Maybe my sense of humor is warped, but I'm cracking up over some of the lines in a new book, 1,001 Things They Won't Tell You, by Jonathan Dahl and the editors of Smart Money magazine. (Workman, $16.95)

We'll let you borrow more than you can afford -- from the college financial aid office.
We'll disconnect you in a heartbeat -- from the utility company
This bottled water is actually tap water - from the gourmet grocer
We're more secretive than the CIA - from the home insurer
Once you'll move in, you'll never see me again - from the home builder

It's hilarious, in a consumers-are-toast sort of way.

I learned something from each one of these statements. And the utility, by the way, will charge you a disconnect and a reconnect fee in addition to just cutting you off.

I'm not much into guides on how to spend money, but this one is good. The subtitle: An Insider's Guide to Spending, Saving, and Living Wisely.

Kudos to anyone who can make consumer battles amusing and turn them into something we can learn from.

> Discuss this entry

It's advantage UK, at least for investors.

Financial advisors in England and the rest of the United Kingdom won't be allowed to receive commissions when selling investments pension or life insurance products, starting in 2012.

The UK's Financial Services Authority, the industry regulator, came to this conclusion as part of its review of the British financial services industry, The Financial Times reported.

Investors will be given a choice: Choose to pay a fee or have the cost of financial advice deducted from m their investment." The amount the advisor receives will be negotiated with the investor.

Harold Evensky, of Evensky & Katz in Coral Gables, doesn't hold out much hope that the same standard will ever be adopted here. But he and a small group of well-known certified financial planners and advisors are trying. They're circulating a petition to get Congress to adopt a "fiduciary standard" for the financial services industry.

Their first demand is that the advisor "put the client's best interest first."

Another plain-language concept in their petition: "Do not mislead clients; provide conspicuous, full and fair disclosure of all important facts."

"It will probably be a while (i.e., never) before we catch up with the investor protection provided investors in the U.K.," Evensky said in an e-mail.

But there's a chance. Congress seems to be in the mood to consider it.

Advisors, it would seem, may be more interested in this idea than ever before. That's considering how much suspicion is circling around their profession, due to the Madoff scandal, trouble in financial products that seemed straightforward (think target-date funds) and generally lousy investment results.

> Discuss this entry

A lawsuit alleges the IBM employees credit union in South Florida caused its members to lose millions by steering them to investments in bonds from a now-bankrupt Georgia finance company that made loans to churches and faith-based organizations.

The claim, made in a lawsuit filed this week in federal district court in West Palm Beach, is against the 85,000-member IBM Southeast Employees Federal Credit Union, which is based in Boca Raton. It has $800 million in assets and 22 branches, according to the credit union's web site.

The suit says the credit union directed members to Wellstone Securities, a broker-dealer that has gone out of business, and that Wellstone recommended members buy bonds issued by Cornerstone Ministries Investments, which is now in liquidation and under investigation by George securities regulators.

"The credit union and its CEO Lary McCants deny the allegations and intend to vigorously defend themselves in court," said its attorney Michael D. Lozoff of Adorno & Yoss in Miami.

He said the suit is one of many where victims of fraud, bad judgment or the troubled economy seek to "recover their losses by imposing blame on the nearest deep pockets."

Three South Florida law firms -- Sallah & Cox in Boca Raton, Dimond, Kaplan & Rothstein in Miami, and Blum & Silver in Boca Raton - filed the suit on behallf of Claudie Schorrig, a retired IBM employee. The suit sees class-action status, for what the attorneys say are "hundreds of victims."

> Discuss this entry

Sorry, I have gotten behind on my blogging. I think I'll blame Bernie.

Here's what I've been writing for the newspaper this week. First, Wednesday's column about a dysfunctional Florida program that aims to help homebuyers but it doesn't have any money or procedures for people to use it. The story is here:
http://tr.im/qwO2

And the second is a screed filled with the the anger of South Floridians at Bernard Madoff. My story about his sentencing is here:
http://tr.im/qwPn

And the third was last Sunday's column, about term life insurance, where rates have been low for years, but premiums are going up soon.
http://tr.im/qwTO

> Discuss this entry

I'm always wary when someone says, "It's different this time."

But maybe it is.

The National Foundaiton for Credit Counseling says one-third of Americans think they'll never be able to afford a home.

Even more telling results from its recent poll: Almost half don't believe owning a home is a good way to build wealth.

What a change that would be from the basic message politicians and the tax code have been sending for years.

What could replace a home as a way to build wealth?

What do you think? Owning a home, does it make sense? Will it ever?

> Discuss this entry

Don't think too much about your retirement.

I know that's the opposite of what most financial advisors say. But I think most people's retirement plans work the other way, surviving on neglect. Which saves them in troubled times, when any pot of money might get raided.

Summertime is the time to set up your account and, well, here's the rest. My most recent commentary from The Nightly Business Report on PBS...

http://tr.im/p3Qf

> Discuss this entry

Florida’s recession is worse than anything this state has seen in more than a half century, when it comes to money in your pocket.

The Bureau of Economic Analysis said Thursday that Florida now has had three consecutive quarters -- a total of nine months -- in which the personal income of state residents has declined.

That hasn’t happened since the BEA began keeping records in 1948. Florida hasn’t even had two consecutive quarters of falling income until now.

Personal income is a measure of all the income to residents of the state. BEA said job losses, low interest rate payments and cuts in dividend income, plus direct pay cuts are to blame for the decline.

“Salaries have taken a drastic hit,” said Jorge Roca, a recruiter for Spherion in the Miami Office. He says it’s not uncommon to see a candidate in a sales position who was making $150,000 in salary plus commission now be offered a position that offers total compensation of $60,000 to $70,000.

The worst period for Floridians’ income in 61 years could have been even worse, had it not been for Social Security, unemployment and other so-called “transfer payments” that held steady.

“Those are very important in all the states because that’s really the only thing supporting personal income these days,” said BEA economist David Lenze.

Florida recorded a 0.9 percent fall in personal income in the first quarter of this year, compared to the fourth quarter of 2008.

The nation as a whole saw personal income fall 0.5 percent. In the fourth quarter, U.S. personal income fell 0.4 percent.

Florida’s first-quarter decline was larger than income cuts in all but seven states.

Expect more of the same for the remainder of this year, experts say. Roca, the recruiter, says the number of jobs to be filled has been growing, but pay levels remain depressed because employers have so many candidates to choose from in the ranks of the unemployed.

> Discuss this entry

Don’t know why so many people don’t seem to know this, but let me correct a misperception.

You may believe that if you sell your home in a short sale, you could be in for a big tax bill – as if getting out from under your old mortgage is the same as actually making some money.

That’s not true, at least when it comes to taxes.

There’s a two-year-old law that allows you to avoid federal income tax on forgiven mortgage debt, such as what you’d have in a short sale or a loan modification, under certain conditions.

The IRS says the Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude from your taxable income:

-Up to $2 million in mortgage debt

-If it’s forgiven between 2007 and 2012

-If the debt t is discharged due to a decline in the home’s value or the taxpayer’s financial condition

-If it was for your principal residence

It’s a break, for those in dire distress.

