Personal Finance News

Not all that long ago, the only major decision the Federal Reserve Board had to make was where to set short-term interest rates. But in the past decade, the Fed has become increasingly aggressive in its efforts to pump up the economy—and there’s no sign it will slow down anytime soon. Whether you’re a borrower, saver or investor, this matters to you.

Some history: As the economy cratered in 2008, the Fed made the unprecedented move of purchasing large sums of Treasury bonds and mortgage-backed securities, which pumped an extra $1 trillion into the economy. Over the course of the next 10 years, it purchased an additional $2.5 trillion. Then, when the coronavirus crisis hit, the Fed purchased another $3 trillion in bonds and securities, bringing its liabilities so far to a record $7.2 trillion. (The total size of the U.S. economy is currently $21.5 trillion.)

And the Fed isn’t done. It now has the authority to support up to $2.6 trillion in new lending, which includes making loans to businesses through its Main Street Lending Facility and lending to city, county and state governments through its Municipal Liquidity Facility. The Fed is also backing loans issued through the Paycheck Protection Program, a federal loan-forgiveness program designed to help small businesses survive the coronavirus pandemic.

As for interest rates, it’s likely they will remain low for a very long time in order to encourage borrowing and keep the money flowing. Fed chairman Jerome Powell announced at the June 10 meeting of the Federal Open Market Committee that the corona­virus could continue to have an impact on the economy for the next two years and that the Fed isn’t likely to raise interest rates until 2023 at the earliest. If inflation remains contained, rates could stay low for even longer. However, although the European Central Bank has experimented with negative interest rates by allowing commercial banks to borrow at negative 1%, the Fed isn’t inclined to go that far.

Good news, bad news. Borrowers will benefit from the low-rate environment. The 30-year fixed mortgage rate is likely to remain below 4% for the foreseeable future (although home prices typically rise faster when rates are low). Auto, home-equity and other consumer loan rates will also

Read more: https://www.kiplinger.com/personal-finance/banking/interest-rates/600949/how-the-feds-moves-affect-you

Choosing a place to spend your retirement years has never been easy, but these days, it’s particularly challenging. The coronavirus pandemic has caused some retirees to rethink plans to move to urban or suburban walkable communities. But rural communities, while offering plenty of opportunities for social distancing, may not offer adequate health care—which is a priority for many retirees, particularly while COVID-19 infection rates are still high.

Some of these concerns could dissipate after a vaccine becomes widely available. But in the interim, it’s a good idea to re­evaluate plans to move—especially if you are considering relocating to an urban area, says Bert Sperling, founder of Best Places, which ranks cities around the country on a variety of factors. “One of the reasons people are moving to those places is their vibrancy,” he says. “If the restaurants are going away, if it’s difficult to go to shows and museums, then what is the point?”

That doesn’t mean it’s too early to start thinking about where you’d like to retire, and, once you feel comfortable traveling, you’ll probably want to test-drive some destinations. We’ve selected seven cities that offer a combination of good health care, low density, a modest cost of living and low to moderate taxes. For example, the cost of living in Pensacola, Fla., is below the national average and there are three top-rated hospitals within an hour’s drive or less. The beach is lovely, too. 

Your own decision will be based on personal preferences, including the type of climate you favor, nearness to family and even your political views. But as you conduct your search, some factors should be at the top of your list, because they’ll continue to play an important role in your retirement lifestyle long after the coronavirus threat has diminished.

Health care. The rapid growth of telehealth means you may be able to consult with specialists outside your community (see Finding Affordable Health Care Now), but there will still be times when you’re going to need in-person visits and treatment. For both emergencies and planned surgeries, it’s important to have a reputable hospital nearby. Having access to reliable health care is particularly important if you have preexisting medical issues,

Read more: https://www.kiplinger.com/retirement/happy-retirement/601003/find-a-great-place-to-retire

Dayna Ford is senior director-analyst for Gartner, a market research firm. She focuses on digital wallets and other forms of electronic payment.

