As Congress tries to hash out health care reform (and wrangle over a public insurance option), many have wondered about the place of long-term care. Most have said including it in reform is too expensive. However, new legislation may help mitigate some of the costs — and provide a savings vehicle for those who expect to need help with long-term care costs in the future. It is called the Community Living Assistance Services and Supports Act (CLASS Act — don’t you love how they name these things?). NPR reports on the main thrust of the act:

That legislation, which is part of the committee’s health bill, would let workers choose to have government deduct money from their paychecks — maybe $65 to $100 a month — and put it in a savings account. When they get old or disabled and need care, they could then use that money.

Anything that encourages automatic savings is generally a good idea. I would be interested to know whether the savings account would offer a high yield, and whether you could direct some of the money to be put into conservative investments. Of course, since it would be a long-term investment, I would favor index funds. I think that something similar to retirement accounts now — complete with tax advantages and the ability to direct some investments — would be in order. But it doesn’t look like that has really been thought out.

In any case, it is fairly obvious that health care reform on all fronts is needed. The private sector has largely dropped the ball, and offering a public option for health insurance (perhaps something similar to what our elected officials have access to) is a good first step. And you wouldn’t be forced to choose it if you could get a better deal elsewhere. A public option would introduce something akin to competition in a market where, quite frankly, there is very little.

Image source: NESRI via Flickr

In our society, there is an aversion to negotiating. For some reason, we feel as though it is rude to haggle and ask for a better price. However, it turns out that maybe we should be negotiating more. Two weeks ago, my husband and I got a 15% discount for an already-on-sale griddle for offering to take the display model. Of course, the item was out of stock. I doubt the display model trick would have worked as well if there were more griddles sitting on the shelf. And when we bought our dryer (and a couch later), we managed to successfully get free delivery and set-up (normally $50) on top of a discount of $75. Just for asking.

But it appears that I am in the minority. Consumer Reports has a graphic in the August 2009 issue that shows that only about a quarter of consumers try to negotiate. However, those who do negotiate tend to have a pretty good success rate:

Consumer Reports also offers these tips on how you can increase the chances that your haggling will prove successful:

1. Know store policy about discounts and matching deals, and research prices for similar items online and off.
2. Time your visit so that you arrive later in the month. Additionally, avoid times of the day that are busy. You want your salesperson to be thinking of his or her quota. And you want him or her to have the time to negotiate with you.
3. Show fixable flaws to the salesperson (or take the display model).
4. Avoid asking for a discount in front of others. Salespeople don’t want to have to give a discount to everyone who sees your successful negotiation.
5. Ask for a manager if the salesperson can’t deal.
6. Offer cash. In some cases, you can get a cash discount by asking. It means the business doesn’t have to pay a transaction fee for accepting your credit card.
7. Walk if you don’t get the deal. Part of negotiating is being able to walk away if you know you can get the same deal elsewhere. At the very least, when you walk you know you can get the same item for the same price someplace else.

For an interesting personal story about negotiating, Man Vs. Debt has a pretty cool story — and some good tips for beginning negotiators.

Do you haggle?

There is a wealth of good personal finance reading out there in the blogosphere. Some of it is good common sense, and some of it is thought-provoking. Here are some of the things that caught my eye this week:

• Ten Things You Should Do When You Get Laid Off from Consumerism Commentary.
• Why Everybody Needs A Side Hustle from Frugal Dad.
• Be Successful by Learning Delayed Gratification from Bargaineering.
• Should There Be Mandatory Personal Finance Classes in High Schools? from Bible Money Matters.
• Find a Bank That Works For You from Green Panda Treehouse.
• Poor Money Choices Ruined My Parents’ Life from Lazy Man and Money.
• Best Free Events to Enjoy Almost Anywhere from Gather Little by Little.
• Things You Own End Up Owning You from My Two Dollars.
• 12 Common IRA Mistakes To Avoid from Good Financial Cents.
• 8 Ways A Recession Can Benefit You In The Long Run from Saving Advice.
• CDs vs. Bond Funds from The Oblivious Investor.
• Do You Keep Money Secrets From Your Spouse? from Free From Broke.
• 7 Tips for Talking to your Fiancé About Money from Mrs. Micah.

Back in the day, when big banks had balance sheets that made them appear flush with cash and full of value, banks offered some of the best dividends. However, between the financial meltdown and TARP, financial institutions found it necessary to cut dividends. For many investors, though, the fact that some banks have made arrangements to repay TARP and move forward, hope has been rekindled for an increase in dividends. But it is probably not likely. Financial institutions probably won’t be able to offer the same kind of dividends for quite some time. Some of the factors that may make banks reluctant to raise their dividends include:

• Losses are still expected to mount for some financial institutions. Credit card charge-offs are increasing, and commercial real estate continues to fall in value. And foreclosures could still continue to cause problems.
• More regulation may be coming. Even with TARP and its requirements behind big banks, the President has proposed regulatory overhaul, and banks are wary of what it will entail, and concerned about how it might limit profitability.