> Discuss this entry

President Obama’s financial reform proposal, what do you think?

I am all for the Consumer Financial Protection Agency in concept, but the list of what it might do seems weak. I want this board to have true power to shake down financial products and let consumers know what they are and what dangers they pose. From what I see, it looks like this board will primarily require mortgages to be simpler. Not enough consumer protection for me.

I do like that the Securities and Exchange Commission is told to hold stockbrokers to a fiduciary standard when they give advice. That means, brokers would have to put your interests ahead of their own. Right now, under SEC rules, brokers need only recommend something suitable for you. And who defines suitable? If two products are suitable, why not recommend the one that pays the higher commission? Suitability is squishy. A fiduciary standard is a much higher standard. I’d like to see it be the rule, for everyone who dispenses investment advice.

But then again, I come at this from a perspective of people making long-term plans to accomplish their own financial goals. I’m not the take-the-money-and-run type.

To read the Obama adminstration's proposal, go here:
http://www.treasury.gov/news/index1.html

> Discuss this entry

In case you didn't see it, my latest story, about modifying your mortgage....

If you know you’re headed for trouble with your mortgage or you already are there, brace yourself.

It’s a mess for borrowers trying to re-negotiate the terms of their mortgages right now. That’s despite a highly publicized, $75 billion, Obama Administration program that pays lenders to modify loans.

If you need to get a new deal on your mortgage – as millions of people do -- the best thing you can do is to arm yourself with information, about the problems you’ll face and what you can do to get around them.

“People are confused,” said Kevin Walker, president and chief executive officer of MortgageReport.com, a new website that helps borrowers learn if they’re e eligible for loan modifications. “Frankly lenders are still trying to figure out the procedures they’re supposed to follow to implement these programs.”

Not many loans are being modified under the Making Home Affordable program, which was announced in February.

By mid-May, the Treasury Dept. reported that the program had resulted in 55,000 loan modifications so far. Lenders can modify loans on their own, not using the program. Hope Now, an industry coalition that’s trying to combat the flood of foreclosures nationwide, said its members had independently modified 127,000 loans in April and made 143,000 new repayment plans, a record number.

But even those figures combined are a drop in the bucket against the Obama program’s stated goal of helping up to 9 million homeowners refinance or modify their loans.

Nothing has turned back the tidal wave of foreclosures sweeping Florida and the nation. Between January and the end of May, the Center for Responsible Lending estimates that 1 million new foreclosures were filed nationwide. Moody’s Economy.com expects 1.54 million new foreclosures this year, on top of 1.44 million foreclosures last year.

Still, the program is new and some lenders appear to be still kicking its tires.

In South Florida, Allen Robinson, managing partner of First Trust Mortgage Corp., said lenders don’t seem interested in drastically altering mortgages. They aren’t reducing the principal owed, he said, but are cutting rates or extending terms.

And there’s the problem of loan servicers handling a flood of applications. Jessica Cecere of the Consumer Credit Counseling Service of Palm Beach said she thinks fewer than 2 percent of loans are being modified.

“We haven’t necessarily seen a lot of denials, just not a lot of answers,” she said.
Lenders say they’re trying to keep up with the demand, but the number of troubled borrowers is huge and still growing. In April, almost 3 million home loans nationwide were 60 days or more delinquent, according to the Hope Now alliance.

“The pipeline of people requesting loan modifications has grown tremendously since March,” said JP Morgan Chase spokeswoman Nancy Norris.

Lenders and services are making some efforts to meet the demand.

Chase has opened five offices in Florida devoted only to loan modifications, including one in Aventura and one in Miami. Norris said Chase can modify loans from Chase, Washington Mutual and a small lender named EMC. Those loan offices are open evenings and weekends.
Wells Fargo, which owns Wachovia, has put details of the program on a special website devoted to mortgages, www.wellsfargo.com/homeassist.

What can you do if you need to rework your mortgage loan? Here’s some advice:

Get informed

This is easier than you think. Start off at www.makinghomeaffordable.gov, the official Treasury Department web site for the program.

You’ll find such details as you can refinance your loan using the program if you are current on your payments, but if you’ve fallen behind, you’ll need to seek a loan modification.

The site points out that loans that are “underwater” – where the value of the home is less than the current mortgage – can qualify, for loans that are up to 105 percent of the home’s current value. Moody’s Economy.com estimates that up to 15.9 percent of all home loans are “underwater” to some degree this year.

Seriously underwater loans – those where the home’s value has dropped more than 20 to 25 percent – won’t qualify.

Lenders will be given financial incentives to modify loans.

The Treasury says it will share the lender or servicer’s cost of reducing payments to some borrowers, plus it will pay up-front fees of $1,000 for each loan modification and up to $3,000 for
three years for successful modifications

Borrowers have the potential to gain, too. The Treasury can make payments in loan modifications that would reduce the principal owed by up to $5,000 for borrowers who make timely payments for the first five years.

Get Help

Some web sites will show you the terms of the loan modification program and figure out whether you qualify.

One is MortgageReport.com, which comes from the same firm that created SimpleTuition.com, a student loan comparison tool. MortgageReport.com gives borrowers a “diagnosis” for their loans. There is no charge to borrowers, who input their loan amounts and other debts. But users who do qualify for a modification will be provided with a list of lenders. Borrowers can then decide whether to send on their own information.

Another site has the advantage of providing borrowers with a free credit score. Fair Isaac, the company that produces the FICO credit score that is commonly used for mortgages, launched Mortgage ReliefOnline.com in April. The site, which is also free to users, allows you to see if you qualify and then refers you to mortgage counselors

You can also get help the old fashioned way -- by talking to someone.

You can find thousands of U.S. Department of Housing and Urban Development-trained counselors by calling the local consumer credit counseling service or through the federal Hope Now program, 888-995-Hope (4673).

Get your documents together

“Be prepared,” said Dale Vermillion, a mortgage industry consultant and author of Navigating the Mortgage Maze. “Have your credit report available and know your credit score.”
Expect to be asked for copies of recent tax returns or pay stubs, information on your loan and any other loans, including a car loan, student loans and personal debts.

Don’t give up

“The first three or four people (you speak to) don’t have any power at all,” said Ryan Smart, vice president of RightTrack Financial Services, a Delray Beach firm that negotiates loan modifications. “The whole system exists to keep people away. They give you “negotiators” who have no power to negotiate the loans.”
Keep going until you get to someone who does have the power to change your loan.

> Discuss this entry

Students, burdened with big college loans, will be very glad to see June end.

Because starting July 1, there’s a new repayment option on federal student loans that will allow some borrowers to reduce their monthly payments.

According to the Project on Student Debt, the new income-based repayment option pegs what you must pay to income and family size – and cuts debts for those in the lower-income brackets.

“For example, a single person earning $30,000 a year with $30,000 in debt could cut her or his standard monthly payment amount in half. All federal loans made to students are eligible for this program, regardless of when they were taken out, from which lender, whether for graduate or undergraduate study," the Project’s web site reports.

