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Raiding your retirement accounts can be expensive. Withdrawing money before age 59½ typically triggers income taxes, a 10% federal penalty and — worst of all — the loss of future tax-deferred compounded returns. A 30-year-old who withdraws $1,000 from an individual retirement account or 401(k) could lose more than $11,000 in future retirement money, assuming 7% average annual returns.
In the past, there were a few ways you could avoid the penalty. Congress recently added several more, and some of those exceptions allow you to repay the money within three years. That would allow you to get a refund of the taxes you paid and — best of all — allow the money to start growing again, tax deferred, for your future.
You’re still better off leaving retirement funds alone for retirement, says Erin Itkoe, director of financial planning at Tarbox Family Office, a wealth management firm in Scottsdale, Arizona. If you can’t, though, you could at least limit the damage from taking the money out early, she says.
What you need to know about SECURE 2.0
The new penalty exceptions are part of Secure 2.0, a package of retirement plan changes that Congress passed late last year. Some exceptions are available for your IRA right now, while others take effect in coming years, says David Certner, legislative counsel for AARP. The exceptions also can apply to workplace plans, such as 401(k)s or 403(b)s, but it may require your employer to opt in, so check with your human resources department, Certner says.
However, the repayment option still isn’t available for most penalty exceptions. For example, you can avoid the penalty if you withdraw $10,000 from an IRA for a first-time home purchase or to pay higher education expenses, but you won’t be able to repay the money later and get the taxes refunded.
Disasters, terminal illness and family expansion
One new penalty exception that allows for repayment is for disasters. People who live in a federally declared disaster area and suffer an economic loss can withdraw up to $22,000 penalty-free. Income taxes still have to be paid on the withdrawal but the income can be spread over three years to reduce the potential tax impact. This exemption was made retroactive to Jan. 26, 2021.
Another potentially large exemption with the repayment option is one for terminal illness. Effective this year, the 10% penalty is waived for people whose doctor certifies that they are expected to die within seven years, says Itkoe, who’s also a certified public accountant serving on the American Institute of CPAs’ personal financial planning executive committee. There’s no limit on how much can be withdrawn.
A three-year repayment period also now applies to the penalty exception when you have or adopt a child. This exception allows each parent a $5,000 withdrawal within the 12 months after a child is born or adopted.
Exceptions for domestic abuse and financial emergencies to come
Next year, the 10% penalty is waived for victims of domestic abuse. The penalty-free withdrawal is limited to the lesser of $10,000 or 50% of the account’s value and can be repaid over three years.
Also effective next year is a penalty-free distribution of up to $1,000 for some emergency expenses. People can take one such withdrawal per year if the money is repaid. Otherwise, only one distribution is allowed every three years.
Note that both of these exceptions are “self-certified.” That means you provide a written statement asserting that you meet the requirements without having to supply other documents or proof, says Itkoe.
Other SECURE 2.0 penalty exceptions
A penalty exception to pay for long-term care insurance kicks in for 2026, but it only applies to workplace plans, not IRAs. Note that the withdrawal — which is limited to the lesser of $2,500 or 10% of the account balance — can only be used to pay insurance premiums, not to pay for the actual care, Certner notes.
Secure 2.0 also expanded the “public safety employee” exception for early withdrawals from workplace plans.
In the past, the 10% penalty didn’t apply for withdrawals from workplace plans if the worker left a job in the year they turn 55 or older, or age 50 for public safety employees. Now, private-sector firefighters and state and local corrections officers also can qualify for the public safety exception after they turn 50. In addition, public safety employees with at least 25 years of service with the employer sponsoring the plan can now avoid the penalty regardless of their age.
This is just a summary of the new penalty exceptions. The rules are complex enough that people should consult a tax professional before taking a withdrawal, Itkoe says. The pro also can help file an amended tax return if the withdrawal is repaid.
But no one should assume that the exceptions make retirement plan withdrawals a good idea since most people won’t pay the money back even if they have the option to do so, she says.
“Drawing from a retirement account should always be a last resort,” she says.
Veterans Life Insurance Group policies are a good option for those in the military, and that is why they received an honorable mention for our list of the best life insurance companies in the United States.
If you have ever shopped for life insurance, then you are likely well aware that there are many different variables that you need to be cognizant of before deciding on your coverage. One such factor is ensuring that you will have the proper amount of protection for your needs. This means that your loved ones or beneficiaries will have enough funds for paying final expenses, paying off big debts, or paying ongoing living expenses if or when the unexpected should occur.
It is also important that you have the proper type of insurance coverage. For example, today, there are many different variations of life insurance protection that you can choose from. While this helps insureds in custom choosing coverage to fit their needs, you also don’t want to pick a policy that isn’t suitable for your specific time frame and your possible long-term savings goals.
There is also another criterion that many people may not realize is important – but should. This is ensuring that the company through which the coverage is purchased is strong and stable financially and that it also has a positive reputation for paying out its policyholder claims. The reason that this is essential is because you don’t want to place your loved ones or beneficiaries in the hands of an insurance company that may not make good on its financial promise to pay out – especially in their time of need.
With this in mind, it is always important to do a thorough review of an insurer before moving forward with the purchase of its coverage. One company that had a good, solid reputation in the life insurance industry is Veteran’s Group Life Insurance Company of Valley Forge, Pennsylvania.
The History of Veteran’s Group Life Insurance
Veteran’s Group Life Insurance Company, also known as Veteran’s Life Insurance Company, has somewhat of a long history regarding names, mergers, and acquisitions. Between the years of 1974 and 1980, National Independence Life Insurance Company operated, and then on January 1, 1981, National Independence became Veteran’s Life Insurance Company.
For more than 26 years, Veteran’s Life Insurance Company operated out of Valley Forge, Pennsylvania. Then, on July 1, 2007, Veteran’s Life Insurance Company merged into Stonebridge Life Insurance Company. Stonebridge was headquartered in St. Louis, Missouri. (Previously, Stonebridge Life Insurance Company was known as J.C. Penney Life Insurance Company, from December of 1967 to May of 2002).
Several years after the merger of Stonebridge and Veteran’s, on October 1, 2015, Stonebridge Life Insurance Company merged into Transamerica Life Insurance Company. This company is operated out of Cedar Rapids, Iowa, and it specializes in life insurance, variable life and annuity contracts, and disability insurance coverage.
Veteran’s Group Life Insurance Company Review
Veteran’s Life Insurance Company, when operating, was headquartered in Valley Forge, Pennsylvania. The company offered a variety of coverage products, including life insurance protection.
It also offered personal injury and property damage, recreational vehicles, and accounts receivable. The company also offered auto insurance, outsourcing, and motorcycle insurance to its customers.
Financial Strength, Ratings, and Better Business Bureau Grade
Before the merger of Veteran’s Life Insurance Company, this insurer was rated by A.M. Best Company as an A (Excellent), and it also had an issuer credit rating of a+. As Veteran’s Life Insurance Company has now been disbanded, these ratings are no longer effective.
Concerning Transamerica Life Insurance Company, the following ratings apply:
A+ from A.M. Best
AA- from Fitch
A1 from Moody’s
AA- from Standard & Poor’s
Transamerica Life Insurance Company has been an accredited company through the Better Business Bureau since December 15, 2014. The company has been given the grade of A+, out of an overall grade scale of A+ through F.
