Reduce or Pause Auto Insurance During Coronavirus? Insure Only One Car?

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Many of us are driving less these days. Nearly all of the major auto insurers are providing some sort of refund – this detailed list suggests an overall average of 15% to 25% back on two months of premiums. But what if you don’t need to use your vehicle for an extended period of time? You might:

  • Reduce your coverage levels to the minimum liability coverage levels required by your state for driving, saving money on premiums but assuming some risk yourself (depending on how much you actually drive).
  • Suspend your coverage as if your car was in storage. This would include liability and collision insurance. You may consider keeping comprehensive insurance to protect against theft, fire, or other damage.
  • Something in between. If you feel like you are driving a lot less, you could do some combination of raising your collision/comprehensive deductibles, dropping only collision coverage, or changing up any of the various options to lower your overall premium.

A common situation might be that a couple owns two cars but only really needs one for a while. Reader Beth shared that she chose to drop the (more expensive) coverage on her newer car while keeping the existing coverage on the older car, thus saving more than 50% on her total bill:

Our family lives in Texas, and we own two cars. Right now because of COVID-19, my husband and I are both working from home and hardly leaving our house, so we do not need both cars. I called our insurance company and temporarily dropped coverage on our newer, more expensive car, which is saving us more than half our 6-month premium. Once the COVID-19 restrictions ease up, we’ll add the second car back on.

[…] We took our newer car off completely and left our older car with the same level of coverage it had beforehand. Allstate said they would happily add the newer car back on whenever we’re ready, and they will simply prorate the amount for however much is left of our 6-month policy.

We are only driving the older car (we drive a couple of times a week right now), and the newer car stays in the garage. Allstate even emailed us a little sign to print off to tape on the steering wheel to remind us to call and reinstate coverage.

I agree with her other advice that the best thing to do is to call your insurance company and explore your options. Mine has always been happy to help me compare a variety of options along with the resulting price changes. If asking about pausing or suspending coverage, you want to make sure it is treated differently than “canceling” coverage, as gaps in coverage can make you look riskier and hike up your future premiums.

As an aside, if you are not going to move your car for a long time, you should looks up tips to prep it for long-term storage. Otherwise, I’d worry that the damage might exceed the insurance savings. Ideally, you would start it up every couple of weeks and drive it for a while on a private driveway.

Note that if your car is under a loan or lease agreement, you may have agreed to maintain a minimum level of coverage that includes both collision and comprehensive coverage. Has anyone else had success in doing this? Or tried and run into problems?

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Do Not Buy List: Healthcare Sharing Ministry As Health Insurance Alternative

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I am creating a “Do Not Buy” list as part of my estate planning to help my family avoid potentially dangerous financial products. These things are not illegal “scams”, but may have hidden risks where it is better to simply avoid them. In addition to equity-indexed universal life Insurance, I am also including health-care sharing ministries (HCSM). The bigger names in this group include Samaritan, Medi-Share, Christian Healthcare Ministries, Trinity/Aliera, and Liberty.

I’ve been reading about these off and on, and they are often mentioned as a cost-saving option for the self-employed and/or those in early retirement. Read this NY Times article It Looks Like Health Insurance, but It’s Not, this Seattle Times article Washington state orders ‘sham’ health-care sharing ministries to halt, and this Consumer Reports article to get some background.

I can definitely see the appeal of the lower monthly costs and the positive feelings from being part of a cooperative community. I can accept that many (but not all) require a strong religious affiliation. I might overlook the fact that they usually don’t cover and basic preventative care like screening exams (mammograms, colonoscopies), flu shots, and other vaccines. However, I cannot accept the following:

  • HCSMs are not health insurance. This also means they are not overseen by state insurance agencies. There no government oversight, nobody to appeal to and have them say “hey that’s not right, you can’t do that”.
  • HCSMs provide no guarantee of payment. Legally, they are just a charity. The ministry looks at each claim and has sole discretion as to whether they want to provide payment.
  • HCSMs do not have to accept or cover pre-existing conditions.
  • HCSMs do not have to cover prescriptions drugs. Read their rules very carefully.
  • HCSMs can cap lifetime payments at relatively low amounts like $250,000. Read their rules very carefully. ACA-compliant health insurance plans have no lifetime limits.

The problem is that by design, yes, MOST people will be satisfied by these programs. MOST people get their bills paid. MOST people can thus leave a positive review. MOST people won’t have an extreme event that requires $500,000 of medical care over time. However, that is not the point of insurance! Insurance is there to protect you from bankruptcy due to a catastrophic event out of your control. Insurance is based on strict contracts, and you should notice that all forms of real insurance (life, health, auto, homeowners, etc) are tightly regulated. What happens if they run into some sort of financial difficulty, perhaps in a recession or from a rogue employee or executive?

Think of the importance of only putting your cash in an FDIC-insured bank or NCUA-insured credit union. The vast, vast majority of the time, banks don’t fail. I’ve never had a bank fail on me. I don’t know anyone who has had money in a truly failed bank where the FDIC had to step in. But I still know that having the proper checks and backstops is important. Sometimes things are great for long time… until they aren’t.

Also, don’t forget that if a healthcare sharing ministry rejects a child’s claims and the family is bankrupt and desperate, they’ll likely end up falling back on taxpayer-funded Medicaid to cover their healthcare needs. Is this how we want the system to work?