However, it is possible — even likely — that, in the future, financial institutions will raise their dividends to some degree. But I doubt they will return to previous levels anytime that could be considered soon. It will take years before banks feel good enough about economic recovery to boost their dividends.

Image source: sxc.hu

One of the biggest concerns facing many Americans right now is retirement.

Looking at the damage done to retirement investment accounts, thanks to the financial crisis and the current bear market, some are looking for ways to encourage new options for retirees. Even for those with longer time frames until retirement, there is still fear. Even if retirement investment accounts recover and grow between now and retirement in 15 - 20 years, some are concerned that the next crash could pull the rug out from under them just as they retire.

Another problem revolves around the longer life expectencies that retirees are expected to have. Few people now will have enough in their retirement funds to last the 20 to 30 years that people will soon be expected to live after retiring.

Enter an ambitious new bill aimed at shoring up retirement.

In the House, the Retirement Security Needs Lifetime Pay Act (H.R. 2748) is being proposed. This bill would allow a tax break for those who take their retirement investment accounts and used them to buy a lifetime annuity. CNN Money offers a look at two of the main tax breaks offered in the bill:

1. You will be allowed to exclude 50% of annual annuity payouts from a non-qualified plan (one you invested after-tax dollars in) from taxable income. The annual maximum exclusion would be $10,000.
2. You will be allowed to exclude 25% of annual annuity payouts from a qualified plan (401(k), IRA and other tax-deferred accounts) from taxable income.

Additionally, there will also be incentives to purchase what is known as longevity insurance. This is actually another kind of annuity. You wait until you are much older — usually in your eighties — to start taking payments. As a result, the payouts are normally higher. And they would start about the time your retirement investment accounts may be running somewhat lower.

Whether or not this is the answer to the problem of investment-based retirement accounts remains to be seen. But it is clear that there are some definite concerns about the ability of Americans to have enough money throughout retirement. An annuity might be helpful. However, the downside to an annuity is that you trust the management of it someone else. I think I will need to consider the matter further (and see whether this bill makes it through and the tax breaks materialize) before deciding an annuity is right for me. So far, though, I am fairly content with my Roth IRA, which is funded largely with index funds.

Image source: Darren Hester via Flickr

We’ve all heard about the great deals being cut for a number of companies. They’ve enjoyed bailouts and preferential treatment on their financing. Now, consumers may be able to get a bit of a break — and the intiative is coming from the credit card companies.

Credit card debt settlemtent made easy

It has always been possible to employ debt settlement as a method of getting rid of unsecured debt. However, the process has long been fraught with complications and strenuous negotiations. Not so much anymore. CNBC offers an example of what happened when one customer asked to settle his credit card account:

Mr. McClelland’s credit card company was calling yet again, wondering when it could expect the next installment on his delinquent account. He proposed paying half of his $5,486 balance and calling the matter even.

It’s a deal, the account representative immediately said, not even bothering to check with a supervisor.

As they confront unprecedented numbers of troubled customers, credit card companies are increasingly doing something they have historically scorned: settling delinquent accounts for substantially less than the amount owed.

Clearly, the economy is forcing credit card companies to consider their options. With delinquencies and late payments on the rise, it is often easier to collect whatever the customer can offer than to try to collect on a debt that the consumer may not be able to pay. With unemployment and the threat of foreclosure forcing people to prioritize their obligations (your mortgage payment should come first), it is becoming a necessity to accept a debt settlement.

Even though you are getting a good deal with the debt settlement, it is worth noting that by the time you get to this point, you have likely paid more than you originally borrowed — and then some — due to the high rate of interest. Credit card companies may not get their entire interest earnings from you, but they’ve probably already made their profit. And, you should also realize that your credit score may be impacted.

Image source: Daylife

It’s that time of year again. When the health insurance company sends me a letter telling me what my new premium will be. This year, my plan resulted in a $50 increase. Because costs keep rising. (Or the CEO of the company is finding his hundreds of million dollars in compensation is inadequate.)

At any rate, last year I received a rather long justification of rising rates — even for those of us who live healthy lifestyles and rarely use our insurance. This year’s justification was rather short, and included, once again the fact that, even though I have an individual plan, my costs go up along with the costs of those in my “group”. Basically, I’m subsidizing others’ poor health and, in some cases, bad health decisions. (Who says that we don’t have socialized health care? Society still pays for it, but not through a government apparatus. Of course, subsidizing it through insurance companies is much costlier to individuals, for the most part, than subsidizing it through the government through slightly higher taxes. But that’s another rant.)

This year, the nice, helpful folks at the insurance company sent me a cover telling me that they are here to help, and offering a very few ways that I might be able to reduce my costs.