Over the past three years, Transamerica has closed 278 complaints with the Better Business Bureau, of which 97 have been closed within the past year. Of these 278 complaints, 196 were having to do with the company’s products and / or services, 41 had to do with the company’s billing and / or collections, 30 had to do with the company’s advertising and / or sales issues, 10 had to do with delivery issues, and 1 had to do with guarantee / warranty issues.
Life Insurance Products Offered Through Veteran’s Group / Transamerica Life Insurance Co.
Transamerica Life Insurance Company provides a wide variety of different life insurance products. These include both term and permanent coverage, as well as accidental death coverage.
Term Life Insurance Coverage
Term life insurance is considered as the most basic type of life insurance coverage. This is because term provides death benefit protection only – and because of this, term can be a very affordable type of life insurance protection.
Transamerica offers several different term life insurance options. These include policies with term limits of 10 years, 15 years, 20 years, 25 years, or 30 years. Coverage can range from a low of $25,000 up to a high of $1 million in face amount. Most of the policies that are offered through Transamerica will require the applicant to undergo a medical exam as a part of the underwriting process.
Term life insurance policies that are offered via Transamerica include the:
Trendsetter Super Series
Trendsetter LB (Living Benefits)
Whole Life Insurance Coverage
Whole life is a type of permanent life insurance protection. This means that the policy offers a death benefit, along with cash value build up. The cash value is allowed to grow tax-deferred, which means that there is no tax that is due each year on the gain, but rather tax is only due at the time of withdrawal.
Both individual and group whole life insurance policies are available through Transamerica. Also, there are whole life insurance policies available through Transamerica with face amounts of between $2,000 and $50,000 that can assist loved ones in paying for final expenses, such as funeral and burial costs.
Universal Life Insurance Coverage
Universal life insurance is another type of permanent life insurance coverage. While universal life offers both a death benefit and a cash value component, this type of coverage is more flexible than whole life insurance. This is because the policyholder, within certain limits, may choose how much of the premium can go towards the death benefit and how much of it can go towards the cash value. In addition, the amount and the frequency of the premium may also be modified, provided that there is a sufficient amount of cash value in the policy.
Variable Universal Life Insurance Coverage
Variable universal life insurance is yet another type of permanent life insurance. Here, too, there is a death benefit and a cash component of the policy. However, the policyholder can invest the cash component in equity investments such as mutual funds – and because of this, the cash has the opportunity to grow substantially due to market movements. It can also, however, lose value due to market risk. With that in mind, it is important to have a good understanding of all of the potential risks involved before purchasing a variable life insurance product.
Final Expense Life Insurance Coverage
Final expense life insurance coverage is also offered through Transamerica Life Insurance Company. While it may be difficult for most people to discuss, end of life expenses can be high – in fact, today, the average funeral can cost upwards of $10,000. This is especially the case when factoring in such expenses as one’s headstone, burial plot, flowers, transportation, and the memorial service itself.
When loved ones do not readily have access to this much money quickly, a final expense life insurance policy can be a good solution to ease financial worries – and to avoid having to dip into savings or other assets to pay these bills.
Transamerica’s final expense life insurance is a whole life insurance policy – which means that it provides a death benefit and a premium amount that is locked in a guaranteed. It also means that there is a cash value component that will provide tax-deferred savings over time.
There are three different final expense policies to choose from through Transamerica. These include the following:
With accidental death insurance, an amount of death benefit is paid out to beneficiaries if an insured die as the result of a covered accident. This benefit will be payable either on its own or in addition to other life insurance coverage.
This type of coverage can also provide benefits in case of a covered accident where the insured loses a limb and / or their vision. The purchase of an accidental death insurance policy does not require a medical exam in order to qualify. This type of coverage may be purchased as a stand-alone policy, or in conjunction with another insurance plan.
There are various options available about accidental death coverage. These include:
Plan A: This policy will pay out a benefit that is equal to $250,000 for a covered accidental death. The benefit will double and payout the amount of $500,000 for common carrier accidents.
Plan B: This plan will pay out a benefit that is equal to $125,000 for a covered death that is accidental in nature. The amount of the benefit will double to the amount of $250,000 for common carrier accidents.@media(min-width:0px)#div-gpt-ad-goodfinancialcents_com-large-mobile-banner-1-0-asloadedmax-width:250px!important;max-height:250px!important
It is important to note that there are some limitations and exclusions included on these policies.
Other Products Offered
In addition to life insurance coverage, Transamerica offers annuities and disability insurance. It also offers dental insurance, long-term care insurance, and Medicare Supplement insurance coverage in order to help seniors from having to pay high out-of-pocket expenses due to Medicare Part A and B coinsurance and deductibles.
How to Find the Best Premium Quotes on Life Insurance Coverage
If you are seeking the best premium quotes on life insurance coverage from Veterans Life Insurance Company, Genworth Life Insurance, or from any life insurance carrier – then it is typically your best course of action to work with either an agency or an independent brokerage that has access to multiple life insurance providers. This is so that you can more directly compare, in an unbiased manner, numerous life insurance policies, benefits, and premium quotes – and from there, you can make the decision as to which one will be the best for you.
We know that purchasing life insurance coverage can often seem a bit overwhelming. There are many variables to be aware of – and there are lots of carriers in the market that you can compare and contrast. It always helps to have a guide to walk you through the process. This is especially the case if you have a specialized situation such as a health condition or if you have been turned down for coverage in the past. But the good news is that today, there are still many options regarding coverage and premium price that may be available to you. So, contact us today – we are here to help.
Las Vegas might have once lured travelers with its gambling halls and affordable $9.99 steak and lobster dinners. However, the Las Vegas Strip of today is a thoroughfare dominated by sprawling luxury resorts — and accompanying hotel bills that almost require a jackpot at a slot machine to offset the financial blow.
MGM Resorts’ Aria Resort & Casino stands out among this wave of newer Las Vegas resorts for being among the first to rely less on a theme (no circus gimmicks, Italian-inspired water features or faux Parisian architecture here, thank you very much). Instead, this glitzy, glassy complex is more about luring in guests with a bevy of bars and restaurants, pools, a spa and, of course, an extensive casino floor.
Aria was one of my favorite places to stay in Las Vegas prior to the pandemic, so I checked in earlier this month to see what’s changed in the last few years. Here’s what it was like to stay there.
CAMERON SPERANCE/THE POINTS GUY
What is the Aria Resort & Casino?
Moving to a stay at Aria following three nights at a conference at Caesars Palace just up the Strip was like experiencing Vegas resort whiplash. That’s no knock against Caesars, but that resort leans heavily into its Roman theme — which certainly keeps the place packed with tourists.
Aria, however, makes a point of not leaning into the various themes its competitors or sister properties embrace, like the Bellagio (Italy’s Lake Como), Paris Las Vegas (France), Luxor (Egypt) or Excalibur (medieval times). Instead, this MGM Resorts-affiliated property is the namesake of Aria Campus — a high-end hotel and casino complex featuring the Aria Resort & Casino, as well as the Aria Sky Suites and Vdara Hotel & Spa. The Shops at Crystals, a luxe shopping mall featuring retailers like Dior and Gucci, connect to the hotel.