My recommendation is to steer clear of all healthcare sharing ministries. I do not doubt that most have good intentions and happy customers, but things can happen that may even be out of their control. HCSMs are charities, not insurance. They can fail as much as any business. Yes, real insurance costs more, but at least you have a clear contract with defined rules and legal options as a backup. If you are my loved one and are reading this, please protect yourself fully and make sure you are buying true health insurance.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Do NOT Buy List: Equity Indexed Universal Life Insurance

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Financial noise is everywhere. I try to be selective and only write about a limited amount of unique, profitable, and actionable information. If I see a bad product, I usually just ignore it and move on. Angry rants are not my thing.

However, I do worry that if something happens to me, my surviving loved ones may not know what to avoid. Therefore, I am adding a DO NOT BUY list as part of my estate planning documents. Simply avoiding the worst things is often a better (and easier) strategy than searching for the absolute best thing.

This WSJ article (paywall?) profiles one of the items on my DNB list: It’s the Hottest Thing in Life Insurance. Are Buyers Aware of the Risks?. I was unaware that indexed universal life (IUL) had grown so much in popularity, now making up 25% of new individual life insurance policies as measured by premium:

A universal life insurance policy combines a death benefit with the ability to build up a policy cash value. An indexed universal life policy is a universal life policy that increases the cash value at a rate tied to the performance of an index, often the S&P 500.

Briefly, here are reasons why I avoid Indexed Universal life insurance products:

  • High fees. In fact, probably multiple layers of fees. They might sound simple, but are actually amazingly complex. Per the WSJ – “We joke that it takes an actuary, an attorney and sometimes an engineer to understand the calculations,” said Billie Resnick, co-author of an American Bar Association book on life insurance.
  • No guaranteed return. You are unlikely to get near the long-term S&P 500 returns. Most IULs have floors which protect you from losses in down years, but return caps which cuts off your return on big up years. Stock market returns are lumpy, but with more big up years than big down years. Historically, protecting against the downside does not help enough to offset missing out on the upside. In addition, they almost always exclude dividends, which means you are guaranteed to miss a significant part of total return. So even if you did magically track the S&P 500 perfectly, you’d still be behind by ~2% due to losing the dividend. You’ll get a smoother ride, but at what cost?
  • Life insurance is better when it is simple and transparent. Ideally, the payout should be a guaranteed amount in exchange (i.e. $1 million cash) for a clearly defined event (i.e. death). When something is simple and transparent, you can easily comparison shop and let market competition create a fair price. IUL policies are again highly complex and nearly impossible to compare side-by-side. Maybe one day this will change, but for now it’s buyer beware.
  • More fine print: Insurers can change the rules after purchase?! Per the WSJ: “Insurers generally retain the contractual right to change these percentages, subject to regulator-approved limits. They also typically can raise the cost of the death benefit, per contractual provisions.” What? Even the floors and cap percentages are subject to change and not guaranteed?
  • In my experience, the loudest supporters of this product tend to be the people who sell them. Why are some things pressured upon you initially as the best thing since sliced bread, but immediately after purchase they become nearly impossible to sell again? The second you buy it, it has lost a huge part of its value. Reminds me of timeshares. Look out for big surrender charges for 10+ years because they have to recover the big upfront commission paid to the salesperson.

I can see how the idea of “stock market-linked returns with less risk” can be attractive, and I would be intrigued if there became some sort of commodity product where multiple companies sold essentially the same thing and competed to drive down prices. However, the current way of selling IULs is too vague and hard to understand for the average customer.

I’m a relatively conservative investor myself, but UILs have all sorts of risks. Side-by-comparisons are hard, so you risk buying a bad version of the product. There is no fixed return, like a fixed annuity. If the stock market tanks, you still risk getting a lousy return. There is a risk the issuer will change the growth rules on you. As with all insurance, the issuer could become insolvent somewhere in there. I prefer my term life insurance policy, as it gives my family a guaranteed fixed payout at a low fixed price after comparing prices side-by-side with several issuers that all offered the exact same product.

My recommendation is simply to steer clear of them all. If you are my loved one and are reading this, my advice is not to buy an indexed universal life policy. Definitely don’t use my hard-earned money to buy one!

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Big List of Free Consumer Data Reports (2/2): See Your Confidential Rental History, Insurance, Retail, & Employment Data

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

magUpdated 2020. Here is the second part of my big list of free consumer reports from over 50 different reporting agencies. The first part included your credit, banking, and subprime lending-related information. This part includes your housing, insurance, and employment history. Request a free copy every 12 months of what these databases have stored about you and are telling prospective landlords, insurers, or employers.

Again, you may not need to check all of these, and many may not even have a file on you anyway. But for example if you are a renter then you’d want to make sure your rental history is clean and correct, or if were applying for life insurance you might check your medical reports.

Based on my situation, I have checked the following reports out of the ones listed below – CLUE Auto, CLUE Property, MIB.com, Milliman IntelliScript.

Rental History

Realpage Consumer Report. Provides tenant screening through their LeasingDesk product, including “the industry’s largest rental payment history database.”

CoreLogic SafeRent. SafeRent provides both tenant and employment screening data, including information regarding landlord tenant and criminal public court records. One free report every 12 months.

