Archive for the 'Politics and Legislation' Category

A Ban on Banks Trading for Their Own Profit

Here’s some hopeful news!  Recently, the FDIC announced that it was supporting a proposed rule that would ban the practice of banks trading to make a profit for themselves instead of their clients.  Currently, banks can bet on a risky investment with their own money.  This was the problem in 2008 when the bets the banks chose failed and the tax payers were forced to bail them out.  The rule also helps to limit a bank’s investment in hedge funds – banks would no longer be able to own more than 3 percent.

Any regulations guarding against another financial crisis seems like a needed step – but of course, the proposed rule has its loop holes.  The banking industry is already complaining that the new regulations would be too confusing and complicated.  Others have pointed out stiff rules could stop them from buying and selling the investments that their clients are demanding. Barlett Naylor, a financial policy advocate for the group Public Citizen was quoted as saying, “The regulators are proposing that they will detect the difference between various trades by fishing through complex data provided by the banks after the fact.  This is an invitation for evasion.”

What do you think?  Is this going to help protect us from another financial crisis?  Or do you think it’s just a temporary fix that people can easily take advantage of?

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Wall Street Protests

Three weeks ago, a movement started on Wall Street.  A loosely organized group of people from all different walks of life came to New York to stand up to what they describe as the corporate greed of financial institutions that is causing the high unemployment in the U.S.  By using social networking sites such as Facebook and Twitter, the movement is spreading to other parts of the country – rallies have been planned for Memphis, Tennessee, McAllen, Texas  and Hilo, Hawaii just to name a few.

The crowd consists of anti-capitalists, anarchists, students, parents, business professionals who have been laid off and have no current job options and military members who are facing a bleak future.  The protests may have been loosely planned, but the message is getting out in mass.  People are tired of the current economic situation and are ready to fight.  Between unemployment, tax payer bailouts, astronomical student loan debts and retirement funds being eaten away, it seems that no one is immune from the problem.  Do you think the demonstrations will have an impact?  What do you think it will take to get the attention of the government and corporations?

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Proposed Increase to the Retirement Age

Do you think Social Security will be around for your children or grandchildren?  Senator Tom Carper of Delaware was quoted as saying, “My sons are 21 and 22; neither of them thinks Social Security is around for them.  I want to make sure that it is.”  But how?  Obviously if we knew how to answer this question, it wouldn’t be such a debate!  But the U.S. government has come up with one proposal that is gaining steam – increasing the retirement age.

The current retirement age of 66 was originally set because of the way Americans worked in the early 20th century.  Many of the jobs were factory and other blue collar jobs that were rough on the body.  As time continued and these jobs moved out of the country, Americans made the switch to less physically demanding and more mentally challenging jobs.   Because of the switch, more Americans began living longer lives and had the ability to continue with their jobs for a more years than the physically demanding jobs.  The most popular plan among lawmakers is increasing the retirement age slowly over time.  By year 2050 the proposed retirement age would be 68 and would  increase to 69 by year 2075.  If this becomes reality, the change would affect those born after 1982.  Do you think that an increase to the retirement age is the answer to helping our economy and Social Security?

You can read more about this topic, here.

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Now What?

So, the debt deal has been made, but what does it all mean?  Especially for seniors?  It all seems to still be up in the air.  The bill that was signed into law this week will cut $917 billion in cuts over 10 years, mostly in security and defense spending.  A bipartisan committee has been formed and given the task of finding another $1.5 trillion in cuts in spending by December 23rd.  If they do not find approval or simply cannot come up with the cuts, automated cuts will begin to be triggered.  Where are those cuts coming from?  Medicare seems to be a likely candidate for deep cuts.

So what can you do to protect yourself?  One way is to carefully watch your stocks that involve government financing such as defense and government contractors.  These contractors will likely lose business due to budget cuts in their sectors.  Another tip is deferring your Social Security benefits.  It’s been estimated that for every year you hold off on taking Social Security, you benefits rise by almost eight percent.  And lastly, take advantage of tax deferred retirement savings accounts!  You can read more tips here.

Read more about Social Security benefits and when to begin taking them, here.

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Would a U.S. Default Mean Less Retirement Savings?

