – in which a
criminal electronically copies debit card data and PIN codes entered by
consumers, then copies the data on to a counterfeit card – is still
possible, despite the transition to chip cards.
Banks looking to
tackle this problem aren't just adding chip readers to ATMs; they are
rolling out a variety of new technologies to bring cash machines out of
the 20th Century. The key will probably be in your pocket instead of
your wallet. Your smartphones might soon be your cash card. What's an eATM?
So-called
contactless ATMs don't need a debit card at all. Account holders pull
out their phone and either use a radio chip inside it to tell the ATM to
hand over some cash
— sometimes called "tap and PIN" — or they receive a one-time code text
from their bank that's entered into the machine to unlock cash.
Phone-as-bank-card
technology has been used in Europe for a few years, but it's about to
arrive for mainstream use in the U.S. this year. Chase announced a big
rollout within a few months, promising smartphone-enabled cash upgrades
at a majority of its 18,000 machines by the end of the year. Chase's
version will be the type-a-code-the-bank-has-texted version. Wells Fargo
and Bank of America have made similar announcements. All promise to
eventually support some version of tap and PIN.
Why would you
bother using your smartphone instead of pulling out plastic? The new
ATMs — called eATMs — have other convenience advantages, too. During an
experiment in California, users seemed most interested in selecting the
denominations they get during a withdrawal.
But
smartphone ATMs are much more than a gimmick, says Avivah Litan, an
analyst with consultancy Gartner. Phones can do a much better job of
authenticating users, Litan said. Your Phone vs. Your Debit Card
"Smartphones
provide a much more secure form factor than chip cards do, as there are
many sensors on smartphones to help with authentication and fraud
detection," Litan said. "Fingerprint readers, cameras, the phone chip
itself, the phone's movements, its location."
Consumers who use
two-factor authentication at their bank website already know that
involving their phone in an authentication process generally makes it
safer. One-time passcodes or virtual tokens create a "something you know
and something you have" two-step process for logging in. Adding
smartphones into the mix will do for ATMs what two-factor authentication
did for websites.
Using phones also pushes some expense onto
consumers — no need for banks to mail replacement chip debit cards. Not
to mention that consumers might start using that digital "debit" card to
make payments, netting the bank a new source of transaction fees.
Meanwhile, cellphone firms think the system will help with consumer loyalty.
"(There's)
more consumer stickiness," Litan said. "It will be harder to switch
manufacturers … (such as) from ioS to Android … if all your payment and
banking information is in an IoS wallet."
And consumers, in this case, really will benefit from stronger security and more convenience.
"It's a 'win win win' proposition for both banks and consumers, and helps the smartphone manufacturers (too)," Litan said. Protecting Your Debit Cards
In
the meantime, debit cardholders can minimize the odds of fraud by
frequenting ATMs inside of buildings, regularly changing their PINs and
not storing those numbers alongside their plastic.
Republican presidential
candidates, from left, Ohio Gov. John Kasich, former Florida Gov. Jeb
Bush, Sen. Ted Cruz, R-Texas, businessman Donald Trump, Sen. Marco
Rubio, R-Fla., retired neurosurgeon Ben Carson participate during the
CBS News Republican presidential debate at the Peace Center, Saturday,
Feb. 13, 2016, in Greenville, S.C. (AP Photo/John Bazemore)
Social Security represents about one-third of the average
retiree’s income. But without any changes to the program, that percent
might fall. Without a fix, Social Security might only be able to pay
full benefits until 2034 — that’s just 18 years away. After that, Social
Security could be able to pay only 75% of the scheduled benefits.
Who’s going to fix that?
As we get closer to
the presidential election, we’re reviewing how the some of the current
White House hopefuls plan to fix Social Security. Here’s what we found
according to data from AARP’s Social Security 2016 Election Candidate website and a review of the presidential candidates’ websites.
In
general, Republican candidates — though there are exceptions and
differences we’ll highlight below — want to raise to raise the full
retirement age; eliminate the payroll tax for working seniors 65 and
older; adopt inflation measures that would ultimately lower
cost-of-living-adjustments (COLA); establish private accounts for Social
Security; and abolish limits on retirement earnings.