The new provision is part of a 2007 law that will be effective next month.

Another part of that law, already in place, wipes out student debt for many borrowers who have full-time careers in public service and who have been repaying the loan for 10 years.

The public service professions that qualify include: military service, public safety and law enforcement, public health, social work, librarians, college faculty and public defenders.

Debts to those borrowers, when they are wiped out, won’t be taxable, FinAid.org says.

Unfortunately, the income-based repayment option is only available for direct federal student loans, not for the federal student loans made to parents and for private student loans.

You can find more details at:

http://projectonstudentdebt.org/july1-2009.vp.html

and at:
http://www.finaid.org/loans/ibr.phtml

> Discuss this entry

The way I read it, the Obama administration is indeed cracking down on executive pay, but only on the companies or banks that have received TARP money. Those folks can only receive a bonus of up to one-third of their salaries.

But for the rest of the public corporations, the administration is planning to introduce a bill allowing a non-binding shareholder vote on compensation.

So, there’s not much there, is there? Nonbinding votes, saying please don’t hand out millions in bonuses, sent to compensation committees that hand out millions in bonuses?

I don’t think this pay debate will ever go anywhere. Big bonuses will go on.

What do you think?

> Discuss this entry

Got an extra $100,000?

You may need it in retirement to cover health care costs.

Today, the Employee Benefit Research Institute put out some numbers on that pricetag, which many people overlook when planning their retirement.

For a man, retiring in 2009 at age 65, EBRI’s low estimate is between $68,000 and $173,000, depending upon his health needs. For a woman, same situation, the number is $98,000 to $242,000 (they live longer).

If you (or your friends or relatives) are age 55 now and will retire in ten years at 65, the estimates are higher. EBRI projects the savings a man will need will be between $114,000 to $634,000 and a woman, $164,000 to $754,000.

As any senior will tell you, Medicare (for which seniors pay premiums) takes up the bulk of the costs, but all those out-of-pocket expenses for supplemental insurance, co pays and prescriptions add up.

You might think you’ll just ignore this if you’re working and retirement is a distant goal, or even something you think you’ll never reach.

Well, this matters to working people, too. EBRI notes that the main Medicare trust fund is heading toward insolvency in 2017. To address than, one proposal is to raise the payroll taxes workers and their employers together pay to support this fund, from 2.9 percent to 6.78 percent.

And that would make it more difficult to save for your own health care trust fund for retirement.

> Discuss this entry

I'm back from vacation and....

Ready to hear what you think. The issue at hand: The SEC charged Andrew Mozilo and other former high-ranking Countrywide Financial executives with fraud.

What exactly is the alleged fraud? Making subprime loans with a wink and a nod and no attention to what would happen to the borrowers in the end? Not somehow mentioning how loose the lending standards had become? Making so many shaky loans that eventually credit markets blew up? Giving false hope to those who should never have been homeowners? Leaving neighborhoods riddled with foreclosures?

Yes, a list of frauds. Do you have one to add?

All this wasn't exlcusive to Countrywide, of course. And courts will sort it out.

Meanwhile, if you’re interested in catching my next speech about personal finance, it’s at noon tomorrow.

Join me at the Hollywood Chamber of Commerce’s Women Owners, Managers, Executives Network luncheon. .

It’s at Memorial Hospital South, 3600 Washington St., Hollywood. Tickets are $20 for members, $30 for non-members and $40 at the door. 954-923-4000 or www.hollywoodchamber.org.

> Discuss this entry

In case you missed it, here's my column from Sunday:

http://www.sun-sentinel.com/business/yourmoney/sfl-sfl-harriet-bank-safety-0531sbmay31,0,41551.column

Don't know why the subject of FDIC insurance brings up so many questions and calls and confusion. But it does.

So, here is a simple, easy to understand fact sheet, for those who want more:

http://www.fdic.gov/deposit/deposits/DIfactsheet.html

I'll be away the rest of this week, celebrating a few graduations. I'll be posting again next week.

> Discuss this entry

My idea of a personal finance stress test seems to be taking hold.

The concept is to compare your situation now against the worst possible case – a major

illness, a cut in pay, the loss of your job.

That would give you a sense of where you need to get to work – save more, reduce your risks or set up emergency lines of credit, for example.

In my column, I’ve suggested some questions you should ask yourself.

Here are a few other ideas from a reader who calls herself Catwoman. If you have some questions for a personal finance stress test, I’d love to hear ‘em.

She says to ask yourself:

5. How many other people are relying on your income? If you die, do you have a plan in place for those people?

Here are the four most important question I'd ask -- and the answers:
http://blogs.trb.com/business/columnists/brackey/blog/2009/05/could_your_finances_pass_a_str.html:

Here's my column on a personal finance stress test:
http://www.sun-sentinel.com/features/time-money/money/sfl-harriet-money-051709,0,1621410.column
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> Discuss this entry

My favorite part of the credit card legislation passed by the Senate yesterday: If the bill is due on a Sunday or a holiday, no more late fees because your payment arrives the next day.

My last credit card payment was due on both. A Sunday and a holiday. Easter Sunday.

I was mailing it close to the due date and that's when I realized it was impossible to get this bill paid on time. I then took out my old bills. The previous month, the due date was also a Sunday.

So of course I was late. More on that story later.

Here's a sense of how hard it was to get credit card reform moving into law.

“I’ve been in Washington twenty years. For the first 19 we couldn’t even get a committee vote on credit card reform," Ed Mierzwinski, consumer program director of U.S. Public Interest Research Group, said in an email.

I'll write more about the details after this legislation goes back through the House. It looks like it has plenty of good news for consumers.

> Discuss this entry

Consumer prices in South Florida fell by the largest amount in 31 years in April.

Inflation declined at a 0.3 percent annual rate in the Miami-Fort Lauderdale metro area for the year ending in April the Bureau of Labor Statistics reported Friday. The decline was the largest ever in the history of the local consumer price index, which was first released in November, 1978.

The only other time prices in South Florida went down, the BLS said, was in 1986, at an annual rate of 0.1 percent.

Nationwide, consumer prices were essentially flat in April. Over the last year, the consumer price index has fallen 0.7 percent, the largest one-year decline since June, 1957. Nationwide, the annual inflation rate has been negative for two consecutive months, the first such trend since the 1950s.

Inflation essentially has disappeared from South Florida’s economy, in contrast to last year, when prices were growing at annual rates of 4.9 percent to 5.8 percent. South Florida’s annual inflation rate’s recent peak was a 6.1 percent at the start of 2006.

Driving prices down were declining gasoline prices. “Transportation costs, year-over-year, fell by 12.2 percent,” said BLS Economist Stephen Rondone.

But not all prices went down. The category of “other goods and services” in Miami was up 5 percent, primarily because of rising tobacco prices and the cost of other personal care products and services.