Experian RentBureau Rental History Report. “Every 24 hours, Experian RentBureau receives updated rental payment history data from property owners/managers, electronic rent payment services and collection companies and makes that information available immediately to the multifamily industry through our resident screening partners.”

First Advantage Resident History Report. Tenant and employment background checks. One free report every 12 months.

Contemporary Information Corp. CIC provides background checks on prospective tenants and/or employees and contractors for landlords and management companies. Keep records of any rental evictions.

Tenant Data. Provides tenant history reports, including any reported damages, unpaid balances, evictions, lease violations, noise complaints, or unauthorized pets.

Screening Reports, Inc. A national provider of background screening service to the multi-family housing industry.

TransUnion Rental Screening Solutions SmartMove provides tenant credit, eviction, and background checks.

  • MySmartMove.com FAQ page
  • SmartMove will disclose the contents of a criminal and/or credit report retained by SmartMove to an individual who requests a copy of their report. To verify your identity and obtain a copy of your report(s) or dispute any information within that report, please contact customer service at 866-775-0961.

LeasingDesk (Real Page, Inc.) Tenant screening.

Auto and Property Insurance

C.L.U.E. Personal Property Report. A division of LexisNexis, CLUE stands for Comprehensive Loss Underwriting Exchange, which collects information that is used to calculate your insurance premiums. This report provides a seven year history of losses associated with an individual and his/her personal property. Includes date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name. This also means you can find out about previous claims on the house you are currently renting or recently bought, even if they weren’t made by you.

C.L.U.E. Auto Report. This report provides a seven year history of automobile insurance losses associated with an individual. Includes date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.

A-PLUS Loss History Reports, subsidiary of Verisk. ISO stands for Insurance Services Office, A-PLUS stands for Automated Property Loss Underwriting System. Auto and property loss claim history.

Drivers History. Owned by TransUnion. Collects driving violations.

Insurance Information Exchange (IIX), subsidiary of Verisk. Provide reports including your motor vehicle records and driver history, including any traffic violations or related criminal history. May require proof of adverse action to obtain free report.

Utilities

National Consumer Telecom and Utilities Exchange. NCTUE tracks when people don’t pay their phone, cable, or utility bills. One free report every 12 months.

Retail

The Retail Equation. Tracks product return and exchange abuse at retail merchants.

Gaming

VIP Preferred. Tracks consumer data regarding check-cashing at casinos.

Medical History

MIB (previously known as Medical Information Bureau). Run by 470 insurance companies with a “primary mission of detecting and deterring fraud that may occur in the course of obtaining life, health, disability income, critical illness, and long-term care insurance.” They record information of “underwriting significance” like medical conditions or hazardous activities. If you have not applied for individually underwritten life, health, or disability income insurance during the preceding seven year period, then you probably don’t have a record.

Milliman IntelliScript. Tracks your prescription drug purchase history. “Milliman IntelliScript will have prescription information about you only if you authorized the release of your medical records to an insurance company and that company requested that we gather a report on you.”

Employment History

The following companies all offer background screening services for employers. Most will not have any information about you unless you authorized a potential employer to run a background check on you (probably during the application process). Some will not provide you information unless there was adverse action. Otherwise, you can get one free copy every 12 months.

The Work Number (division of Equifax). They also keep historical income records.

Accurate Background, Inc.

American Databank, LLC.

Backgroundchecks.com.

Checkr

EmpInfo

  • EmpInfo.com report request page (scroll down to FCRA section).
  • Generally won’t have a report on everyone, only for people specifically requested by an employer.
  • 800-274-9694

First Advantage Background Check. Tenant and employment background checks. One free report every 12 months.

HireRight, also recently merged with General Information Services (GIS)

Info Cubic.

IntelliCorp

OPENonline

Pre-employ

Professional Screening & Information, Inc.

Sterling Talent Solutions (acquired EmployeeScreenIQ)

PeopleFacts

Truework

Reminder: Also see Part 1: Big List of Free Consumer Reports with Your Credit, Banking, and Payday Lending Data.

Sources: ConsumerFinance.gov, FTC.gov, Wikipedia

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Big List of Free Consumer Data Reports (1/2): See Your Confidential Credit, Banking, and Payday Lending Data

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

magDouble-checked and updated for 2020. Since these are available every 12 months, it is a good idea to check these near or around the same time each year. A lot of companies make their money by collecting and selling data – your personal data. In the past, it was often difficult if not impossible to see what they were telling prospective lenders, landlords, even employers about you. Under the FCRA and/or FACT Act, many consumer reporting agencies (CRAs) are now legally required to send you a free copy of your report every 12 months, as well as provide a way to dispute incorrect information.

Some have an online request form, but some require snail mail with proof of identity. You probably won’t want to bother checking all of them, but if you’ve experienced any sort of rejection or adverse reaction in these areas the cause might be found inside one of these databases. Keep in mind that you may not have a file with all of these places. Requesting a copy of your own consumer reports does not hurt your credit score.

Based on my situation, I have checked the following reports out of the ones listed below – Experian, Equifax, TransUnion, CoreLogic Credco, Chexsystems, and LexisNexis.

Credit-Related

Experian, Equifax, and TransUnion. The three major credit bureaus track your credit accounts, payment history, and other related information like bankrupts and liens. Free copy of each once every 12 months.