While the Aria is on the Las Vegas Strip, it’s set back farther than some of its siblings and competitors. However, the Aria Express Tram connects visitors from Aria and the Shops at Crystals to the Bellagio and Park MGM (both part of MGM Resorts along with Aria).
If Aria did lean into any theme when it first opened in late 2009, it was its high-tech features — something I noticed during my stay amid posters all over the property encouraging guests to text a digital concierge or use a tablet in their room to communicate with staff and make reservations. More on that later.
Related: 17 best hotels in Vegas with suites that are worth it
CAMERON SPERANCE/THE POINTS GUY
How to book the Aria Resort & Casino
Because of the reciprocity between MGM Resorts and Hyatt, there are a variety of ways to book a stay at Aria and earn loyalty points and on-property elite benefits. As a World of Hyatt Explorist member, I booked my Friday and Saturday night stay directly through Hyatt for a Deluxe Strip View King guest room that averaged $435.44 per night, including taxes and fees.
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Room rates are higher on the weekends, but the silver lining is that, because I’m an Explorist, I also have MGM Resorts Gold status when I book directly.
That comes with waived resort fees and an enhanced room upgrade (the staffer at check-in moved me up to the 33rd floor compared to a room on the 21st floor that was initially available), which saved me $90 over the span of my two-night stay. There is also a dedicated check-in counter in the lobby for MGM Gold members and above, which saved me some time upon arrival.
CAMERON SPERANCE/THE POINTS GUY
Luxury on the Strip
The first time I visited Aria years ago, my taxi driver referred to it as “glassy and classy” when she dropped me off at the resort. That moniker still holds as the hotel’s curved glass towers leave an imposing, modern presence among the wide variety of architectural styles that characterize the Las Vegas skyline.
I wouldn’t lump Aria in with the ultra-luxury vibes of the adjacent Waldorf Astoria Las Vegas or the Wynn and Encore resorts farther north on the Strip. However, Aria still has an elevated, less-chaotic vibe than some of the other Las Vegas properties.
CAMERON SPERANCE/THE POINTS GUY
New York’s famed Carbone restaurant and celebrity chef Jean-Georges Vongerichten have venues on the property, and you’ll be hard-pressed to find an affordable meal here save for the food hall and outposts of on-the-go chains like Starbucks and Pressed Juicery. The prices might make your wallet cry, but it certainly adds to an aura of exclusivity lingering around certain parts of the resort.
That said, this is still a Las Vegas resort: There’s plenty of boisterous fun taking place on the casino floor and on Aria’s sprawling pool decks during the daytime.
CAMERON SPERANCE/THE POINTS GUY
Spacious room with a view
I was eager to return to Aria because my last time here was prior to my time as a hotel reviewer. I remember being blown away by the size of the rooms, and that part still rings true.
My panoramic room had ample space for stowing luggage — two closets plus a dedicated, built-in shelf for storage — and a marble bathroom that was great for couples or friends traveling thanks to the double vanity.
CAMERON SPERANCE/THE POINTS GUY
My room featured an incredible, panoramic view of the southern swath of the Las Vegas Strip: The Cosmopolitan, Planet Hollywood, MGM Grand, Vdara, the Waldorf Astoria, Park MGM Las Vegas, Tropicana, Mandalay Bay and Delano were all visible from the room. Also, I work at TPG and am obviously an aviation geek, so I spent quite a while with my flight radar app on my phone and taking in the sights of planes landing and taking off from nearby Harry Reid International Airport (LAS).
The sprawling layout for a non-suite guest room plus the impeccable views put Aria in the higher category of resorts that I’ve stayed at in Vegas. However, the room also showed signs of needing a refresh.
CAMERON SPERANCE/THE POINTS GUY
The room featured a comfy king-size bed and blackout shades that were controlled by a wall-mounted switch (curiously, they could be closed from a nightstand switch but only opened from one out-of-bedside reach in the guest room foyer).
There was a tablet intended for making restaurant reservations and accessing hotel information, but I found it to be terribly glitchy (breakfast options one morning took several minutes to actually appear on the tablet). Google was my friend during this stay more than Aria’s supposedly stellar digital concierge infrastructure.
One of the reading lamp lights wasn’t working, which I thought would have been checked during turnover before my arrival. Additionally, many of the light switches seemed as glitchy as the tablet or didn’t work at all. The hotel room’s TV offered device connectivity, but I stuck to just reading from my phone or laptop.
CAMERON SPERANCE/THE POINTS GUY
There were two large chairs, a workstation and the hotel minibar. However, I could have used a fainting couch after checking out some of the minibar prices. It was nearly $25 for a bag of cashews or almonds. Want a liter of Fiji water? That’ll run you $24.75. I highly recommend grabbing snacks and beverages at the CVS nearby on the other side of the Waldorf Astoria on the Las Vegas Strip.
There was a large soaking tub and shower (Aria uses KiNU products) behind a glass door. I always find these layouts a little pointless because you end up getting the tub wet for no reason when you take a shower. A grip pad on the shower floor would also have been nice, as I was always extra cautious trying not to slip while rinsing off. There’s a separate water closet behind a frosted glass door.
CAMERON SPERANCE/THE POINTS GUY
One of my sink drains was clogged, but I didn’t bother calling maintenance during my stay since the other sink worked perfectly fine — again, something you’d think would have been noted during turnover.
The bathroom lights were a little glitchy in that you’d press a button several times to get the light on in the shower — another slight stand-alone problem that can swell to an overall annoyance at a hotel touting its tech prowess on many advertisements throughout the property.
Overall, I think the hotel is going to need an interior design overhaul in a few years. The furniture and dark wooden cabinetry all felt like they were teetering on the intersection of dated and wear-and-tear, and the linens all seemed dull and in need of replacing (or at least an iron). I know wear and tear are going to inevitably happen at a highly visited hotel in Las Vegas, but a hotel leaning into its luxurious reputation like Aria needs to start thinking about this sooner before long-time guests start looking elsewhere for a stay.
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CAMERON SPERANCE/THE POINTS GUY
Pricey eats and drinks
As the minibar might suggest, mealtime at Aria can be stressful if you’re trying to dine on a budget.
My “affordable” dinner at Din Tai Fung, a famous Taiwanese dumpling and noodle restaurant that opened a Las Vegas outpost at Aria in 2020, came to $92.50 for a yuzu margarita, pork xiao long bao (soup dumplings), steamed shrimp and pork dumplings and spicy noodles. The food, recommended by the very friendly waitress, was delicious, but I felt a little rushed (I was in and out in under 40 minutes). It was fun, however, to watch the chefs make the dumplings in the display kitchen near the host stand at the restaurant.
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CAMERON SPERANCE/THE POINTS GUY
I purposefully didn’t make a reservation at any restaurant ahead of my arrival, as I wanted to see how well the “Fine Dining Priority Reservations” benefit of MGM Gold status worked on a last-minute booking. It didn’t exactly pull miracles for me, as I didn’t find any availability at Carbone or at Salt & Ivy, a clearly popular breakfast spot based on the Saturday brunch wait that rivaled any TSA security line during the holidays. (I recommend just sitting at the bar at Catch just off the lobby for a full breakfast if you’re looking for something heartier than Starbucks.)