The world is waiting to see what the U.S. government will do in the upcoming days regarding a possible default.  Today, the Assistant Secretary of Labor, Phyllis Borzi announced that for retirement plans such as IRA’s and 401ks, a U.S. default would be “very, very disruptive.”  Why is this?  According to Borzi, the likelihood of investors wanting to invest would greatly decline due to fears that they would not be able to easily access their money due to withdrawal restrictions.  Pension funds would also be greatly affected because most of them are required to hold AAA bonds and U.S. treasuries.

Are you worried about your retirement funds if the government defaults?  What are your thoughts on the situation?

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Public Worker’s Benefits Will Most Likely Be Cut in New Jersey

This week, New Jersey lawmakers passed a bill that severely cuts the benefits of government workers and retirees.  This new legislation not only decreases union’s collective bargaining rights, it also raises retirement ages, increases the amount workers must now pay for their health insurance and suspends cost-of-living (COLA) increases to retirees’ pension checks,  The most shocking part of this bill is that it was passed in New Jersey, a state that is typically pro-labor with Democrats controlling both houses of the Legislature.

The move by New Jersey to strip workers of their previous benefits will save the state approximately $132 billion over the next 30 years.  But many argue that the state is fixing the problem by hurting those who have worked hard their entire lives for their state.  What do you think?  Have union’s become out of control and it’s time to reign them back in to help fix budget problems?  Or is this a case of the working class having to bear the brunt of a broken system?

Read more here in the article, “New Jersey Legislature Moves to Cut Benefits for Public Workers.”

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Seniors group sues US HUD over reverse mortgages

Yahoo News, March 8th, 2011

The largest advocacy group
for U.S. seniors sued the Obama administration on Tuesday over
policy changes it says make it easier for older Americans to
lose their home to foreclosure…

Read this article.

Editor’s Notes:  The lawsuit here relates to a change that HUD made in the reverse mortgage program back in 2008.  If a reverse mortgage titleholder dies, and his spouse is not a titleholder on the property, then she will be required to pay off the loan in order to keep the home.  The key point is, however, that she will be required to pay off the entire loan, even if the home is worth less than the balance of the loan at that time.

This violates one of the major provisions of the reverse mortgage program, that homeowners are not required to pay back anything beyond the value of the home, no matter what.  The lawsuit alleges that HUD’s rule changes made this situation possible, and indeed, there’s a number of homeowners who have been foreclosed upon in these exact scenarios.

As always, here at NewRetirement, we aren’t in the business of giving advice, nor of telling people what they should and shouldn’t do with their money.  But if this isn’t evidence that both titleholders should get a reverse mortgage jointly, rather than with only one titleholder on the property, then we don’t know what is.  A single reverse mortgage, leaving a younger spouse without title to the home, is an extremely risky enterprise, and can, theoretically, lead to results like this.

Get more details about the risks and benefits of a Reverse Mortgage

Anger brews over government workers’ benefits

AP Newswire, March 8th, 2011

Pension Envy!  The Next Big Fight/Debate!?

You have probably read about the brouhaha in Wisconsin over
pensions.  More and more state and local governments find that they are not able
to pay for benefits that public employees have been promised.

A recent article from the Associated Press, “Anger brews over
government workers’ benefits,” summarizes the debate.  “At its heart, the issue
is this:  Some public workers get a sweet deal compared to other workers.  And
it’s taxpayers who pay for it.”

And there is mounting evidence that citizens are taking sides
in this debate.  A USA Today/Gallup poll last month found show that Americans
largely side with the employees, though about two in five that want government
pay and benefits reined in.

Read this article

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Reverse Mortgages Face Another Makeover

US News & World Report, March 4th, 2011

Reverse mortgages are set for their second major change in less than a
year. Growing problems with loan defaults—estimated to have increased
in recent years to about 5 percent of all outstanding reverse
mortgages—have prompted regulators at the U.S. Department of Housing
and Urban Development to begin drafting new oversight rules. They
would require loan applicants to demonstrate their ability to pay property taxes
and home insurance premiums on their properties. The rules would apply
to the government’s home equity conversion mortgage (HECM) program,
under which nearly all reverse mortgages are made.