You can also now freeze your credit reports for free, but you must contact each bureau separately. For the contact info, please see Big List of Ways To Protect Your Identity: Free Credit Monitoring, Free Credit Locks, and Free Credit Freezes

CoreLogic Credco. One of the largest credit-related CRAs and often used by mortgage lenders, your CoreLogic Credco Consumer File can contain: previous homeownership and mortgage info, rental payment history, any reported delinquencies, and other debt obligations like child support. Free copy once every 12 months.

LexisNexis. One of the largest personal information databases that includes public records, real estate transaction and ownership data, lien, judgment, and bankruptcy records, professional license information, and historical addresses on file. Free copy, must mail in form.

Innovis. A supplementary credit report and identity verification provider. Free copy once every 12 months.

SageStream, LLC (formerly ID Analytics). Per their site, they are a “a credit reporting agency that produces credit reports and scores from our repository of consumer information contributed by a wide array of companies including leading financial services organizations, wireless providers, utilities, retailers, auto lenders and many others” Free copy, must fax or mail in a written form.

Banking-Related

Chexsystems. A consumer information database used by an estimated 80-90% of all banks to help determine the risk of opening new accounts. Think of it as the banks’ version of a credit bureau. If a person commits check fraud or overdraws their account, it will be listed here. In addition, the simple act of opening or closing a bank account may be recorded in their database. Having a negative ChexSystems record can leave you blacklisted from opening bank accounts at most major banks. Free copy once every 12 months. You can now request your report online.

CrossCheck, Inc. Provides check verification services for various industries, including automotive sales and repair, building supply, home improvement, retail, medical, dental, and veterinarian industries.

Global Payments Check Services, Inc. Provides check verification services for various industries.

TeleCheck. Per their site, they provide “industry-leading check acceptance, check processing and risk analytics services to merchants and financial institutions.” One of the major companies that protect businesses and banks from bad checks. Must order by phone or mail.

Certegy Check Services. Per their site, a “check risk management company that provides verification, guarantee and risk analytics to thousands of businesses that choose to accept checks as a form of payment for goods or services.” Clients include check-cashing stores and casinos. Free copy once every 12 months. Must order by phone or mail.

Early Warning Services. A collaboration between a group of big banks including Bank of America, BB&T, Capital One, JPMorgan Chase and Wells Fargo. Provides fraud prevention and risk management in relation to bank accounts and payment transactions. Must order by phone.

Subprime-Related (Payday Lending)

The following companies focus on subprime customers with clients including payday lenders, title loan lenders, rent-to-own stores, and subprime auto loan providers.

Teletrack (affiliated with CoreLogic).

FactorTrust. Free copy once every 12 months. Owned by TransUnion.

Clarity Services, Inc.

DataX Ltd.

Microbilt and subsidiary Payment Reporting Builds Credit (PRBC). Microbilt is a provider of credit data for the “approximately 110 million underserved and underbanked consumers in the United States.” Free copy once every 12 months.

Next up, I will double-check and update Part 2: Rental History, Insurance, & Employment Data.

Sources: ConsumerFinance.gov, FTC.gov, Wikipedia

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Open Enrollment Checklist: HSA, HCFSA, DCFSA, Disability Insurance, Life Insurance

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maxben

We just finished our open enrollment paperwork, and like many other workers we faced a long and confusing list of instructions. They tried to distract me from the increased health insurance premiums by adding a bunch of optional “perks” like universal life insurance and paid identity theft protection. Christine Benz has a thoughtful Checklist for Open Enrollment Season. Here are my own thoughts as I went through the options:

Health Savings Accounts (HSA). Doesn’t “triple tax-free” sound good? HSA contributions are tax-deductible (pre-tax money), they grow tax-free once there, and your withdrawals are tax-free when spent on qualified healthcare expenses. However, you have to be enrolled in a qualified high-deductible health plan (HDHP) to be eligible, which means your higher out-of-pocket costs might not offset the cheaper premium plus upfront tax savings. Depending on your estimated healthcare costs, tax rate, and how much your employer pays, you may be better off with a traditional HMO or PPO plan. A bit of math will be needed.

In order to maximize the HSA’s long-term advantages, you will also want to treat the HSA as an investment account. This means you’ll you need to cover the higher annual out-of-pocket costs yourself and still have money left over to fund the HSA.

Healthcare Flexible Spendings Accounts (HC FSA). I’ve said it before, but these can be a bureaucratic mess. The benefit is “use-it-or-lose it”, but for me it has been “use-it-and-lose-my-mind”. Third-party benefits administrators have given me several bad experiences with submitting my receipts and ensuring they are approved. If it takes me an hour to submit/check/argue/re-submit/check a $50 medical expense, then in my opinion the tax savings of $10 was not worth it at all. But if I don’t follow through, I lose the entire $50. Asymmetric risk in a bad way.

There are also some finer details if you want to have both an HSA and an FSA (look up limited-purpose or post-deductible FSAs).

Dependent Care Flexible Spendings Accounts (DC FSA). These are better. You can have both an HC FSA and a DC FSA as they cover separate things. If you have eligible childcare costs (or adult dependent care), it is quite possible you reach the $5,000 annual maximum. I usually wait until I’ve already paid out $5,000 in preschool tuition, and then I just submit a single receipt for a potential $1,000 tax savings (assuming 20% tax rate on $5,000). Now that’s a good per-hour rate.