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CAMERON SPERANCE/THE POINTS GUY
The check-in agent during my arrival recommended Jean Georges Steakhouse. At the time, I figured he was trying to send me to the most expensive spot at the hotel for dinner (The restaurant is known for being one of the few in the U.S. to serve actual Kobe beef). Alas, it had availability, so I took myself to dinner solo on a Saturday night.
CAMERON SPERANCE/THE POINTS GUY
Let’s say I went the “bargain” route at the luxe restaurant by ordering a $23 wedge salad, a $74 8-ounce filet mignon and a $21 side of crunchy potatoes served with chili yogurt and herbs. By no means was this cheap, but I was surprised to see a gin martini here going for “only” $20 when a glass of 2021 George Pinot Noir Ceremonial went for $25. A scoop of ice cream ($8) and a double espresso ($7) rounded off the meal.
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CAMERON SPERANCE/THE POINTS GUY
Was it worth it? There were certainly some amazing points: The staff was wonderfully attentive without being suffocating, and I loved the variety of four sauces to come with the steak: a habanero sauce, soy miso, barbecue and bearnaise.
That said, I ordered my steak medium and found it to be teetering into the well-done territory — a grilling mishap I’d imagine a patron paying $67 per ounce for the A5 Certified Kobe Beef on the menu wouldn’t be too thrilled by.
Fast casual options that (mostly) won’t break the bank
Since my last visit to Aria, the buffet was replaced by Proper Eats Food Hall. This features a mix of fast-casual options for all taste buds, like Laughing Buddha Ramen, Egghead, Lola’s Burgers, Proper Bar and even a speakeasy: Easy’s Cocktail Lounge.
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CAMERON SPERANCE/THE POINTS GUY
The hotel has signs everywhere noting how easy it is to order via your phone or from a self-service kiosk to cut down on wait times. However, I noticed during peak hours, these features were turned off, and you still had to wait in a long line at Egghead. Again with the tech failures!
I grabbed a burger, fries and soft drink one day at Lola’s for $33.81, including tax and tip. That’s pretty hefty for what’s essentially fast food with no sit-down service, and I knew Aria was getting to me when a voice inside my head said, “Well, that’s not bad, relatively speaking, compared to everything else here.”
To ensure I wasn’t letting the luxury prices go to my head, I ducked into an In-N-Out farther down the Strip before I flew home. A burger, fries and a soft drink there came to only $9.75.
For those in a bit of a rush in the morning, the mobile ordering at Aria’s second-floor Starbucks consistently worked. Also, the Pressed Juicery across the hall is a healthy alternative (though a costly one considering a wellness shot of ginger and lemon juice plus an acai bowl came to $16.50).
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CAMERON SPERANCE/THE POINTS GUY
Fitness and poolside fun
I didn’t book a treatment at the Aria Spa & Salon but passed through every day of my stay en route to the gym. Both spaces are very modern and sleek, and there’s an inviting seating area with a fireplace just outside the gym.
The hotel fitness center overlooking the pool area was spacious and had all the cardio and weightlifting equipment one needs for a variety of workouts. There’s even a rock-climbing wall and bowls filled with chilled towels to cool off post-workout.
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CAMERON SPERANCE/THE POINTS GUY
I came out of the gym each morning just before the pool’s 9 a.m. opening time to an extraordinarily long line of folks jockeying to stake the claim to a lounger outside. This deterred me from checking out the pool daily until mid-afternoon when things calmed down. Aria features three pools; though one is a private pool for Sky Suites guests only.
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I didn’t feel like I was missing out by hanging out at just the “regular” pools both afternoons I ventured down. While you hear a lot about Sin City’s infamous pool parties, Aria’s pool scene was a relaxing spot to read a book, sip on a (tiny) margarita ($21.82) and listen to early 2000s Gwen Stefani music belt out over the speakers.
Related: The best hotel pools in Las Vegas
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Checking out
Aria Resort & Casino arrived at the height of the Great Recession at perhaps a misplaced time. Late 2009 likely wasn’t the best time to launch a luxury casino resort in Las Vegas, but it found success and a following by courting high-end travelers with its glamorous accommodations and restaurants.
The resort is still riding high on luxury, but there are signs a refresh needs to happen sooner than later. After all, nobody wants to stay at the hotel relying on stories of the glory days.
If MGM gets ahead of this now, there will still be plenty of reasons to keep returning to Aria for years to come.
Convinced that Aria is the right property for your next trip to Vegas? You can book here.
Citi announced today that it will let borrowers stay in their homes for six months if they agree to a deed-in-lieu of foreclosure.
In exchange for the deed on their property, homeowners will also get a minimum of $1,000 for relocation assistance and counseling, as well as coverage for certain property expenses if Citi determines the borrower can no longer afford them.
Borrowers must continue to pay utilities on their own, though homeowner’s association and escrow fees will be determined on a case-by-case basis.
So what’s the catch? Well, as part of the agreement, homeowners must maintain the property in its current condition and agree to bi-monthly meetings with relocation specialists.
The upside with a deed-in-lieu of foreclosure is that the borrower is released from the mortgage liability, but the obvious downside is losing their home.
The win for the bank/mortgage lender is avoiding foreclosure costs, and the possible damage/theft to the home that comes with that; the program may also reduce downward pressure on home prices.
The pilot program, which is expected to help as many as 1,000 families in places Texas, Florida, Illinois, Michigan, New Jersey and Ohio, will begin on February 12.
To be eligible for the program, dubbed the “Foreclosure Alternatives Program,” borrowers must be at least 90 days delinquent, occupy the property in question, and hold a first mortgage with clear title owned by CitiMortgage.
Homeowners will only be considered for the program after being evaluated for a permanent loan modification; for those who don’t qualify, CitiMortgage will also explore the possibility of a short sale.
“At CitiMortgage, we’re committed to finding every solution possible to help families facing foreclosure. However, the reality is that not every homeowner has the financial ability to remain in their home,” said Sanjiv Das, CEO of CitiMortgage, in a release.
“The goal of the program is to help homeowners make a smooth transition into the next chapter of their lives. The Foreclosure Alternatives Program is another tool in our ongoing efforts to find creative, innovative ways to help our customers across a variety of difficult financial situations.”
Late last year, mortgage financier Fannie Mae unveiled a foreclosure prevention tool called the “Deed for Lease Program,” which allowed borrowers to lease their homes after agreeing to a deed-in-lieu of foreclosure.
Depending on the loan amount you need and where you’re buying a home in Maine, you may find it difficult to find financing beyond the conforming loan limits. If this is the case, you may need a jumbo loan.
What is a jumbo loan?
So what are jumbo loans in Maine? They are large loans that exceed the loan limits set by the FHFA for conforming loans. Jumbo loans allow borrowers to finance homes that exceed the conforming loan limit (CLL), making it possible to buy high-end properties that may not be otherwise affordable.
If you’re considering purchasing a home that requires financing beyond the CLL, then you’ll need to apply for a jumbo loan. It’s important for homebuyers to understand the requirements and implications of obtaining a jumbo loan in Maine. For instance, borrowers typically need a higher credit score and a larger down payment to qualify for a jumbo loan.