Electronic payments have soared since the pandemic began. Do you expect that trend to continue after the crisis is over? I do, though the trend toward digital payments due to the pandemic has taken different forms: shopping online, paying digitally while doing a physical pickup or using contactless methods of payment, such as digital wallets. All were existing trends that had been steadily climbing over the past couple of years but have accelerated since the pandemic began. After the crisis is over, the rate of digital payments will drop, but not to what it was before.

Apple, Google and other providers offer apps designed to eliminate the physical wallet in favor of a digital one, but they’re not widely used. Do you think they’ll become more popular now? In places such as Asia, the use of digital wallets is very pervasive. A key reason we don’t have more adoption here is consumer inertia. Consumers in the U.S. and Europe are accustomed to using plastic credit and debit cards. But concerns about health and hygiene could get consumers to try digital wallets. Once they try them, some will continue to use them.

What about contactless, peer-to-peer payment systems? We will continue to see the growth of peer-to-peer systems such as Venmo. You also have programs such as Zelle, which caters more to consumers who use traditional banks. The pandemic adds momentum because some consumers don’t want to touch cash. Concerns about hygiene will get some people over the inertia that prevented them from trying these systems.

How can consumers protect themselves from identity theft when using these products? In some ways, digital wallets are more secure than credit and debit cards. For example, when you make online purchases using a digital wallet, only the wallet provider sees your credit or debit card information. Consumers should follow best practices for protecting data on their phones—use passwords and biometric authentication, auto-lock the screen—to keep their phones protected. And make sure you choose

Read more: https://www.kiplinger.com/personal-finance/banking/600948/if-youre-using-cash-less-often-youre-part-of-a-trend

This isn’t about you, Northern Virginia. On second thought, maybe it is. We must be going. Not right now, but when we retire.

My wife and I have found a lot to like about our bedroom community near Washington, D.C. Access to the best of the arts, the soulful vibe of the city, professional sports and the historical sites make my heart sing. Point the car west and we can be in the foothills of the Blue Ridge mountains in 45 minutes, or on Skyline Drive in Shenandoah National Park in not much longer.

But as we approach retirement, we have to look at whether it makes financial or lifestyle sense to continue living in busy Northern Virginia after we retire. For us, it just doesn’t. In pre-pandemic times, traffic was always nightmarish—and, due to construction of even more federal government buildings a mile from our house, it was getting worse. Plus, the cost of living here is high.

After I mentioned in an earlier column about our plans to leave this area in retirement, reader Denis Symes of Fort Collins, Colo., warned me that I might regret it. He and his wife retired and moved from Northern Virginia to Fort Collins to be close to grandchildren. “We’ve never lived in a small rural town before and deeply miss Virginia and the cultural attractions in the D.C. area,” Symes wrote. “Yes, the cost of living and housing are much less, but the absence of a metropolitan area is deeply missed; lower costs don’t make up for this. I’ve met other retirees here who feel the same way.”

We’ve been scouting potential retirement regions for a few years, and we’re keeping metro access top of mind. Two areas are making the cut: the Shenandoah Valley of Virginia (close to D.C. but worlds away) and the Lowcountry region of South Carolina, close to Myrtle Beach. In both cases—and to a greater extent in South Carolina—housing and taxes, among other things, are less expensive than in Northern Virginia.

According to the Kiplinger State-by-State Guide to Taxes on Retirees, Virginia ranks as a tax-friendly state for retirees. Residents 65 and older can deduct up to $12,000 per person of retirement income, subject to income-eligibility limits. Property taxes in Virginia are modest, and sales taxes are low. And there are no inheritance or

Read more: https://www.kiplinger.com/retirement/happy-retirement/601002/my-search-for-the-perfect-place-to-retire

After the stock market began its plunge in mid-March, investors hurried to find out if their portfolios could withstand the steep drop and what to do next.  Now, several weeks later, we’ve all exhaled as the market has gradually recovered.

Fortunately, this scenario may benefit many investors, presenting them with a golden opportunity to re-allocate their portfolios to match their risk tolerance. This is particularly true for those who gradually increased their allocation to equities in recent years and then saw their portfolios collapse in March. Now, with the Standard & Poor’s 500 index only off 8.4% from its all-time highs as of June 30, it’s time for all investors to examine their tolerance for risk without having an uncomfortable discussion as the market is plummeting.