Other cities saw even greater declines in consumer prices. The BLS said its measure of inflation fell 3.5 percent on an annual basis in Atlanta, 2.2 percent in Chicago and 1.3 percent in Los Angeles.

The BLS reports a national inflation figure every month. Six times a year, it reports a local figure for the Miami metro area and nine other major cities. The BLS does not measure consumer prices in Palm Beach County.

> Discuss this entry

Four questions for your Personal Finance Stress Test

Ask yourself:

Ignoring your mortgage for the moment, does more than 10 percent of your monthly take home pay go to debt payments – credit cards, home equity loans, student loans?

If it does, that’s high. Work to reduce it.

Now add you mortgage payment to that debt payment. Is the total more than 36 percent of your take-home pay?

That’s when the bells begin to go off. If you have stretched above that number a bit, because your income isn't all that great and home prices are high, your goal should be to get back down below that limit.

If you lost your job, how many months would you be able to live off your savings?

If you answer is, why didn’t you say weeks, this is an issue. Your goal should be to build up an emergency fund that would cover at least three months’ worth of expenses. Or more.

If your pay is cut by 10 percent or if you were forced to go on unpaid leave for a short time, would you still be able to cover your monthly bills?

If you answer is no, then it is clear you are not living on less than you make. And the people who win the savings game do. No matter what your income is, you should not be spending it all.

Do you have some questions of your own you think would fit on this list? Send them to me.

I'm writing a column about everyone doing a stress test on their own balance sheets. Should be interesting.

> Discuss this entry

Four questions for your Personal Finance Stress Test

Ask yourself:

Ignoring your mortgage for the moment, does more than 10 percent of your monthly take home pay go to debt payments – credit cards, home equity loans, student loans?

Now add you mortgage payment to that debt payment. Is the total more than 36 percent of your take-home pay?

If you lost your job, how many months would you be able to live off your savings?

If your pay is cut by 10 percent or if you were forced to go on unpaid leave for a short time, would you still be able to cover your monthly bills?

Tomorrow: I'll answer the questions.

Tell me how you do on this test.

And send me your suggestions for other questions. I'm writing a column about everyone doing a stress test on their own finances Should be interesting.

> Discuss this entry

Another piece of good news:
Consumers borrowing dropped in March, by the largest amount in 18 years.

Are we getting smart or what? No longer adding to our debt, but actually paying it down?

The Federal Reserve report on consumer credit showed that the amount of debt on credit cards dropped 6.8 percent in March, after falling 12.1 percent in February.

Menwhiile, a survey from Mintel, a market research firm, said more than two in five adults say they're using debit cards more offten and credit cards less. They're spending money they actually have..

Wow.

I think spending is beginning to come back, but I hope it will do so slowly, on a more solid foundation than borrowing.

.

> Discuss this entry

Here's something I don't like:

I hear that rates for term life insurance policies at some major carriers are rising.

Term life nsurance has been one of the best bargains around for years. I hope this isn't a major turnaround.

Anybody out there shopping for life insurance and wants to share the experience with me? I plan on writing about it soon.

> Discuss this entry

Good news of the day:

A group of important economists said this morning that the recession is starting to slack off. The National Association for Business Economic survey, which has been going on since 1982, showed the lowest ever reading for industry demand and capital spending four months ago. Now, the indicators are looking better. Not falling at the same rate. Maybe getting down to the bottom of the V in this economic free-fall.

Other good news: The Obama administration, which must be filled with crisis junkies, has found a new disaster it needs to fix: Credit card abuses. Hurray! This one is never going to be resolved by the private sector or by new Fed rules that don’t go into effect until next year. Let’s get going. Consumers need credit cards that work with them. And banks need consumers to be able to pay these debts.

What particular aspect of your credit card bugs you the most? Tell me. Let's make a list of worst business practices. Things cards should never do.

> Discuss this entry

Paycheck news: f you’re feeling a bit more flush, let me explain why.

In the first three months of this year, the median weekly earnings of the 100.4 million still-employed full-time workers around the nation went up. The increase was no great shakes. Just a 2.6 percent rise over the year before, said the Bureau of Labor Statistics Thursday.

But, that came at a time when there was no inflation. None. So workers got a real 2.6 percent increase in pay.

The trend has been going on for six months. In the final quarter of last year, wages rose 4 percent, while inflation was up just 1.6 percent. Workers' real pay rose 2.4 percent.

This is a reversal of recent history, in which paychecks were losing ground. Because as wages went up, inflation went up faster. For example, in the third quarter of 2008, wages went up 3.6 percent but inflation rose 5.3 percent, so real wages fell by 1.7 percent.

That meant you and your paycheck had less purchasing power. More money didn’t add up to much at all. It left the impression that there’s never enough.

With low to no inflation, any perk up in pay is feels good. And it makes a difference in your well-being.

> Discuss this entry

Did you notice a little bump in your paycheck?

Anyone who is part of a double-income couple better watch his or her paycheck closely. This boost now may cost you next April 15

Here's why: Employers started using a new withholding table by April 1. In one of many recent tax law changes, Congress decided to give wage earners an up-to-$400 per person cut in payroll taxes. The plan was to get this money into workers' hands quickly and out into the economy. Rather than wage earners waiting until next year to file their taxes and get the benefit of this tax cut, the plan was to take less out of paychecks starting now.

But, the new withholding tables in some cases cut too much. If that happens to you, you'll have to pay it back next year.

The tax and accounting business of Thomson Reuters looked at the new tables and found that for a husband and wife who both work and who each earn $75,000, the new tables might mean a cut of $1,228 cut in payroll taxes. But their maximum new tax credit is only $800. So next year, they'd have to pay the extra $428 back.

Thomson Reuters says others who might have too little tax withheld include people who work two jobs, people who receive taxable pension payments and teens or others who are claimed as dependents on parents’ or others’ tax returns.

What to do?

If you think you don't have the right amount of tax withheld, look at IRS Publication 919, How Do I Adjust My Tax Withholding, says CCH, a Wolters Kluwer business and a provider of tax, accounting and audit information.

This new tax break isn't available to everyone. It begins to phase out for those whose adjusted gross incomes are more than $75,000 for singles and $150,000 for married couples filing joint returns.

> Discuss this entry

When you're paying, you know how much you're paying, right?

No.

And when it comes to credit cards, when something goes wrong, like a late payment, would you know how long that will hurt your credit?

Nope.

A survey out from TrueCredit.com, a unit of TransUnion, says we're really not well informed at all.

The poll by Zogby International was an online survey of 2,557 adults taken earlier this month. It showed:

Most people have no idea what's a normal interest rate on a credit card. Fully 84% said they don't know the current average interest rate on a credit card. It's 13.6 percent, Bankrate.com reports.

More than half (or 54%) don't know how long a late payment will remain on their credit report. The answer is seven years.

Oh, and, 90 percent believe a credit score is included on a credit report. It isn't. Generally, you have to pay to get it in a separate report, while you can get a credit report for free once a year.

Dismal as the report is, it's a giant flashing arrow to the lesson of the day: Get your credit card facts straight. A little bit of knowledge will help you select the best deal out there.