What is the jumbo loan limit in Maine?
In Maine, the conforming loan limit is $726,200 across all counties. For example, the conforming loan limit in Cumberland County is $726,200, so any mortgage that surpasses the loan limit designated for your county by even one dollar is classified as a jumbo loan.
As a reminder, the loan amount is what determines whether or not you’ll need a jumbo loan, not the price of the home. So, if you were to put $50,000 down on a $750,000 home in Cumberland County, the mortgage would be $700,000, which is under the conforming loan limit for this area. In this case, your loan wouldn’t be considered a jumbo loan.
To identify the conforming loan limits where you’re considering buying a home in Maine, check out this FHFA map.
What are the requirements for a jumbo loan in Maine?
Borrowers must meet stricter requirements to qualify for a jumbo loan than they would for a conforming loan. The specific requirements can vary from lender to lender, but below are the typical requirements for borrowers seeking a jumbo loan in Maine.
Higher credit score: To qualify for a jumbo loan, borrowers typically need to have a credit score of at least 720. However, some lenders may be willing to accept scores as low as 660, although less frequently. A higher credit score demonstrates a borrower’s ability to manage credit responsibly and is a crucial factor that lenders evaluate when reviewing jumbo loan applications.
Larger down payment: Jumbo loans are a popular financing option for homebuyers looking to buy high-value homes. However, compared to conventional loans, jumbo loans typically require a larger down payment. While the exact amount varies depending on the lender and the borrower’s financial profile, down payment requirements for jumbo loans can be as high as 20% or more. It’s worth noting that putting down a larger sum upfront can often help borrowers secure a better interest rate on their jumbo loan.
More assets: To qualify for a jumbo loan, lenders require borrowers to demonstrate that they have sufficient liquid assets or savings to cover at least one year of loan payments. The exact amount of assets needed can vary depending on the lender and the size of the loan, but having more assets can increase the chances of approval and potentially lead to better terms and interest rates.
Lower debt-to-income ratio (DTI): To qualify for a jumbo loan in Maine, lenders typically look for a debt-to-income (DTI) ratio of no higher than 43%, and ideally closer to 36%. The DTI is calculated by dividing the sum of all monthly debt payments by the borrower’s gross monthly income. This requirement ensures that borrowers have a strong ability to repay their loan and manage their debt.
Additional home appraisals: For a jumbo loan, your mortgage lender may require a second appraisal to ensure that the property’s value is accurate. This is particularly true in regions where there are few comparable home sales. The additional appraisal acts as a second opinion and helps the lender to mitigate their risk. It’s important to note that the cost of another appraisal may be higher than a typical home appraisal, particularly in areas with fewer sales.
Choosing to adopt a child is an exciting milestone in life, but it’s also one that takes a lot of planning and effort. Future adoptive parents can opt for either a domestic adoption or international adoption, but there are a lot of differentiating factors that may influence the decision.
If you’re considering adoption, you’ll want to understand the distinctions between domestic and international adoptions, from the process and timeline to the costs involved, so you can decide what’s best for you.
The Domestic Adoption Process
One of the major advantages of choosing a domestic adoption is that you have the potential to adopt a newborn. However, the timeline is not set in stone and may depend on whether you opt for an open, semi-open, or closed adoption. Most domestic adoptions are considered at least “semi-open.”
Depending on the agency you work with, you may need to be chosen by a birth mother based on your profile. Once you’re selected, the timing depends on the expected (and actual) due date. The process usually takes a few months. Typically, you get access to the child’s medical records as well as the birth mother’s family history.
An open adoption also allows some contact and conversations with the birth mother before the baby is born. In a semi-open adoption, personally revealing information is withheld between the adoptive parents and the birth mother.
Once the baby is born and you officially adopt the child, the adoption agency may facilitate sending updates to the birth mother, as well as pictures so she can see the baby is well taken care of.
Domestic Adoption Eligibility Requirements
American adoption requirements vary by state and by the adoption agency you choose to work with. Generally, you must be at least 18 years old, and there’s often a minimum age difference required between you and the child.
Most states allow domestic adoptions regardless of marital status; parents can be married, single, divorced, or widowed and still qualify.
Explore your state and city adoption websites for more details on additional requirements unique to your area.
The International Adoption Process
International adoption, thanks to rules and clearances, typically will not involve a newborn, so you’ll need to be open to welcoming an older baby or toddler to your home.
With international adoption, there are issues that could affect your ability to adopt, even in the middle of the process. New international laws and relations between the United States and other countries have the potential to derail families who are in the middle of an adoption. The process varies by country but typically takes between 1.5 and 2.5 years.
While you can find out about the child’s medical history, you likely won’t know anything about the family history. Once you adopt a child from abroad, you won’t have any contact with the birth family.
International Adoption Eligibility Requirements
Each country has its own eligibility requirements for adoptive parents, which are typically much stricter than domestic requirements. Often you’ll need to meet income requirements, which may include a higher amount if you already have children. Some countries also have net worth requirements.
In addition, you may discover that some countries restrict the type of families that are allowed to adopt from there. For example, some only offer adoption to married couples or single women.
These rules vary by country, and there are some countries, such as Colombia, that allow single men and same-sex partners to adopt.
International vs Domestic Adoption Costs
The costs vary greatly with both international and domestic adoptions, but the common thread is that it can be expensive if you’re not adopting a foster child.
For international adoptions, expect to pay anywhere from $20,000 to $50,000, depending on the country.
In South Korea, for example, adoptions may cost between $32,000 – $38,000. In China, the range is $35,000 to $40,000. Adoptions from India may span $21,000 to $25,000.
Choosing an international adoption also requires you to travel to the country (often more than once) in advance of actually adopting your child.
Domestic adoptions through a private agency may cost between $30,000 and $60,000.
It is much less expensive, and potentially even free, to adopt through foster care. However, as a foster parent, your goal is to help reunite the child with the existing family. Adoption may become an option, but it is not the primary objective.
Recommended: Common Financial Mistakes First-Time Parents Make
Funding Options for Adoptions
Adoption costs are often out of reach for many U.S. families. But even if you can’t tap into your savings (or don’t want to), you can explore other options for funding your adoption.
Recommended: 5 Tips for Saving for a Baby
Employer Benefits
Some companies offer adoption assistance funds as part of their employee benefits packages. In addition, about 34% of employers offer paid adoption leave and 25% provide paid foster child leave. This provides flexibility to transition when a new family member arrives.
You may want to check with your HR department to make sure you don’t miss out any adoption benefits offered by your company.
Adoption Federal Tax Credit
The federal government provides some tax benefits for adoptions. First, if you use employer benefit funds to pay for the adoption, that money is excluded from your income so you don’t have to pay federal taxes on it.
The tax code also offers an adoption tax credit that can help offset some of the costs involved in adoption, whether you adopt for a domestic or international adoption. Qualified adoption expenses include things like adoption fees, legal costs, and travel expenses.
The tax credit amount changes every year, so it’s a good idea to talk to an accountant for more specifics.
There are income limits for qualifying for both the tax exclusion and credit.