This opportunity exists even as some investors wonder if they should double down on the markets’ recovery. They are concerned if they don’t have enough stocks in their portfolio, or the right stocks, they will miss out if the market races to a new record in the next 12 months.

But history shows us there is a “sweet spot” in any portfolio when we consider the trade-off between risk and reward. It may seem hard to believe, but it tends to be a portfolio that consists of between 50% and 60% stocks.

As an investor’s portfolio takes on more risk, with stocks making up 70%, 80% or more, returns can certainly increase as the market moves higher. But because their portfolio becomes less and less diverse, the investor takes on significantly more risk. And that’s what caused panic in some people a couple of months back.

A simple chart comparing the performance of three portfolios helps demonstrate the often-disproportionate relationship between risk and return. The chart below shows the performance of three different portfolios over a 5-, 10- and 15-year period.

It’s important to note that while the portfolio consisting of 75% stocks performed slightly better than those with only 60%, the difference is small. At the same time, the stock-heavy portfolio leaves little marg

Read more: https://www.kiplinger.com/investing/601010/could-now-be-the-right-time-to-dial-down-your-investment-risk

Traders will enjoy a long holiday weekend away from their desks. That's because the stock market is closed Friday, July 3, in observation of Independence Day; the fourth of July falls on a Saturday this year.

Bond traders not only get all of Friday off, but the bond markets will shut down early on Thursday, July 2, closing up shop at 2 p.m.

Regular trading hours for both the stock market and the bond market resume on Monday, July 6.

The following is a schedule of all stock market and bond market holidays for 2020. Please note that regular trading hours for the New York Stock Exchange (NYSE) and Nasdaq Stock Market are 9:30 a.m. to 4 p.m. Eastern on weekdays. The stock markets close at 1 p.m. on early-closure days; bond markets close early at 2 p.m.

Read more: https://www.kiplinger.com/investing/600985/is-the-stock-market-closed-fourth-of-july-2020

China has faced daunting challenges this year. Hong Kong erupted in political protests, COVID-19 got its start in Wuhan, relations with the U.S. deteriorated sharply, and the economy shrank 6.8% in the first quarter, nearly two points worse than the rate of decline in America. In fact, for Chinese stocks, it has been a rough five years, with the MSCI China index returning just 2.5% annualized, compared with 8.6% for MSCI’s USA index. (Prices, returns and other data are as of June 12.)

Still, I like China as a long-term investment for a lot of reasons. The most obvious is that, despite threats from the U.S., China is too big for America to do without. China has four times the population of the U.S. and two-thirds of the gross domestic product, with the economic gap closing rapidly. Even with COVID, Chinese GDP is expected to grow by 1% this year, easily the best performance among major countries, according to projections by the Economist Intelligence Unit, a division of the Economist Group media company. The estimate for Europe is a decline of 8.0%; Kiplinger currently projects U.S. GDP to shrink by 5.7%.

China’s markets have also matured, and volatility has dramatically declined. The Shanghai Stock Exchange 50, an index composed of the “A” shares (that is, shares that can be traded only by Chinese citizens and large foreign institutions) of 50 large and representative Chinese companies, dropped just 16% from the start of 2020 through its low on March 23. That compares with a loss of 35% over the same period for the Dow Jones industrial average, its U.S. analogue.

Best of all, Chinese stocks are relatively cheap. At this unusual time of business disruption and high un­employment, traditional valuation measures are distorted. Still, the differences are so wide, they can’t be ignored. The price-earnings ratio of the MSCI China index, which captures 85% of the value of the country’s markets, was 12.5 at the end of May. That contrasts with a P/E of 22.0 for the MSCI USA index.

China Mobile (symbol CHL, $35), the giant Chinese telecom company, carries a P/E of just 9, based on estimated earnings for the year ahead; by contrast, U.S. wireless behemoth Verizon Communications has a P/E of 12. The P/E of Read more: https://www.kiplinger.com/investing/stocks/600959/chinese-stocks-have-long-term-promise