Employer-sponsored disability insurance. The best thing about group disability insurance through your employer is that it’s easier to qualify and the cost may be subsidized by your employer. However, if you switch or lose your jobs, you might lose your group disability insurance at the same time. This won’t happen with your own portable plan. Specialized workers can purchase riders that will pay out as long as you can no longer perform your specific occupation (as opposed to any lower-paying job). However, it’s so easy to put this off that getting some employer-sponsored disability insurance can be a good first step.

Life insurance. A common offering is a year of your salary in life insurance. Beyond that, you should always compare with an individual term life insurance plan. That way, if you have a special medical condition that makes your private premium somehow crazy expensive, then you can always fall back on the group plan. For most healthy folks, finding your own portable term life policy will be cheaper and it won’t go away if you lose your job. If you get a 20-year level term policy, your premium also stays fixed for those 20 years. No surprise increases.

Other benefits. The menu seems to expand every year. 401k investment advice. Commuter benefits. Student loan repayment assistance programs. Accidental death and dismemberment (ADD) insurance. Critical illness insurance. Long-term care insurance. Identity theft insurance If it’s free, I’ll take it but in general I decline the ones that require a premium.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Mastercard Free ID Theft Protection and Credit Monitoring

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Data breaches are scary fact of life these days. If you have a Mastercard, did you know that they offer a Mastercard ID Theft Protection service to cardholders for free? If you activate it, Mastercard has paid on your behalf for a private-label identity theft protection service provided by Generali Global Assistance, Inc. (GGA). The same way that Safeway doesn’t actually make their generic version of Cheerios, Mastercard has outsourced this service. Thanks to reader Bill P for the tip.

Services are provided by Generali Global Assistance, Inc. (GGA), one of the largest providers of private-label identity protection services in the United States. GGA has handled thousands of identity-related cases and has protected millions of customers since it began offering the service in 2003. GGA’s in-house identity theft resolution specialists are certified identity theft risk management specialists – CITRMS® certification by the Institute of Consumer Financial Education (ICFE) and FCRA-certification (Fair Credit Reporting Act by the Consumer Data Industry Association).

You’ll receive an alert if there’s a change to your TransUnion credit report (e.g., new inquiries, new accounts, updated personal information by creditors). That’s nice, but I already get more comprehensive coverage from all three bureaus than this from my combination of Credit Sesame, Credit Karma, and FreeCreditScore.

The difference that caught my eye was their emphasis on full-service, human help if you do become a victim of identity theft. Emphasis mine:

This program is designed to help protect you from identity theft and provide full-service, hands-on assistance in the event of an incident. Studies have shown that the largest cost to victims of identity theft is lost time and stress associated with figuring out how to restore their identity, including replacing cards and documents while communicating with creditors to dispute fraudulent activity. In the event of an incident, we will assign you with a personal case manager to help you resolve issues, saving you countless hours and reducing the stress associated with identity theft.

Their package of services includes: identity theft affidavit assistance and submission, creditor notification, dispute and follow-up, 3-bureau fraud alert placement, inform police/legal authorities, placement of credit freeze and opt-out services provided by certified identity theft resolution specialists.

These could be hollow claims, but hopefully they are truly helpful in taking care of these things on your behalf. If you have a Mastercard, it may be another worthwhile service to add to your defenses.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Yes, Health Insurance Costs Impacted My Early Retirement (FIRE) Plans

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health

When the topic of early retirement comes up, a common question is “Are you concerned about health insurance?” I could be a cheerleader and say “nah no big deal”, but to be honest it has impacted my early retirement plans. Not only are the costs high today, but imagine how much higher they will get in the future if current trends continue.

The Kaiser Family Foundation (KFF) released the results of their annual Employer Health Benefits Survey, and the cost of family health coverage in the U.S. now tops $20,000 a year. This is more than a 50% jump from just 10 years ago:

Here’s another chart (same data set) from this Bloomberg article that goes farther back.

If you are single or a couple without kids, here’s a state-by-state map breakdown of the average monthly premium for the lowest Silver plan (per person):

The premium prices listed above don’t include deductibles and out-of-pocket expenses, which are rising as well and add up to another $2,000 per year on average:

Deductibles are rising even faster than premiums, meaning that patients are on the hook for more of their medical costs upfront. For a single person, the average deductible in 2019 was $1,396, up from $533 in 2009. A typical household with employer health coverage spends about $800 a year in out-of-pocket costs, not counting premiums, according to research from the Commonwealth Fund. At the high end of the range, those costs can top $5,000 a year.

Obviously, budgeting another $15,000 to $20,000+ in healthcare costs is going to be a huge factor to consider. Here are the ways that I have seen folks deal with this cost.