By contrast,
Democratic candidates — though there are differences we’ll highlight
below — generally want to increase the payroll tax cap of $118,500 and
improve benefits for low-income seniors.
By way of background, you
might also want to read this Congressional Budget Office (CBO) report,
Social Security Policy Options, 2015, which detailed how various policy
options would improve or not improve Social Security’s finances.
Also,
most policy wonks suggest that Social Security could gain long-term
financial stability if the gap between the system’s revenues and its
outlays could be reduced through an increase in tax revenues, a
reduction in benefits, or some combination of those two approaches,
according to the CBO report.
The CBO report also noted that
although “most of the options in this report would improve Social
Security’s long-term finances, only a few would significantly postpone
the combined trust funds’ exhaustion date because most would be phased
in slowly.”
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That said, here’s a recap of how the current batch of presidential candidates plan to solve Social Security’s problems. Bernie Sanders:
Sanders wants to increase Social Security benefits by about $65 a month
for most recipients. Plus, he wants to boost the minimum benefit to
$14,363 a year for someone who has worked for 30 years and he wants to
use the consumer-price index for elderly (CPI-E) to calculate
cost-of-living adjustment (COLA) instead of the Consumer Price Index for
Urban Wage Earners and Clerical Workers (CPI-W).
By doing this,
an average senior at the age of 80 will see a $43 a month increase,
while the average senior at age 90 will see a $73 a month increase in
benefits, according to Sanders’ proposed legislation, the Social
Security Expansion Act.
Of note, Sanders is the only presidential candidate who wants to use the CPI-E to calculate COLAs. Learn more about CPI-E.
According
to SocialSecurityWorks.org, Sanders would fund improved benefits for
low-income seniors and improved benefits for all seniors by including
earnings over $250,000 a year in the payroll tax (currently those making
over $118,000 do not pay in on their income about that amount). Sanders
would also apply a 6.2% Social Security tax on investment income for
high-income households. Hillary Clinton:
Clinton wants to “expand Social Security for those who need it most and
who are treated unfairly by the current system — including women who
are widows and those who took significant time out of the paid workforce
to take care of their children, aging parents, or ailing family
members.”
Of note, Clinton is the only candidate who wants to
improve benefits for caregivers, according to AARP. “She supports
targeted benefit expansions, including a caregiver credit so that people
(mostly women) who take time out of the workforce to care for loved
ones aren’t penalized when calculating their Social Security benefits,”
according to SocialSecurityWorks.org.
And like Sanders, Clinton
wants to “preserve Social Security for decades to come by asking the
wealthiest to contribute more.” Options include: taxing some of their
income above the current Social Security cap and taxing some of their
income not currently taken into account by the Social Security system. Read Clinton’s proposal.
SocialSecurityWorks.org
praised Sanders and Clinton for opposing all types of Social Security
benefits cuts, including efforts to raise the retirement age. Of note,
Clinton recently tweeted “I won’t cut Social Security. As always, I’ll defend it, and I’ll expand it.” Donald Trump:
There’s nothing on the candidate’s website about Social Security, but
this week Trump was quoted as saying: “We’re going to save Social
Security, too, by the way. I mean you’ve been paying in for years, and
now they want to start chopping away.”
Trump previously proposed
raising the Social Security retirement age to 70 from 67. But he backed
away from that stance last year and has since called for infusing Social
Security with cash by canceling foreign aid to anti-American countries.
Read Is Donald Trump’s new plan for Social Security crazy?
According
to SocialSecurityWorks.org, Trump has criticized Republicans for
supporting cuts to Social Security and Medicare, and has said he won’t
cut benefits, but will instead strengthen them by growing the economy.
This is a departure from his position in a book he wrote in 2000, where
he called Social Security a Ponzi scheme and said it should be
privatized, according to Lacy Crawford, a communications director for
SocialSecurityWorks.org . Jeb Bush: Of all the
candidates, former Florida Gov. Jeb Bush plans to make the most changes
to Social Security. According to his campaign’s website, his plan would:
Adjust
benefits for seniors who choose to retire early (even smaller checks
than given now) or work past the retirement age (even bigger checks than
given now)
Eliminate the retirement earnings test:
Under current law, the government reduces the amount of Social Security
benefits for seniors who choose to continue working and make more than
$15,720 a year. Bush will eliminate that provision.