> Discuss this entry

Are your dreams of retirement gone?
No. No. Don't let that happen.

You can get there. The question is, when you do, will you Sink or Swim? That's what my friend Frank Armstrong III asks in his new book, The Retirement Challenge (FT Press) that he's written with securities attorney Jason Doss.

Frank, a certified financial planner and investment manager, and Doss, who represents clients who have disputes with the financial services industry, have put together a plain-spoken guide that respects your basic intelligence about your own money.

They give you the facts to support your own decision-making. But when a choice is a bad one, they say so.

I first got to know Frank because a long time ago he published a very good investment book online, for free, that anyone could download. "My marketing technique was to supply lots of useful information to the masses. It worked," he says in a new release. He manages more than $400 million.

He's honest, he's straightforward like a former fighter pilot would tend to be and he makes sense.

An example from the book is their discussion of whether to pay off a home mortgage in retirement. Lots of people want to do this. Frank then discloses that if you were his client, you'd be withdrawing your money from his firm's accounts and therefore he'd earn a smaller fee for managing it. So his financial incentive would be to say no, don't take the money.

But he lays out the pros and cons for you to choose. "The answer to whether you should pay off the mortgage depends on how comfortable you are with financial leverage and how much leverage you are willing and financially able to bear."

Credit card debt? Get rid of if Annuities inside an IRA? No. If you're living paycheck-to-paycheck before retirement, don't take a lump sum distribution for your pension.

Good, solid stuff. Excellent book.

The only thing I don’t like about this volume is its online companion web-stie, which comes across as gimmicky. Every web user has preferences and this site to me isn’t as easy to use as it should be.

> Discuss this entry

It's hard enough to understand this financial crisis, much less get a picture of it in your head.

But some folks have tried. Good magazine sponsored a contest asking people to d describe how our financial system managed to blow up. Take a look at some of their graphics here:

> Discuss this entry

President Barack Obama seems to be comfortable telling Americans how to handle their personal finances. A while back, didn't he say it was a good time to buy stocks? And today, he says it's a good time to refinance your mortgage.

This in from AP: "Speaking at the White House, Obama on Thursday emphasized that that average rates on 30-year fixed-rate mortgages have dropped to 4.78 percent. That is the lowest rate on record.

Said the president: "People can really take advantage of this."

(Note to the Chief: When Freddie Mac later on announed the weekly average, it had popped upt o 4.87 [ercemt.)

It's still good rate and it might even go lower in weeks to come.

This chance to grab low rates may not come back around again for a while. At least, while our Financial Advisor-in-Chief is in office.

I wrote about the rush to refinance two weeks ago. You can have a look at my story here:
http://www.sun-sentinel.com/features/home/sfl-flzrefi0328sbmar28,0,8300.story

> Discuss this entry

Oh good grief. The number of home mortgages that are at least 90-days in arrears practically doubled in February compared to the year before in the Miami-Miami Beach-Kendall area. If it's that bad down there, you know it's probably that bad or near as bad in the rest of South Florida. That's according to a survey from First American CoreLogic in a survey released Tuesday.

Also released Tuesday, in the last year, home prices in the Miami metro area fell by 29.4 percent, according to the S&P/Case Shiller Home Price Index.

Hey, like maybe you want to surprise us?

The drumbeat of bad, bad, more bad news is there, but there are faint sounds that some people are actually buying houses. Stuart Miller, head of Lennar, said it Tuesday. People have to live somewhere.

Should we give people more tax breaks for buying? Find a way to funnel them cash?

Is it irresponsible to walk away from a home that's worth less than the mortgage?

What should we do to solve the housing crisis? Put your ideas down in writing and let me know....

.Here are some other posts on this topic. Keep the conversation going.

http://blogs.trb.com/business/columnists/brackey/blog/2009/03/housing_crisis_tell_me_your_so.html

http://blogs.trb.com/business/columnists/brackey/blog/2009/03/solve_the_housing_crisis_chang_1.html

> Discuss this entry

One of the ideas for solving this real estate crisis is to force banks to get real. To lower the amount of many home mortgages.

And how? Attorney Jeffrey Tromberg of the Florida Debt Relief Center in Fort Lauderdale wants to see the bankruptcy law changed. So that judges can force banks to lower the mortgage loan amount.

They can't do that now. Bankruptcy judges can force a change in the mortgage on a vacation home. But the judge can't do anything about the mortgage on a primary residence.

The lenders pretend this "loss" hasn't happened. But South Florida home prices are down, on average, by 45 percent from the 2005 peak. If you borrowed back then, your home is not nearly worth what you paid for it.

"Would someone who bought a stock at $100 and reads the papers today seeing the stock is now at $40 pretend that he still has a $100 asset?" Tromberg asked.

The $60 is gone, whether the investor sells the stock or not.

The Obama administration favors the idea of changing the bankruptcy law, too.

Guess who doesn't like it?

Banks and mortgage lenders.

So tell me what you think? Should banks be forced to lower loan amounts -- to reflect the real value of home mortgages?

> Discuss this entry

What do you think would solve the real estate crisis? That's something i will be talking about on television next month and I'd like to hear your ideas.

I think low mortgage interest rates, now the lowest in almost 60 years, might get things started.
Here's what I wrote about that today:

http://www.sun-sentinel.com/features/home/sfl-flzrefi0328sbmar28,0,8300.story

> Discuss this entry

This just in, from the self-regulatory organization that polices stock brokers...

"Washington, DC — The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Morgan Stanley & Co. $3 million — and ordered it to pay more than $4.2 million in restitution to 90 Rochester, NY-area retirees — to resolve charges that its supervisory system failed to detect and prevent brokers from persuading Eastman Kodak Company and Xerox Corporation employees to take early retirement based upon unrealistic promises of consistently high investment returns and by espousing unsuitable investment strategies."

Which leads me to remember...

Financial Self-Protection Rule Number 67854098&%@#:

Don't take retirement advice from someone who wants to get his hands on your retirement money.

> Discuss this entry

Here’s why I don’t like to write about fraud:

It’s always the same story over and over again.

Somebody with bad intent swindles an investor because the investor didn’t look into the person, the brokerage or the investment. The investor trusted. Asked no others for advice. Didn’t check the background. Assumed because the person was on the radio or in his church that it was all good. Never heard a negative word about the person.

Second reason I don’t like to write about fraud: There’s too much of it. It could be all I ever write about.

Last week, an official with the Securities and Exchange Commission said the SEC has “dozens” of investigations underway, looking for fraud in hedge funds, in derivatives, in mortgages, in homebuilders.

Fraud surrounds us, especially in South Florida, where daily, it seems, court cases and law enforcement officials have a growing, never-ending stream of cases.

Each one is important.

And that’s why, even though I don’t like it, I write fraud stories anyway.
.

> Discuss this entry

Should you refinance your mortgage to take advantage of falling interest rates?
Here are some answers on interest rates and getting a new mortgage.

How low will mortgage interest rates go?