  1. Use an Affordable Care Act (ACA) plan and get a subsidy if your income (MAGI) is low enough to qualify. KFF has a very handy ACA subsidy calculator that will help you estimate this. If you live in California, The Finance Buff has some helpful information on the California Health Insurance subsidy. The annoying part is you never know if the rules will change on you down the road.
  2. Plan ahead with a job that offers health insurance benefits after you retire and before Medicare kicks in. You’ll probably have to hunker down with the same employer for a number of years.
  3. Save enough money (or create enough income) to pay for health insurance premiums.
  4. Find a part-time job that you both enjoy and offers health benefits. Employers know that health insurance is expensive, but you can negotiate benefits as part of your total compensation.
  5. Run a part-time side business that earns enough profit to cover health insurance costs. Look for potential group discounts or tax breaks that are available as a business instead of a consumer.
  6. If it works for your situation, try a high-deductible health plan (HDHP) and fund a Health Savings Account (HSA) due to the tax advantages.
  7. Join a direct primary care arrangement or health care sharing ministry that is exempt from ACA.
  8. Extend your current employer coverage for up to 18 months through COBRA (check cost).
  9. Move to a foreign country with reasonable and transparent cash pricing.
  10. Some people have bought short-term health insurance plans, but these are not ACA-compliant “full insurance”. Beware the limitations. Read the horror stories first.
  11. Here’s a person who gave up a promotion and quit her job to qualify for Medicaid.

Right now, we are covered by employer-sponsored health insurance, but for us it is a negotiated part of the total compensation. You can’t expect an employer to keep your same benefits package when you work less than full-time, but you can agree to take less salary in exchange for health insurance. At other times, we have bought health insurance directly. The most recent cost was around $1,600 a month for our family, very close to that $20,000 number. Even if we could qualify for a partial ACA subsidy, we would still be looking at around $10,000 a year in healthcare costs.

The difference with healthcare costs is that once you qualify for Medicare, your costs should hopefully be much less than that $20,000 a year price tag. According to BI, the national average cost for Medigap Plan F is $1,712 annually, or just under $150 a month.

So the amount you have to save to retire early depends on how many years you have until age 65. For us, that’s 25 years so that’s a big number and I don’t see how that doesn’t extend the time you need to be ready for retirement. Health insurance was definitely a factor in us going the more gradual semi-retired route.

Now imagine the overall impact that healthcare costs have on businesses, both big and small. Services and products cost more to make when every employee costs more to insure. I was able to take risks as an entrepreneur because my spouse had health insurance that covered both of us. If I had to keep my family covered with health insurance, I might still be working at MegaCorp. As Warren Buffett has said, “medical costs are the tapeworm of American economic competitiveness”. In the coming years, I wonder how both the healthcare and student loan situations will change, because the current trajectories are unsustainable.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

The Other Side: Reasons Why You Might Not Want To Retire at 40

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Previously, I wrote about how you might consider retiring earlier if you have adequate flexibility to decrease your spending temporarily and/or earning additional money. If you have early good luck with market returns, you will gain many more years of freedom.

Now I’d like to present the other side of that argument. If you retire in your 40s or 50s, there are hopefully many years of fun times ahead of you. However, there is also a higher chance for events that significantly increase your expenses and decrease your ability to earn more money.

Let’s say you and your spouse/life partner are both 40 years old and have saved up $2 million and are pretty confident that you can live off of $60,000 to $80,000 per year. That’s may seem like a lot of money. However, here are some things that can throw a wrench into your plans.

Yourself

  • You may become disabled and become unable to work. Your daily healthcare expenses may also rise significantly.
  • Your spouse may have a health event or pass away prematurely, which will affect your household finances.
  • You may be the subject of a liability lawsuit.
  • There may be an expensive accident – Home fire, theft, fraud.

Many of these situations can be offset by proper insurance. Disability, life, homeowners, long-term car, and/or umbrella liability insurance.

Your spouse (Divorce)

A divorce can be devastating, both emotionally and financially. There are many articles about increasing divorce rates amongst those aged 40+ and 50+. Even if you split your assets equally into two parts, a couple can usually live more efficiently than two individual households. In addition, you may no longer be eligible for the full spousal portion of a pension, healthcare package, and/or Social Security.

Parents, Elderly Relatives and/or Siblings

  • You may have a perfect financial situation, but your parents (or other close family members) may not.
  • You can’t control your parents (or siblings) and their decisions. They may develop dementia, fall for fraud, have substance abuse issues, or simply be bad with money.
  • Some people may be able to easily separate themselves from the responsibility of taking care of their relatives, but many will find it very difficult. Every person’s sense of familial duty is different.
  • Fulfilling what you believe is your responsibility may require great deals of time, energy, and money.
  • Your parents’ ongoing health issues may permanently change your life for decades. See NYT: At 75, Taking Care of Mom, 99: ‘We Did Not Think She Would Live This Long’

Children

  • If you are in your 40s, your kid status is not set in stone. If you don’t have kids, you still might have some. If you already have some, you might have more. Even if you don’t want kids now, you might change your mind. I know of many friends who had at least one kid well into their 40s.
  • Even though kids don’t necessarily need everything they seem to get these days, kids do require significant time, energy, and money.
  • Your child may have special needs. Imagine a multiple of that time, energy, and money.
  • Your child’s special needs may permanently change your life. It may not stop after 18 years.
  • Your child’s special needs may not become apparent until they are 5 months old, 5 years old, or 15 years old.

I may be wrong, but my impression is that early retirees are more likely to be childless than the general population. Perhaps knowing that you have less people to be responsible for makes it easier to take the retirement leap. I strongly believe that you should only have kids if you want to have kids, not because your parents or society wants you to have them. I can’t imagine how I would get through a single day with my kids if I didn’t want to be a parent.