Friends and Family
Many adoptive parents ask friends and family members for financial support when starting the adoption process. You could even start a crowdfunding campaign as a way for your broader community to donate to your adoption fund.
Hopeful parents may want to include a compelling personal story about the path to adoption to help draw in potential donors from their community.
Just remember that if you use a crowdfunding platform, you generally have to pay fees taken out of the money you’ve raised. This usually ranges from 3% to 8% when including both fundraising fees and processing fees.
Recommended: New Parent’s Guide to Setting Up a Will
Personal Loan
Another option for financing your domestic or international adoption is with an unsecured personal loan.
This type of loan typically comes with a fixed interest rate and repayment period, which allows you to make a set monthly payment over a set number of years.
You’ll need good credit to qualify for the best interest rates. Lenders may also take your debt-to-income ratio into consideration. You may qualify for a larger loan amount if your existing debt is low compared to your monthly income.
Sometimes referred to as an adoption loan, the proceeds from this type of loan can be used for just about anything. That means not just the agency and legal fees but also soft costs like travel and meals, which can get expensive if you’re adopting from abroad.
The Takeaway
Choosing to adopt a child can be life-changing, but an international or domestic adoption usually carries a high price tag. Fortunately, with tax benefits and funding options available, you can worry less about how to pay for all of the costs associated with the process and focus more on the joy of growing your family.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.
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Mortgage rates are basically flat again today. The Fed meeting, although not a major policy event, is still in focus for financial market participants right now.
You never know what will happen in the Eccles Building so we could see rates adjust tomorrow when the concluding statement is issued. Read on for more details.
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Market Outlook 4.30.17 from Total Mortgage on Vimeo.
Where are mortgage rates going?
Rates move sideways as Fed meeting begins
The Federal Open Market Committee kicks off its two-day meeting today.
Financial market participants are moving slightly out of bonds and into stocks ahead of the event, pushing up Treasury yields.
The yield on the 10-year Treasury note, which is the best market indicator of where mortgage rates are going, is up a couple basis points to 2.96%.
Mortgage rates tend to follow in the footsteps of the 10-year yield, so we’re seeing some mild upward pressure today.
While the Fed meeting is certainly on investors’ radar, there’s no reason to expect a massive swing in rates tomorrow afternoon.
It’s virtually guaranteed that the FOMC members will vote to keep the nation’s benchmark interest rate, the federal funds rate, unchanged from the prior meeting.
In fact, the language and tone are both expected to be little changed from the previous meeting.
Rate/Float Recommendation
Lock now before rates rise
Mortgage rates are holding at some of the highest levels of the year, but they are poised to continue moving higher.
If you’re considering buying a home or refinancing your current mortgage, it’s more likely right now that rates will rise than fall, so you’re best bet would be to lock in a rate soon.
Learn what you can do to get the best interest rate possible.
Today’s economic data:
FOMC Meeting Begins
The Federal Open Market Committee will begin a two-day meeting today. The event will end tomorrow with a written announcement out at 2pm.
PMI Manufacturing Index
The PMI Manufacturing Index hit a 56.5 for April.
ISM Mfg Index
The ISM Mfg Index came in at a 57.3 for April.
Construction Spending
Construction spending fell 1.7% month over month, putting it up 3.6% year over year.
Notable events this week:
Monday:
Personal Income and Outlays
Chicago PMI
Pending Home Sales Index
Dallas Fed Mfg Survey
Tuesday:
FOMC Meeting Begins
PMI Manufacturing Index
ISM Mfg Index
Construction Spending
Wednesday:
ADP Employment Report
EIA Petroleum Status Report
FOMC Meeting Ends
Thursday:
International Trade
Jobless Claims
Productivity and Costs
PMI Services Index
Factory Orders
ISM Non-Mfg Index
Friday:
Employment Situation
Fedspeak
*Terms and conditions apply.
Carter Wessman
Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.
In an effort to get a pulse on the industry and learn more about the tools available to help real estate agents grow their businesses, I sat down with Robert (Bob) Burns, Real Estate Coach, Trainer and Consultant with Leader’s Edge Training, to discuss the resources they offer for real estate professionals.
While there’s no shortage of training available in the marketplace for agents, I quickly learned that for those real estate agents who want to take their career to the next level there is a vacuum in the real estate training space that few – besides Leader’s Edge – are addressing.
In our discussion, Bob shared the fact that “there’s a whole other side of this conversation [i.e. agent training] that’s not talked about nearly enough, and that’s management…the management side of the real estate business. There’s little to no training available.”
Why is this important?
As an agent, maybe you’re thinking that’s no big deal…I’m great at selling, how hard can it be to manage a brokerage?
Ask anyone who’s done it though, and you’ll quickly realize that it’s a lot tougher. For example, how do you know if your commission plan is truly competitive in the marketplace?
Or if you have the right financial reports with the key information you need to manage the brokerage well? Are things slipping through the cracks, or are you on top of every little thing that needs done?
Maybe you were in management before you got into real estate. That’s great, but were you managing employees or independent contractors?
It’s different, you know…the dynamics are definitely not the same.
For example, if you were a sales manager in the retail industry the methods and processes you used to manage employees will not be the same as the ones you need as the manager of a brokerage firm.
“It becomes not about telling people what to do and having, you know, all of that discipline and structure,” said Bob, “it really is an exercise in leadership in generating followership, and building relationships and trust so that these independent contractors that are like, herding cats, will actually follow you to where you want to bring your organization. And that’s a whole other skillset for most people to develop.
“So I love working with managers to help them with their leadership skills, to build followership and also with the nuts and bolts of actually managing their service delivery, their financials, their process…all the stuff that’s required as kind of foundational to their business so they can do the fun leadership stuff and getting people to follow them and recruit agents to their firm and retain them so they stay and help their agents build their business.”
Interested in learning what makes him tick, I asked Bob about how he got into the business.
“I have basically only ever worked in the real estate business. I came out of college with an education background that I didn’t want to use. I found out that education wasn’t for me and I went in an interview with a local real estate company in South Minneapolis – Coldwell Banker Burnett.
“They walked me through the process to get licensed. I became licensed and started my career as a 20 year old kid trying to live in an apartment, trying to help people with their most valuable asset – their home – so I had to learn fast.
“What I love the most about it [real estate] is that your output is pretty much in proportion to the input. In other words, the more you put into it, the more you get out of it. The harder you work, the more you earn and the better you do.”
[PULL QUOTE HERE] “It’s really a meritocracy, and I love that about real estate.”
“Anyone with the right drive, and the right work ethic can come into real estate and make a respectable living for themselves and their family.”
But what should real estate agents expect from the training offered by Leader’s Edge Training?
There are four components to the training; learning, practice, implementation and accountability.
“With adult learners,” said Bob, “especially in a professional environment, we’ll tend not to just learn something for the sake of learning…it needs to be applicable.”
Agents who enroll in the training offered by Leader’s Edge will not only learn something new, they’ll have the opportunity to learn in a very specific way that will help them really retain what they learn.
They’ll learn through implementation and practice, in an environment where it’s safe to practice the skill before the stakes get high.
Also, agents will experience accountability.
Unlike other training programs there’s no “here’s what you need to know, go do it and have a nice day,” agents receive true accountability that will help them implement what they’ve learned in a practical way.