Lots of people are talking about 4 percent, down from today’s 4.98 percent average.
I hope the market will not get locked up, as buyers insist on not refinancing their mortgages until rates fall to 4 percent.

How quickly should you try to grab a better rate?

At least one mortgage broker tells me that the drop will be very swift and short, meaning homeowners should refinance as quickly as possible. But you have to note that the last time the Treasury started buying up bonds, rates fell sharply at first, but drifted downard for more than a month afterward.

Will you qualify?

You can, for up to 105 percent of your home’s current value, under Treasury Department guidelins.

Can you get the deal done?

Mortgage companies and banks have cut and cut staff in the last year and a half. They are at bare bones staffing levels, I’ve heard.
And yet I saw that applications to refinance loans surged 21 percent last week.
So it may not be easy to put in your application, because there may not be enough workers there to handle it.

If you are refinancing, tell me how it's going. I'm working on a story about it and I'd like to chat.

> Discuss this entry

Need help with your taxes?

Internal Revenue Service offices in Miami, Plantation and West Palm Beach will be open to offer help this weekend. For free.

Dozens of volunteer tax assistance sites will also be working Saturday. For a list of Florida volunteer tax program sites and their hours this weekend, click here;

http://www.irs.gov/individuals/article/0,,id=204543,00.html

The IRS will prepare tax returns, for free, for those whose income is $42,000 or less.

Employees will also answer questions and offer advice to those who are having trouble paying their taxes due to the downturn in the economy.

IRS offices normally don’t have weekend hours.

But on Saturday, the South Florida IRS offices that are open from 9 a.m. until 2 p.m. are:

7850 SW 6th Court, Plantation
1700 Palm Beach Lakes Blvd., West Palm Beach
51 SW First Ave., Miami

(Beyond South Florida, the other Florida offices open Saturday are:
2891 Center Pointe Drive, Fort Myers
400 West Bay St., Jacksonville
7410 S. US 1, Port St. Lucie
9450 Koger Blvd, Saint Petersburg
5971 Cattle Ridge Blvd., Sarasota
3848 W. Columbus Drive, Tampa)

> Discuss this entry

The Mortgage Bankers Association reported yesterday that nearly 60 percent of the sub prime loans in Florida in the fourth quarter of 2008 were delinquent or at the start of foreclosure.

Okay, that's it for the even-handed journalist tone.

Six out of ten loans gone bad? And whose fault is that?

I mean, six out of ten Floridians are not unemployed.

So, if they have jobs, what is wrong?

Is it, perhaps, the loans? Or the lenders who made them?

If, six times out of ten, we tried to make a telephone call but the system could not connect, would we accept it? If the lights didn't go on six times out of each ten that we flipped the switch, would we all say, that's not the electric company's fault?

No. We'd grab those companies and say you're part of our structure. We cannot be a civilized developed country unless this works right, unless there's power and telecommunications.

And we can't function with lenders who do not know how to lend.

If I were a banker or a lender, I'd be standing on top of a hill calling for regulating the whole lot of 'em in the mortgage industry. Hey everybody, here are the new rules and we all play by them.

You want to lend to speculators? Go ahead. But charge a high price because you're taking a high risk.

But you don't wreck our system by paying big commissions to someone who can push a loan on to a borrower you know won't be able to repay.

This is a dream but, Could we perhaps find out who made each of those delinquent loans and send them out to cut the weeds down around the house and to bring the full force of the lending institution into a discussion about what can be done at this point? I mean, they talked to them when they made the loan. They can't talk now, when the loan went bad?

Could we go trailing after the bank and lending executives and their bonuses over the last six years and ask them to pay the money back, to stabilize the system today?

Six out of ten loans gone bad? That's the borrowers' fault?

Apparently 22 percent of loans made in Florida are sub prime, more than the national average. And far more have gone bad here than in the rest of the nation.

That's not the sign of a sick industry?

Or, maybe not. Maybe these lenders are amazing good at pinpointing the deadbeats and turning them all into homeowners.

If they're so good at that, it should be cinch to recognize someone who will pay back a loan because they promised to.

Nationalize the banks? Nope. I don't want to own them.

But regulate them. Or what's left of them.

> Discuss this entry

If the government buys into Citicorp, should you?

Sounds like a solid idea.

In concept, what could feel more secure these days? The government picks the winner, backs it up with cash, and probably will be there for a long time to watch over its investment.

And it came in when the price was so low, too. Not too bad.

I don't like the idea, mind you, that we're in this terrible economic situation, where our huge financial institutions are teetering and in need of help.

I don't want to start speculating on who is next, because the list of banks in trouble is very long. Banks everywhere are weak.

The terms aren't entirely clear, as to what will eventually be there for shareholders. And of course, nobody should make a single bet. Any stock you buy should be in the context of a diversified portfolio.

But if it's time to start placing bets on who will be here ten years from now, then my list would begin with any bank the government buys into.

> Discuss this entry

College students, Congress handed you a break in the stimulus bill.

You'll now be able to buy computers and other technology with money from a Section 529 College Savings Plan.

Money in a Section 529 plan can be withdrawn tax-free when it is used for the educational purposes spelled out in the law. Previously, you could only use these funds for tuition, books, room and board and fees, but not for that laptop.

It's not a great big refund check, but it's a break you and your parents can appreciate.

> Discuss this entry

The Senate is handing homebuyers a $15,000 tax break.

This is way bigger than the previous version of a break for homebuyers.
By a voice vote, the Senate decided to hand anyoone, not just first-time homebuyers, a tax credit of up to $15,000 for homes purchased this year. It's still not law yet, but, Wow.

More details later.

The Stimulus bill, which is moving through the Senate, may come up for a vote later on today.

And did you hear there's another tax credit proposed for interest and sales tax on car purchases? That's not as big, but still, we need all the breaks we can get.

> Discuss this entry

You can call me biased, but it's a bias toward trying to do the most good. In terms of personal finance, the most good often comes with time.

If you can get younger workers to save and save seriously about retirement, they have the best chance of achieving their goals, because time can turn small amounts invested into large amounts.

And so, here's a list of smart rules for the 30-ish set, for handling money well, from Kiplinger.com:

http://kiplinger.com/columns/starting/archive/2009/st0121.htm

> Discuss this entry

Let’s look at long-term investors. They’re down, but not as out as you might think.

If you’d owned all the Dow stocks for the five years ending Dec. 31, 2008, you’d be down 5.5 percent for the entire period.
Five-year holders of the Nasdaq index were down 18 percent and of the S&P 500, down 10.5 percent. This is on a total return basis, meaning price changes plus any dividends.

This is supposed to make you feel better.

Because these five-year returns are significantly higher than what happened in the 12 months we just finished.

Last year was all-out awful. The Nasdaq fell almost 41 percent in price alone. S&P, negative 39 percent, the Dow lost 34 percent.

But the addition of time and dividends helps overcome even awful years.

2008 was just one year.

It is so easy to forget, the markets were up four years out of the last five.