It may be my own personal situation coloring my view, but the 30s, 40s, and 50s feels like the “sandwich decades” where you are most likely to be responsible for both parents and children. Retiring very early may permanently impair your ability to earn any more money, which in turn may be a source of future regret. You can (and should) insure against certain things, but not everything.

My take. Retirement timing is a form of regret minimization. You want to minimize the regret of “I should have retired earlier and had more freedom time”, but also minimize the regret of “I wish I made more money so my limited freedom time is more enjoyable”. It’s hard to find that happy medium where you give yourself enough financial wiggle room while keeping an eye on your mortality.

I started down the path of “semi-retirement” in 2012 with the birth of our first child. “Semi-retirement” is a rather generous take on our reworking of the traditional one full-time working spouse and one full-time parent arrangement so that we were both 50/50. Since then, we have both had the urge to try to live solely off our investments, but we are also keenly aware of the large number of people that we are responsible for caring for. In the end, we’re still both working part-time as that seems to be the solution with most optionality for now.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Safe Deposit Boxes: A Perfect Place to Store Copies Of Important Documents

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The NY Times recently published an article stating Safe Deposit Boxes Aren’t Safe. I was a little disappointed in the article because it was a bit sensational, but I suppose the takeaway is important for folks that made other assumptions. A more accurate headline would be “Safe Deposit Box Contents Aren’t Insured”.

No federal laws require banks to compensate customers for lost property from a safe deposit box. Usually, you have agreed in the rental contract that that maximum liability is on the order of $1,000. Unfortunately, there have been rare cases where folks have lost the contents of your safe deposit box. Natural disasters like fire, flood, or even a movie-style bank robbery have occurred. The NYT article told the story of a man who stored $10 million of rare watches in a safe deposit box and lost them when the bank mistakenly emptied it because it thought the owner stopped paying the rental fees.

If you think about it, why would a bank agree to charge you maybe $100 a year in rental fees, but be responsible for $10 million of property? What if it was $100 million? That doesn’t sound like a good business model. How do they know what you put in there? You could put in a silver Casio and say it was a Patek Philippe. This is the domain of insurance and personal articles policies. Your homeowner’s policy may offer limited coverage on safe deposit box contents, but you can bet they won’t cover $10 million without asking a lot more questions.

Despite this lack of insurance, having access to a small box inside a bank’s vault for $30 a year can still be a great deal. Why not just store copies of valuable documents and photos? The odds of losing the contents are still quite low. Although they have little monetary value on the open market, these items are still quite valuable to me:

  • Copies of identity documents (birth certificates, marriage licenses, Social Security cards, passports)
  • Copies of real estate deeds and auto titles
  • Copies of paper savings bonds
  • Copies of mortgage and other loan documents
  • Copies of insurance policies
  • Copies of your home inventory (paper and digital)
  • Additional digital scans of above?
  • Copies of personal photos on flash drive

The idea is that the important contents of my house are consumed in a fire, I can still rebuild my life. Sometimes things get lost, and most recovery procedures work much more smoothly with a copy of the original. I like having physical documents because flash drives can fail as well.

Some people might argue to keep the original in the safe deposit box and the copies at home. That is certainly debatable. You might even keep some originals in one and the rest in the other. However, I would first make sure you have copies of all important documents in two different, secure locations.

Bottom line. The stuff in your safe deposit box isn’t insured against loss by your bank. If something has a high market value, make sure you insure it independently. Safe deposit box can still be useful for keeping copies of important documents.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

My Money Blog Portfolio Asset Allocation Update, June 2019 (Q2)

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Here’s my portfolio update for the second quarter of 2019. Most of my dividends arrive on a quarterly basis, and this helps me determine where to reinvest them. These are my real-world holdings, including 401k/403b/IRAs, taxable brokerage accounts, and savings bonds but excluding our house, cash reserves, and a few side investments. The goal of this portfolio is to create sustainable income that keeps up with inflation to cover our household expenses for the next (hopefully) 40+ years.

Actual Asset Allocation and Holdings

I use both Personal Capital and a custom Google Spreadsheet to track my investment holdings. The Personal Capital financial tracking app (free, my review) automatically logs into my accounts, adds up my balances, tracks my performance, and calculates my asset allocation. I still use my manual Google Spreadsheet (free, instructions) because it helps me calculate how much I need in each asset class to rebalance back towards my target asset allocation.

Here are my YTD performance and current asset allocation visually, per the “Holdings” and “Allocation” tabs of my Personal Capital account, respectively:

Stock Holdings
Vanguard Total Stock Market Fund (VTI, VTSAX)
Vanguard Total International Stock Market Fund (VXUS, VTIAX)
WisdomTree SmallCap Dividend ETF (DES)
Vanguard Small Value ETF (VBR)
Vanguard Emerging Markets ETF (VWO)
Vanguard REIT Index Fund (VNQ, VGSLX)

Bond Holdings
Vanguard Limited-Term Tax-Exempt Fund (VMLTX, VMLUX)
Vanguard Intermediate-Term Tax-Exempt Fund (VWITX, VWIUX)
Vanguard Intermediate-Term Treasury Fund (VFITX, VFIUX)
Vanguard Inflation-Protected Securities Fund (VIPSX, VAIPX)
Fidelity Inflation-Protected Bond Index Fund (FIPDX)
iShares Barclays TIPS Bond ETF (TIP)
Individual TIPS securities
U.S. Savings Bonds (Series I)

Target Asset Allocation. Our overall goal is to include asset classes that will provide long-term returns above inflation, distribute income via dividends and interest, and finally offer some historical tendencies to balance each other out. I make a small bet that US Small Value and Emerging Markets will have higher future long-term returns (along with some higher volatility) than the more large and broad indexes, although I could be wrong. I don’t hold commodities, gold, or bitcoin as they don’t provide any income and I don’t believe they’ll outpace inflation significantly.