Eliminate
the payroll tax for seniors at age 67: This will eliminate a 6.2% tax
on work for seniors who choose to work well past the retirement age.
Increase
the Social Security retirement age: Workers are now eligible for full
Social Security benefits at age 66 (gradually increasing under current
law to 67). Workers can choose to retire as early as age 62, if they
agree to a lower Social Security check each month. This proposal,
similar to one in the bipartisan National Commission on Fiscal
Responsibility and Reform (Simpson-Bowles), will very gradually change
these eligibility ages by a month every year starting in 2022. (Of note,
Bush is the only candidate who wants to raise the early retirement age,
according to AARP.)
Provide a minimum retirement
benefit for low-income workers: Seniors who have worked for 30 years
will be guaranteed a minimum benefit that is approximately $15,000 a
year (125% of the federal poverty level for an individual). This will
guarantee that seniors do not live in poverty.
Slow the
growth of costs over time by adjusting benefits for wealthier seniors:
Under current law, the government determines the amount of a worker’s
Social Security check through a complicated formula based on the
worker’s average earnings. This proposal will change that formula so
that wealthier workers, who can afford to save for retirement on their
own during their careers, get smaller checks from Social Security during
retirement.
Change how Social Security checks are
updated each year: Each year, the government updates the amounts of the
Social Security checks they send to each senior. The annual update is
based on growth in the overall American economy, but the government
currently uses inaccurate data to calculate the changes. This proposal
will use a more accurate measure of inflation called the chained
consumer-price index.
Bush is the only presidential
candidate to propose decreasing benefits for early retirees and
increasing benefits for later retirees. John Kasich:
There’s nothing on Kasich’s website about retirement security, but he
has been quoted as saying that he’ll have legislation to fix Social
Security within the first 100 days of his administration, according to
AARP.
But even though there’s not much meat on the bones on
Kasich’s website, AARP suggests that Kasich would increase the
retirement age; means-test high income, and index benefits to prices.
Kasich
is the only candidate to propose indexing benefits to prices, according
to AARP. According to a transcript of Kasich’s remarks on C-Span, he
said this in October about Social Security: “…We need to look at the
issue of raising the retirement age. We do need to have a indices of
prices and not both prices and wages. Those things will get us in a
pretty good place, and we have to think about a disconnect of what we
pay in and what we get out. But Social Security is so sensitive it has
to be stabilized, and I’ve got to let you in on something. We’re going
to have to include some Democrats in this who understand this program
needs to be fixed.”
We received no response to email requests to Kasich’s press office asking for more information.
SocialSecurityWorks.org
notes the following about Kasich’s stance on Social Security: “In 1999
when he was House Budget Committee Chairman, he had a plan to deeply cut
and partially privatize Social Security. During the current campaign,
he has said he would cut Social Security for future beneficiaries and
was quoted as telling an individual who objected, ‘you’d get over it.’
He has expressed interest in raising both the retirement age and the
early retirement age, as well as means-testing benefits. He’s also
implied that he still supports some form of privatization.” Ted Cruz:
According to AARP, Cruz, like Bush, Kasich, and Sen. Marco Rubio, would
increase the retirement age for future beneficiaries. And like Bush,
Cruz wants to implement a chained CPI for all urban consumers (C-CPI-U)
to reduce COLAs. He, as well as Ben Carson, also wants to create private
accounts for Social Security.
In the past, Cruz has called Social Security a Ponzi scheme. Watch Cruz on Social Security: “Ponzi scheme.” Marco Rubio:
Rubio has, like Bush, outlined his plans to fix Social Security.
According to his website, Sen. Rubio would make no changes to Social
Security and Medicare for those in or near retirement. For future
retirees, he would:
gradually increase the retirement age for future retirees, to keep up with changes in life expectancy;
reduce the growth in benefits for upper-income seniors while strengthening the program for low-income seniors;
exempt Americans over 65 who wish to keep working from the payroll tax, strengthening the economy and seniors’ savings;
abolish the Retirement Earnings Test, which discourages work and does nothing to help Social Security’s long-term solvency.