If you look at all this on a chart, you’d realize that investors in these three indexes were ahead of the game during those first four – strongly ahead, too, if you were in large-company stocks – before 2008 came along and blew up all their gains or more.

> Discuss this entry

Hey there, aren't you glad 2008 is over?

I certainly am. You can read my take on the market's horrible year in the story posted on SunSentinel.com/business under the headline Suffering a Market Hangover.

If you're looking for how your stock is starting off the new year, I can help. .

You can use the service on the middle of this page, left-hand side. Simpy enter your stock or mutual fund symbol or the name or even part of the name. When you get the symbol or ticker, you can get a report of the current price and a chart of its performance.

Hope it's better than last year.
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> Discuss this entry

How do you pull off a $50 billion ponzi scheme, as the Securities and Exchange Commission alleges? How do you do it with no one seemingly knowing it's going on? Here are my questions:

-Who were Bernard Madoff's clients?

He was running a hedge fund, correct? So his clients should have been deemed to be qualified investors, which, by the SECdefinition, means someone who has a net worth of $1 million or at least annual income of $200,000. The notion of "qualified" is that this person is sophisticated about investments and understands risks. Why then are we hearing from investors who said they didn't understand what they were getting in to?

-Who could understand his statements?

It took The Wall Street Journal about a day to figure out that he couldn't possibly have transacted the volume of options trading that he said he did. So what was on his statements and did anyone ever call up and ask for an explanation?

Steve Pomeranz, a Boca Raton certified financial planner, told me he reviewed Madoff's statements and couldn't make sense of how he could do what he claimed to do.

Why, then, did anyone believe the statements were true? Does complicated equal smart, sophisticated, trustworthy? Not in my book.

-Why were people silent?

Because they were making money. Until now. They thought they had the smartest money manager ever, the one who knew more than anyone else. The one who had the secret to making money when markets were only losing money. It's a fiction. It continues because of secrecy.

It all has an air of a quiet, secretive club where it worked until it didn't.

It does not sound like the kind of investing that an ordinary working schlub does, going down to the broker or telling his employer to put his 401(k) savings into a mutual fund.

Oh yeah, and this one,
Where were the regulators?
No answers there

> Discuss this entry

Congress slipped a big change for Individual Retirement Accounts into the pension bil that passed Thursday.

Lawmakers inserted a provision that would suspend required minimum distributions temporarily. People over age 70 and a half must take a certain amount of money out of their IRA's every year. These required "distributions" have become quite controversial this year, because of how they are calculated.

This provision suspends the required minimum distributions or RMD's next year, for 2009.

Here's why RMD's have suddenly become controversial:

The law says you have to use the value of your account at the end of the prior year and you must take out a certain percentage based on your life expectancy. Retirees were protesting, because almost everyone's portfolio was larger last year than it is now. If they had to take money out based on last year's value, it would be a big hit to what is now a smaller portfolio. If they don't take the RMD, they're still in the hole, because the tax code says they have to pay a penalty of half of the amount that should have been withdrawn.

Watch for President Bush to sign it into law.

The proposal is HR 7327.

> Discuss this entry

Investment News had an article last month reporting that most, seven out of ten, top mutual funds that are actively managed were doing worse than the market.

That means, in the first ten months of the year, if you were paying a manager of your mutual fund to pick stocks for you, the manager was doing worse than the Standard & Poor's 500 index. You could have bought an index fund and probably paid a fraction of what you paid your active manager and lost less money. Because everyone's losing money.

The winners are losing less.
The winners are not the stock pickers.

How are your funds doing? And what do you think of my cousin's idea, that your investment advisor -- your financial planner or stockbroker or whoever -- ought to see his or her pay go down when the investments they chose decline in value?

She's talking about your personal investment advisor. She thinks that person ought to be paid based on performance, not for just showing up.

> Discuss this entry

I'm going to guess that plenty of people will disagree with what I say on The Nightly Business Report tonight. My commentary is about whether people should consider giving securities as holiday gifts this year. So tell me, what do you think? Going to give stock to the kids this year? Watch the Money File segment on WPBT Channel 2. The show airs at 7 p.m.

> Discuss this entry

You want to buy a house but you don’t think you could get a mortgage.
Bad credit? Not much a down payment?
Don’t forget FHA mortgages, one broker pointed out to me recently.
FHA loans can still be had with as little as a 3 percent down payment. And FHA itself doesn’t impose a minimum credit score requirement (although some lenders do). So those who would not qualify for a bank loan may be able to do it this way.
My point: Don’t assume you won’t get financing. It’s tough these days, but not impossible.
And,
Don't forget to send me your personal finance questions at helpline@SunSentinel.com

> Discuss this entry

Good news: Mortgage interest rates did fall again, as expected.

Freddie Mac is reporting the average 30-year, fixed-rate mortgage this week was at 5.53 percent, the lowest rate since Januray.

We've already seen a boom in refinancings, as people rush to cash out of expensive loans or ones that are about to reset to higher rates.

Bet that boom continues.

And look at 15-year, fixed-rate mortgages, they're averaging 5.33 percent, Freddie Mac says. That's the lowest since March.

A year ago, 30-year , fixed-rates were closer to 6.

This would be a great time to refinance, if you qualify.

Consider a 30-year, fixed rate mortgage of $100,000 at 5.5 percent. The principal and interest payment would be $567.79. If that rate were 6 percent, the payment would be $599.56.

The difference is a savings of $381.24 a year.

> Discuss this entry

I'm watching mortgage rates. The Mortgage Bankers Association reported Wednesday that mortgage refinancing activity shot up Thanksgiving week, as interest rates fell. Then bond guru Bill Gross of Pimco went on CNBC and predicted that rates on 30-year mortgages would fall to 4.5 percent as the economy recovers, down from 5.97 percent now. Today, Freddie Mac will tell us what happened to rates in this past week. And that may send even more people off to their lenders to refinance. Might be a good idea for struggling homeowners.

> Discuss this entry

The recession is here to stay. Already longer than the average recession, it will hang around through most of 2009.

“It looks like (the recession) will last at least through the middle of next year,” said Wachovia Corp. Senior Economist Mark Vitner. “Probably it will bottom out then but the recovery process is likely to be very long and agonizing.”

He said that typically after a recession ends, unemployment tends to continue rising for at least a year.

“We are not likely to see a return to good economic times until late 2010 or early 201l,” he said Monday.

Florida, he said. “may take longer than the rest of the country.”

Florida’s recession started about six months earlier than the nation's recession.

University of Florida Economist David Denslow says the state’s economy started declining during the summer of 2007. The National Bureau of Economic Research said yesterday that the nation entered a recession one year ago, last December.

Denslow expects the downturn to continue through 2009. “My guess is we’ll see declining output in the first half of 2009 and essentially flat in the second half,” Denslow said Monday.

Recovery, he says, may come for Florida in the first half of 2010.