I believe that it is important to imagine an asset class doing poorly for a long time, with bad news constantly surrounding it, and only hold the ones where you still think you can maintain faith based on a solid foundation of knowledge and experience.

Stocks Breakdown

  • 38% US Total Market
  • 7% US Small-Cap Value
  • 38% International Total Market
  • 7% Emerging Markets
  • 10% US Real Estate (REIT)

Bonds Breakdown

  • 50% High-quality, Intermediate-Term Bonds
  • 50% US Treasury Inflation-Protected Bonds

I have settled into a long-term target ratio of 67% stocks and 33% bonds (2:1 ratio) within our investment strategy of buy, hold, and occasionally rebalance. I will use the dividends and interest to rebalance whenever possible in order to avoid taxable gains. (I’m fine with it drifting a bit either way.) With a self-managed, simple portfolio of low-cost funds, we minimize management fees, commissions, and taxes.

Holdings commentary. On the stocks side, everything has had a nice bounce back up since the drop in late 2018. I know that US stocks have beaten international stocks for a while, but I remain satisfied with my mix, knowing that I will own whatever successful businesses come out of the US, China, or wherever in the future.

On the bond side, my primary objective is to hold high-quality bonds with a short-to-intermediate duration of under 5 years or so. This means US Treasuries, TIPS, or investment-grade municipal bonds. I don’t want to worry about my bonds “blowing up”. I then tweak the specific breakdown based on my tax-deferred space available, the tax-effective rates of muni bonds, and the real interest rates of TIPS. Right now, it is roughly 1/3rd Treasuries, 1/3 Muni bonds, and 1/3rd TIPS.

Performance commentary and benchmarks. According to Personal Capital, my portfolio went up 9.9% so far in 2019. I see that during the same period the S&P 500 has gone up over 15%, Foreign Developed stocks up nearly 11%, and the US Aggregate bond index was up nearly 5%.

An alternative benchmark for my portfolio is 50% Vanguard LifeStrategy Growth Fund and 50% Vanguard LifeStrategy Moderate Growth Fund – one is 60/40 and the other is 80/20 so it also works out to 70% stocks and 30% bonds. That benchmark would have a total return of +10.97% for 2019 YTD.

I’ll share about more about the income in a separate post.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

The Personal Finance Index Card: Book Version Differences

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After rediscovering the young adult versions of fitting personal finance advice on an index card, I decided to go back and read the book The Index Card: Why Personal Finance Doesn’t Have to Be Complicated by Helaine Olen and Harold Pollack. (I was able to find it via library eBook.)

I noticed that the book version of the “index card” was slightly different. The original card had 9 items, but two of them were merged away into each other (401k/IRAs) and (Pay Attention to Fees/Buy Index Funds). I bolded the new additions below. (You can see all chapters on the Amazon page.)

  1. Strive to Save 10 to 20 Percent of Your Income
  2. Pay Your Credit Card Balance in Full Every Month
  3. Max Out Your 401(k) and Other Tax-Advantaged Savings Accounts
  4. Never Buy or Sell Individual Stocks
  5. Buy Inexpensive, Well-Diversified Indexed Mutual Funds and ETFs
  6. Make Your Financial Advisor Commit To a Fiduciary Standard
  7. Buy a Home When You Are Financially Ready
  8. Insurance – Make Sure You’re Protected
  9. Do What You Can To Support the Social Safety Net
  10. Remember The Index Card

Here again is the original:

Here are my notes on the newly-addressed topics of home-buying and insurance.

Home-buying. This will always be a hard topic because it mixes in emotion, personal history, peer pressure, and all that fuzzy stuff. If you want to own a home, you need to make sure the purchase won’t blow up your overall financial picture. Nothing really surprising, but still good advice.

  • Get your debt under control first.
  • Save up as close to a 20% down payment as you can.
  • Stick with a 15 or 30 year fixed-rate mortgage.
  • Prioritize what you really want and need in a home. Stay within your budget.
  • Location, location, location.

Insurance. There are low-probability events that can destroy decades of hard work, and that’s why humans invented insurance to spread the risk. Here are their cut-to-the-chase bullet points:

  • Emergency fund – Maintain one!
  • Life insurance – If you’re young(ish), just buy 30-year level term insurance.
  • Property insurance – Raise your deductible as high as you can handle.
  • Health insurance – Always sure you stay in-network.
  • Liability insurance – Coverage for at least twice your net worth.

I’m glad that this book still retained its “quick-and-dirty” nature. No single rule will cover every scenario, but it’s good to have a clear and concise collection of the big points along with just enough explanation that you understand the basic reasoning behind it.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.