Their coach will question them…“did you do what you said you would? How did it go? What worked? What didn’t work?”, etc.
Bob noted that continuing education for most agents is thought of as “more of a passive, ‘getting my hours in’ type of learning.” Highlighting what makes him different, he notes that, “The training that I provide is more about making a behavioral change in your business, so you can run a more successful practice.”
If you’re an agent who wants to “create change and growth in your business, that leads to making more money and helping more people,” you’re just the kind of agent who would benefit from Leader’s Edge Training.
“The core program that I deliver with Leader’s Edge Training is a “six week, one day a week in-person course,” said Bob. “It’s an advanced course in real estate; everything you need to know and then some to run a successful business. We do before and after measurements; we’re very big on measurement.
“The average participant increases their business 217% versus what they were doing before they took the class,” continued Bob.
“The other component to it, is that while they’re with me during that six week period of high accountability, high motivation – and this really positive environment – the average participant in the class that I deliver will close six transactions that can be traced back to the activities they did with me in the course. It’s very, very measurable.”
In addition to the training, Leader’s Edge offers agents two other resources that can help them grow their business; an app and a podcast.
“The ‘Agent Success’ app that we developed allows you to put in your business goals as a real estate agent,” said Bob. “And it breaks those goals down into quarterly, monthly and weekly activities that you need to complete on a regular basis to reach those goals.
“So if you want to make a certain amount of money in real estate, you put in those goals; you put in how many weeks a year you want to work, and then every day when you wake up the app tells you exactly what to do, how many calls you need to make, how many mailers you need to do, how many doors you need to knock on, how many social media posts you need to make…it spells it all out for you.
“And you can keep track of your activities as you do them, much like a fitness app such as My Fitness Pal or Fitbit or whatever…you can track your activities. And it will kind of assign you points based on the activities that you’ve done. And if you do those activities, you’ll reach your goals and the app help you get to where you want to go.
“It’s available in the iTunes Store and in the Android Google Play Store. We’ve opened it up to everybody; it’s not just Leader’s Edge clients…we want to contribute to the growth of the real estate industry as a whole.
“We’ve made it available for free to all real estate professionals… they can go out and download it and start using it today.”
Without question, in my experience most real estate professionals love to help others achieve success. One such way they can do that is by sharing their knowledge through podcasts.
Bob’s podcast is called “How They Won” and is available on a number of platforms.
“Every week I interview top real estate professionals, mostly real estate agents,” said Bob, “but also people connected to the real estate industry…and they share the secrets of their success.
“The interviews are typically around 30 minutes, and while some episodes have gone as long as 60 minutes I try to keep it 30 to 40 minutes so you can listen as you walk around your commute or on the treadmill or the elliptical at the gym.
“There’s been a tremendous response…real estate agents like to learn from each other.
“And the other thing about about “How They Won”… as I was doing my market research, I noted that there are a handful of real estate podcasts that are out there.
“I’m a big podcast fan…I love podcasts…but the real estate podcasts that are out there, in general, with the exception of a very, very small few, from a quality and organization standpoint, I just find very difficult to listen to.
“So my goal with “How They Won” was to launch something that was of a very high, professional, listenable quality,” continued Bob, “and that was organized and succinct in a way that listeners could actually implement in a short period of time.
“For their time investment, I wanted them to be able to actually implement some of the things that they learned in the podcast.”
At the time of this writing we’re facing a moratorium on physical gatherings, so I asked Bob how he was adapting to the changes brought by the Coronavirus epidemic.
“What I’m doing right now, is a lot of what’s called mindset and motivational work. It’s very hard in this environment for people to do the right things; to hold themselves to a certain standard. They lose track of the discipline of running their business. You’re not going to close as many real estate transactions in this kind of environment.
“So the focus has shifted from a lot of action-based tasks (e.g. make these contacts, knock on these doors, or send out this mailer,) to more of a ‘where are you’, ‘where’s your head at today’. As a real estate agent what are you thinking about? How can we implement some structure in your day so that when we do wake up to a sunrise in the first day of a post COVID-19 real estate market you’re ready…you won’t miss a beat when the light turns green again.”
Taking the cue, I asked a question that I’m sure is on a lot of peoples’ minds; especially those of us in the real estate industry.
“What do you think the real estate industry as a whole is going to look like…at least for the United States after we get the ‘all clear’ so to speak?”
“It’s really hard to say,” said Bob. “I think it comes down to some basic economic factors. The biggest driver historically of real estate, contrary to what almost every written article wants you to believe, is not interest rates.
“Interest rates are not the biggest driver of the real estate market…it’s employment.
“Just like, you know, the old adage in real estate is ‘location, location, location’… the economics of this industry is ‘employment, employment employment’.
“So depending on how quickly we can get home buyers and home sellers back to work is going to shape whether this is a V shaped recovery or a U shaped recovery.
“For example, if you want to buy a house, typically you’re going to need a mortgage to buy it. Mortgage Lenders aren’t going to lend you money if you don’t have a job.
“So these four levels that we’re seeing in these layoffs; if we’re able to kind of sustain those small, medium and large businesses through however long this is, whether it’s weeks or months, if we’re able to keep those businesses open and they’re able to bring their workforce back to work, then I think this whole thing will have a very little impact on the real estate business as a whole.
“It’ll be a setback, but we have a whole bunch of built-up demand happening behind this dam. And when we’re back open for business, all of that pent-up demand is going to be satisfied. And we’re going to see a fast and full recovery.
“If on the other hand, we’re not able to keep these small, medium, large businesses to the point where they’re able to bring their workforce back in, and these unemployment claims that we’re seeing are permanent rather than temporary, I think it’s going to be a much slower recovery as new businesses have to become established to take the place of businesses that didn’t survive.
“And those business have to grow organically, and eventually get back to the point where they can have a payroll where we did pre COVID-19, then I think you’re looking at a much more protracted recovery or a much, much longer recovery if that happens.”
So what should agents be doing now, as we’re in a state of flux?
Unfortunately, we’re in uncharted territory right now, but one things that is vital for every agent to consider is to take the time to work on their mindset.
Social distancing, and in some cases, stay-at-home orders can wreak havoc on your mindset if you let it.
Pay attention to what you read, and what you listen to. Take care of yourself, your family, and your business and when possible, take advantage of this time to expand your knowledge so that you can hit the ground running when the time is right.
Anita Clark is a Warner Robins Real Estate Agent helping buyers and sellers in middle Georgia with all of their home buying or selling needs.Whether she is selling new construction homes, assisting first-time buyers, or helping military relocating to Houston County, she always puts her customers needs first.
We hear a lot about the doubts over the future of Social Security. Here are a few I’ve come across:
“Three-fourths of those 18 to 34 don’t expect to get a Social Security check when they retire.” — USA Today
“My husband and I are both 28, and we laugh every time we hear [‘yes, you’ll receive Social Security’]. No, we won’t receive Social Security, even though we’ve both been paying into it since we were teenagers…I can’t think of one of my peers who expects Social Security to still be around when we’re retirement age. Call us bitter.” — A comment to my last column (“When Will You Be Able to Retire?”)