Reverse mortgages have been hailed by supporters as a way for
cash-strapped seniors (the youngest borrower in a household must be at
least 62 years old) to tap a portion of the equity in their homes and
free themselves from future mortgage payments. Under the terms of a
reverse mortgage, the loans are, in effect, paid off to lenders using
the remaining equity in the home that has not been paid to homeowners.
Homeowners can stay in their homes as long as they’re able, even after
these repayments and loan fees have exhausted all of the remaining
equity in the home.

However, the fees for reverse mortgages have been criticized by
consumer groups as too high. And there were past abuses in which
aggressive marketers convinced seniors to take out reverse mortgages
and put the loan proceeds into expensive investments that were not in
their best interest.

Last fall, the Federal Housing Administration—the arm of HUD that
oversees the HECM program—introduced a new HECM Saver loan that
features very low upfront fees. It also pays out a smaller percentage
of a homeowner’s equity than a standard HECM loan. This provides a
larger equity cushion against loan losses and possible claims on the
FHA insurance that provides safeguards to HECM borrowers and lenders.

Now, another large change in the program is under discussion, driven
by the growing number of loans that are in default. While reverse
mortgage borrowers no longer have to make mortgage payments to stay in
their homes, they do have to pay taxes, insurance, and other upkeep expenses.

Read more of this article.

About Reverse Mortgages:
  Reverse mortgages do change as the regulations that support their existence are adjusted by the government in response to pressures and uncovered abuses.  We strongly recommend keeping up to date on the program by getting all the information you can.

A New Credential for Home Care Aides

The New York Times, February 25th, 2011

When the Direct Care Alliance first offered the test that would lead to
becoming a credentialed “personal care and support professional,” Maria
Frank, a 60-year-old home care aide in Nazareth, Pa., signed up.

She didn’t need the certificate to land a job; she’d been on the job
for more than two decades, and for the past 13 years had cared for the
elderly through Home Instead, the national home care franchise. It was
mostly for her own satisfaction that she wanted to pass the test.

“It was hard,” reported Ms. Frank. “It’s a pretty long test.” Two
hours, to be precise. But like 80 percent of the first 100 workers who
took the test in a pilot project, she passed. Her certificate — her
first professional credential — is in the mail.

The Direct Care Alliance,
which represents hands-on employees who care for the elderly and
disabled in facilities and in people’s homes, sees this credentialing
process as key to elevating the home care work force. “These workers
have a lot of knowledge and skills, but they don’t have a way to prove
it,” said Helen Hanson, professional development manager at the
alliance. “The credential is a way to show employers and prospective
employers their professionalism.”

For the elderly and their families, finding competent, caring home
care aides can be a daunting task. Do they go with someone advertising
on Craigslist, hoping her references are reliable? Or hire through an
agency, trusting that it has thoroughly vetted its employees? They’ll
pay more for agency people, but the workers themselves will take home
much less, and agency rules — many prohibit aides from driving their
clients, for instance — may not dovetail with an elder’s needs. Yet
hiring independently, unless an aide is already well known to the
community, can be a scary prospect.

Even the nomenclature is confusing: there are personal care
attendants and home care aides and home health aides. (And one wishes
that the alliance hadn’t selected such a mouthful — “personal care and
support professional” — for its new credential.)

But this is a field that resists standardization. Training and
certification requirements for home care aides remain a hodgepodge.
Thirty-five states regulate home care agencies and set varying
requirements for their workers, said Bill Dombi, vice president for law
at the National Association for Home Care and Hospice, which has also
operated a certification program (currently suspended) for Medicare home
health aides. But 15 have no regulations for agencies. And very few
states regulate individual caregivers at all.

So a national credential for home care workers makes sense. The
welter of state regulations may limit the usefulness of the Direct Care
Alliance’s new testing program, said Marla Lahat, executive director of
Home Care Partners, a nonprofit agency in Washington. Employers must
still hire only a certified nursing assistant to comply with state laws.

But she thought the alliance’s credential could be a big help to
independent aides who don’t work for agencies or to workers in states
without such regulations. “They can say, ‘I’m not just a baby sitter or a
housekeeper. I have skills. I passed a test,’ ” Ms. Lahat said.

Read more of this article.

Long Term Care Insurance:
  If regulation forces standards on long term care givers, then costs are liable to increase even further, making advanced planning even more necessary.  Consider the benefits of long term care insurance at NewRetirement.com



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