I called to see what I could come up with. I did end up finding out about a plan that would reduce my health insurance premium to around $400 per month, rather than watching it jack up to $466 per month. The move will save me $792 on premiums in the coming year. I had to change my office visit co-pay, increasing it by $10, and agree to a $200 deductible for my prescriptions, but even with those changes, the new premium will save me $500 this year, over what the new premium would have been. I did have to raise my deductible as well, but that will only kick in if we have a major expense (which we haven’t yet), and the $2,500 deductible is something we can handle with our emergency fund — or the Health Savings Account I am thinking of opening.

I wanted an even higher deductible, but any plan with a higher deductible switches to deductible and then 20% coinsurance, which the lady explained to me means that I pay all of my out of pocket expenses and then 20% of all costs after the deductible is reached. After figuring out the fact that I would not reach the deductible this year, and would have to still pay a premium (only $20 less than the plan I chose), I realized that I would actually be paying more overall. Stupid cleft stick the insurance company catches you in. It sounded good at first, but when considering health insurance costs, it is important to factor in more than just the premium. You need to look at your out of pocket obligations and whether that 20% is more than the office visit co-pay. Hint: It usually is.

I wanted to get rid of maternity, but no plans with my company offer that, unless I go with an even more grotesque deductible/coinsurance plan. I looked for other plans from other health insurance companies (and will probably continue my search today), but none of them are really any better for the (rapidly dwindling, I discovered in my information) coverage I receive. In the end, I figure I’m kind of stuck. Sure, it’s crappy, but for all of my looking, I haven’t found anything much better.

Our health care is costlier than any other in the developed world, and it isn’t even the best. And, as my monthly premium goes up every year, I am continually reminded of the fact that in many cases, one insurance company is much like another. At least this year I’ve actually managed to reduce my premium. But it didn’t just happen. I had to go out there and look for a reduction. If I hadn’t taken the initiative, I would have had to swallow a $50 increase instead.

Has your health insurance premium been going up? How much? What are you doing to try and reduce your health insurance costs?

Over at Gather Little By Little, Stew asked his kids some questions about money, and shared their answers. I thought it was such a fun idea that I brought my son in and asked him 10 questions about money, just to see what he would say. My son is six, and it will be fun to see how his answers compare to Stew’s kids’. Of course, I worry that he’s done a better job of teaching his kids about money…

1. What is money? It’s dollar.
2. How do we get money? From the bank.
3. What do we use money for? Buying stuff.
4. How much money does mommy and daddy have? $1,000.
5. What is a person called who has lots of money? A bank.
6. What is a person called who doesn’t have much money? Me.
7. What is something good to spend money on? Buying food.
8. What is something not good to spend money on? I can’t think anything.
9. What should you do if you didn’t have enough money to buy something? Get more from the bank.
10. What would you like to save your money up for? A toy backhoe.

My favorite answer is #6. Classic.

Clearly, I need to do a better job of teaching my son about where money comes from, and what he needs to do to earn it. It doesn’t just magically appear from the bank. He understands that I give him an allowance, and he does save up money, but clearly we’re missing a few steps.

Do you know what your kids think about money?

image source: Miranda Marquit

It used to be that we talked about risk in terms of whether or not you have the risk tolerance right now to handle the losses that come with higher risk investments. However, risk isn’t just about whether you can deal with the possibility of losing money. It also includes whether or not you are missing an important goal. It can also mean (as The Oblivious Investor points out) that you end up with lower returns than you expected.

When deciding on your risk tolerance, one of the factors you should include is what might happen if you get smaller returns than you expect, or what happens if you miss an important goal. This might change your asset allocation, as well as the various financial strategies that you employ to meet your goals.

When planning for the future, it is a good idea to lean to the conservative. If an investment shows annualized returns of 10%-12%, maybe you should guesstimate the returns for your purposes at 7%-8%. And don’t expect less risky investments (like bonds and cash) to offer more than 3%-4% — it’s even less right now in some cases. And be prepared for the eventuality that you might not even get that. It is also a good idea to have a back-up plan, just in case you don’t end up meeting your goal on time, and you need a little more time to make things work.

Obviously, I am not “hip”, “cool” or “uptown” in any way, shape or form. I saw this story on CNN Money for a “recession buster” $90 shirt, and blanched. $90 for a shirt is a recession buster?

Yes, I understand that people pay much more than that for custom shirts and other articles of clothing. I, however, am not one of them. My husband and I both believe in the “go to Kohl’s and try on a clearance or sale shirt to see if it fits” mode of shopping. The last time I paid $90 for clothing was when I was in college. I bought a $100 formal black dress. And that was splurging big time for me.

I’m not big into spending money on clothing. However, I am happy to pay for a good meal at a fine restaurant. And I’ll almost always spend whatever it takes to thoroughly enjoy myself when I travel. I guess it’s just a matter of priorities.

What are your spending priorities? Would you spend $90 on a shirt? What would you spend a lot of money on?

image source: jovike via Flickr