“Six in 10 Americans who have not yet retired believe they will get no Social Security benefits when they retire, more pessimistic than at any time since Gallup began asking this question in 1989.” — Gallup
“According to one survey, 100% of people married to Robert Brokamp wish he would shave his head rather than try to pull off a comb-over.” — My wife
If you’re among the doubters (of Social Security, not my hairdo), then listen up: The following paragraph is the most important group of words you’ll ever hear regarding Social Security. It’s key to understanding how the program works, and whether you’ll get anything. Here it is:
Social Security is predominantly a pay-as-you-go program. Most of the payroll taxes that are collected from today’s workers go into the checks of today’s beneficiaries. Thus, as long as there are people working and paying payroll taxes, there will be money to pay Social Security benefits.
According to the most recent Social Security Trustees report, from 2037 to 2084 payroll taxes will be enough to cover 75% of projected benefits. That’s not great, but that’s not nothing, either.
People who think that they won’t receive any Social Security benefits must believe one or all of the following three things:
In the future, people won’t work.
In the future, the government won’t collect payroll — a.k.a. FICA (Federal Insurance Contribution Act) — taxes. Currently, workers “contribute” 6.2% of their paychecks to the Social Security system, and their employers match with another 6.2%; the self-employed pay the whole 12.4%. Another 2.9% goes toward Medicare. As you know if you’ve looked at your paycheck, it’s a separate withholding from income taxes. In fact, the majority of Americans pay more in FICA taxes than they do in income taxes.
In the future, Social Security will be means-tested to such a degree that the “wealthy” (an arbitrary designation, to be sure) won’t receive any benefits. Those who don’t think they’ll receive Social Security assume they’ll be among these “wealthy.”
I don’t think Nos. 1 and 2 are likely. No. 3 is possible. The program is already means-tested to a degree, since the percentage of income that is replaced by Social Security decreases as lifetime earnings increase. However, I think that if changes to the means-testing formula result in a group losing their benefits completely, it will be a small group — certainly not 60% to 75%, as the aforementioned surveys suggest. I find it very unlikely that a future Congress — elected by future citizens — will change the program in a way that the majority of people who pay FICA taxes won’t get at least some benefits.
Those Crazy Trust Funds
For many years, the payroll taxes collected were more than needed to pay current benefits. The surplus went into the Social Security trust fund, which invested the money in special-issue U.S. Treasury bonds. However, this year — thanks to the stinky economy — benefits will exceed revenues. That’s projected to temporarily reverse, but at some point in the middle of the next decade, the retirement of the baby boomers will cause benefits to exceed taxes. This is where the trust funds come in. They’ll be sold to cover the shortfall.
In my opinion, this is the essence of questions about the future of Social Security: What, exactly, are we to make of these trust funds? Are they truly assets? Here are the two arguments:
Those who think that the Social Security system is essentially sound will point out that of course the trust funds are real assets. They’re full of U.S. Treasuries, which are considered the safest investments in the world.
Those who think otherwise point out that since Treasuries are federal government debt, the trust funds contain just worthless pieces of paper with a note written on them that says, “Dear Uncle Sam: I owe you lots of money. Love, Uncle Sam.”
I have to admit, I haven’t quite decided to which camp I belong. I’m inclined to go with the latter. After all, when, say, 2020 rolls around, and the Social Security Administration needs some money from the trust fund, it will take one of these special-issue Treasuries to Uncle Sam and want to exchange it for cash to be sent to retirees. Where will that cash come from? I almost think I need to see a spreadsheet or detailed flowchart or something to fully understand how all that will work. If you have suggestions for how to accurately think about the trust funds, I’m all ears.
For Now, Plan on Getting Less
That’s enough talk about Social Security for now (assuming you’re still reading). From a financial-planning perspective, I’ll reiterate my advice from my last post. If you are in or near retirement, plan on getting your benefit. If you’re younger, play it safe and plan on getting 25% to 75% of your projected benefit. But plan on getting something.
I’m sure you have your own thoughts and opinions about Social Security, and I encourage you to share them below. However, let me say this: Often, discussions following articles about Social Security turn into political brawls that degenerate into name-calling and general silliness. So please, all you right-wing nutjobs and left-wing commies, let’s keep it civil. Stick to the topic of Social Security and the facts. And maybe advice for creating a sweet comb-over.
Federal regulators have finalized new guidance on how banks should handle distressed commercial real estate.
Adobe Stock
Federal regulators say banks should include short-term accommodations in their toolkits for dealing with distressed commercial real estate loans.
The Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and National Credit Union Administration issued a joint statement on commercial real estate accommodations and workouts on Thursday. The missive updatesguidance first released by the regulators in 2009, amid a rash of bank failures driven by — among other things — bad real estate loans.
The statement notes that banks should step in to address distressed loans before lenders default or have to go through a so-called “workout” process, which can entail renewing or extending loan terms, extending additional credit or restructuring credit with or without concessions. The agencies noted that short-term modifications — which suspend, extend or defer repayment terms — can be an effective way to address issues before more significant accommodations are needed.
“These actions can mitigate long-term adverse effects on borrowers by allowing them to address the issues affecting repayment ability and are often in the best interest of financial institutions and their borrowers,” the statement reads.
The new policy statement also updates the 2009 guidance to incorporate accounting changes that have taken place during the intervening years, including requirements that banks estimate current expected credit losses for all their assets.
It also gives examples for how loans should be classified and accounted for once they have entered a workout process.
The inclusion of guidance around short-term accommodations and accounting best practices was the result of public commentary fielded by regulators since proposing rule changes last August. In total, the agencies received 22 comments from banking organizations and credit unions, state and national trade associations and individuals.
Otherwise, the finalized guidelines are largely similar to the policy proposed more than a decade ago. The statement urges banks to engage with troubled commercial real estate borrowers early and have policies in place for dealing with accommodations in a safe and sound manner.
Regulators also note that examiners won’t punish banks for working with borrowers in this way. Similarly, borrowers will not be criticized for engaging in these types of pre-workout remedies.
The guidelines for handling distressed commercial real estate loans have been in the works for years, but they have taken on a renewed importance in the current market, as rising interest rates and falling occupancy rates squeeze some commercial property owners — especially for offices in central business districts. Last summer, the FDIC said it would more thoroughly scrutinize banks’ commercial real estate loans.
The issue is acute for smaller and midsize banks, which tend to have higher concentrations of commercial real estate debt on their balance sheets. Analysis by the property advisory firm CBRE suggests that more than 300 banks in these size categories have enough commercial real estate loan exposure to wipe out their tier 1 capital.
Large banks also have significant commercial real estate exposures, albeit not as concentrated. In its annual stress test report, released this week, the Federal Reserve noted that the 23 large banks examined in this year’s test hold roughly 20% of office and downtown retail debt in the country. Under the Fed’s severe stress scenario, the banks were projected to lose $65 billion on their commercial real estate loans, or 8.8% of average balances.
“The large projected decline in commercial real estate prices, combined with the substantial increase in office vacancies, contributes to projected loss rates on office properties that are roughly triple the levels reached during the 2008 financial crisis,” the Fed wrote in a statement accompanying the stress-test results.
Despite the forecasted losses, all the banks examined passed this year’s stress test. Still, the scenario demonstrated the magnitude of distress banks could face.