> Discuss this entry

My husband and I are living in a small townhouse and we’re debating whether we should buy a house. Together, we earn six figures. From the sale of my previous house, I have saved $100,000 that I want to use for a down payment. But my husband is afraid. He does not want to commit to a larger mortgage right now because he is concerned about the overall economy and the possibility that one of us could lose our income if we got laid off. My feeling is that our financial position is strong. My car is paid off and I have no credit card debt and neither does my husband. He’s supporting one child in college. My only bill is a $7,000 student loan. What should we do? I feel this new home would be an incredible investment.
-Janet Baker

Here are two ideas that may surprise you: You’re assuming you know something that no one can know. And, price is just one part of picking a home.

Let me explain:

You can’t pick the rock-bottom of the housing market or the stock market or anything else. You won’t know until the bottom has been hit and prices begin to bounce up. A house becomes “an incredible investment:” only if you bought low.

But first, lets' get specific.You plan is to take on double the mortgage debt that you have now. You need far more information than just the home price before you decide to act on that plan.

“The smart answer is that there’s a lot of work involved,” said Certified Financial Planner Steve Pomeranz of Pomeranz Financial Management in Boca Raton. . “Fortunately, you can calculate this type of answer.”

Figure out not just the price and the potential mortgage payment, but realize that your property tax bill will go up along with your homeowners insurance premium. Do a “worst case” scenario to see what you could afford if you or your husband lost a job.

Next let’s talk about your cash situation. You have enough to make a substantial down payment. But my concern is, that’s all you have. If you bought this house and a pipe inside broke, it doesn’t sound like you have anything else to handle emergencies. If you buy double the house you have now, the problems that arise will be more expensive than you may expect. “The big issue is what is your overhead going to be relative to your income,” Pomeranz said. “Are you going to be house poor?”

And finally, you have to make this decision based on peace in your home with your husband, which is just as important as the well-established idea that owning a house is a great way to build wealth. At least, that's how it works under normal circumstances.The housing market has been anything but normal for the last couple of years.

There’s no reason to think it will stay this way forever. Just choose carefully, budget very specifically and you’ll come out okay.

Send your personal finance questions to helpline@SunSentinel.com.

> Discuss this entry

Send your question – or your strategies for coping with a financial crisis – to Helpline@SunSentinel.com.

I have my money in a fixed annuity with New York Life. I called the company and they say it is safe, but I’m worried. Should I be?
Bob Bergman, Tamarac.

I retired more than 20 years ago. I have five fixed annuities from Allianz. From what I was told, if the market was bad I probably will not make money, but would not lose my initial capital. I hope they are fairly safe.
-Morton Schwartz

Before considering whether annuities are a “safe” investments, it’s important to understand a little bit about them. An annuity is a contract you buy from an insurance company that promises to make payments to you either immediately or at some time in the future. Usually, people buy them to save for retirement or just as they retire, to ensure that they have regular income.

When you buy an annuity, the financial strength of your insurance company is important. Equally important is the strength of state insurance regulation. Regulatory agencies monitor insurers’ financial health and they will act if a company’s position deteriorates. They step in, demanding the companies shore up their financial position.

If regulation and monitoring don't keep the company strong, there’s a backstop.

In Florida and in all the states, there is a guaranty association. Any insurer who does business in the state must be part of it. If one insurance company fails, the others must pick up the coverage and continue it, up to certain limits.

This does not happen often, but it does happen. You can protect yourself if you know how this works.

First, let’s deal with life insurance and the guaranty association. If your policy is not an annuity but is pure life insurance, then the death benefit is protected up to a $300,000 limit per insured life in Florida. The cash value of life insurance is protected up to $100,000. Those are the Florida guaranty limits for policies issued by companies regulated by the state of Florida and for those policyholders who were Florida residents at the time the insurance company is declared to be insolvent or liquidated.

The limits are per person and per company.

Now, to the question of annuities.

If it is a fixed annuity, the Florida limit is up to $100,000 in cash value for a deferred annuity that is not currently making payments to the policy holder. If the policy is making payments, then up to $300,000 is covered.

If it is a variable annuity, the same limits apply, but you may not be covered for losses caused by a decline in the value of your investments.

The rules depend upon whether your insurance company guarantees your principal. If it does, then the guaranty association covers it. If the principal is not guaranteed, then that would not be covered by the guaranty association, according to William Falck, executive director and general counsel of the Florida Life & Health Insurance Guaranty Association.

If you have an equity indexed annuity, a portion of your interest might also be guaranteed and therefore both principal and that part of the interest would be backed by the guaranty association.

"A good way to remember it is if it's guaranteed by the company, it's likely guaranteed by us," Falck said.

Because the $100,000/$300,000 limits on annuities are also per life and per company, that means, if you had a $100,000 annuity at one company and $100,000 at another, you’d be covered for both policies.

If an insurer gets into serious trouble, the guaranty association liquidates the assets of defunct insurance companies over the years, to get its money back.

State law governs who gets any funds that are recovered. Policyholders have first priority.

And the guaranty funds have in the past reimbursed some policyholders above the guarantee limits, but you shouldn’t count on that happening again.

These can be large, long-winded efforts, too. A huge insurer, Executive Life, became insolvent in 1991 and Falck said the Florida guarantee association expects to be handling payments to policyholders through 2060.

There are two main lessons in all this:

Know that some variable annuities can put you at risk.

And, the best way to stay safe is to stay below the limits.

If you need more insurance than that, buy more than one policy, from different companies, to avoid getting entangled in an insurer’s troubles.

For more information, take a look at www.nolhga.com.

> Discuss this entry

I don't have any wealth to redistribute.

But I do have information that you may find useful.

So here's my idea:

Send me your questions about personal finance. I’ll answer them here, on this blog.
Let’s talk about how you and your money can survive this meltdown.

If you’re trying to make a decision – continue investing in this crazy market or not. If you’re trying to figure out if you’re positioned correctly – what do you think of my asset allocation?

If you’re considering not doing something, like not paying into a college savings account. Or sending the bank the keys to your house because you no longer are paying the mortgage.
.
Give me your tips, too. On what you’re doing to make the best of these tough times.

Put your question into the comment space below or, send it to me in a private email at hjbrackey@SunSentinel.com.

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We're all trying to make it through this economic crisis. The Nightly Business Report on PBS decided to ask its viewers for input. What are some of your best ideas for handling this storm? I discussed those ideas on NBR. Here's the video...

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Any business counting on a pickup in consumer spending should take note: An early peek at consumer confidence among Floridians in October shows that consumers’ outlook is dismal.

The decline was most apparent when pollsters from the University of Florida asked people whether this is a good time to buy an expensive or big-ticket item. That part of the index sank 14 points to an all-time low of 52.

"Florida consumers are becoming increasingly pessimistic about their ability to maintain financial stability," said Chris McCarty, director of UF’s Survey Research Center at the Bureau of Economic and Business, said in a statement.

According to preliminary results of surveys in October, Florida’s consumer confidence index plummeted eight points to 60 in October, almost matching its all-time record low.

When the full survey is completed and released in November, McCarty said he expect the consumer confidence reading to be at or below its record low of 59, which was recorded in June.

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