Personal Banking E-Newsletter - September 2012

Four Health Insurance Options for the Self Employed

Self-employment is an important career choice for many people. But with this choice comes the need to provide your own health insurance, which can be a formidable expense. The new health care legislation signed into law by President Obama should make it easier for individuals to purchase health insurance. Until all its provisions take effect, if you are self employed and are seeking health care coverage, here are four options.

  1. Join your spouse's plan. If you have a spouse or partner who is or can be enrolled in an employer-sponsored plan, joining his or her plan is usually the simplest and least expensive way to maintain coverage. Nearly all employer-based plans offer coverage to spouses and children, and many provide coverage to domestic partners as well.

  2. Look into COBRA coverage. If you formerly worked for an organization that employed 20 or more people and made a group health plan available to employees, you may be able to obtain medical coverage through the federal Consolidated Omnibus Budget Reconciliation Act, known as COBRA. COBRA requires employers to make available to departing employees the option of continuing membership in an employer-sponsored group medical plan at the employee's expense. You can continue your health insurance under COBRA for yourself and your dependents for 18 months, during which time you can search for the best option as a self-employed person.

  3. Check out high-deductible plans. Another option is to enroll in a high-deductible health plan (HDHP) and fund a health savings account (HSA). As the name suggests, high-deductible health plans involve a high deductible or threshold, a minimum of $1,200 for an individual and $2,400 for a family in 2011, below which you must pay all costs. In essence, a high-deductible policy provides coverage for catastrophic situations but not for regular doctor visits and routine care. Such plans can involve complex cost-sharing arrangements in which certain procedures or visits are covered only in part. When considering this option, factor in not only monthly premiums but also the costs of partial out-of-pocket payment for different procedures.

    Combining an HDHP with a tax-free health savings account can also save you in taxes. You deposit pre-tax dollars into your HSA, and use that money to pay medical expenses that aren't reimbursed by your health insurance.

  4. Investigate coverage through a professional association. A more cost-efficient option may be to enroll in a group plan through a professional association or union. Check with any affiliations you may have (or inquire about any you can join) and ask about group rates for members.

When shopping for the right plan, make sure to compare premiums, coverage, deductibles, and copays. Also keep in mind that after you turn 65, you may be eligible for Medicare, even if you remain self-employed.

© 2011 McGraw-Hill Financial Communications. All rights reserved.

Back to School Savings

It's that time of year again…While back to school shopping can be hard on your kids (because it means summer is nearly over), it doesn't have to be hard on your wallet. The average family spends an estimated $594 on back to school expenses, according to the National Retail Federation. However, creating a strategic budget and planning ahead can help you keep your family's costs down. Here are a few simple tips to help you stick to your budget during this year's trip through the "back to school" aisles.

1. Make a list (or get one from the school). Just like having a list for grocery shopping can prevent buying items you don't need, starting your back to school shopping trip with a complete list of items your child needs for the upcoming school year will save you time and money.

2. Take inventory of what you already have. Once you have the list, check off any items you already have. That notebook from last year with only 7 pages used? Recycle it for one of this year's classes. Pens, pencils and markers don't have to be brand new, either. If they still work, wait to buy until you actually need new ones. This tip also applies to clothing. Basics never go out of style, so you don't need to buy your child a whole new wardrobe every year. When you do need to get them new clothes, buy sizes they can grow into.

3. Check sale ads, use coupons and compare prices. There's no rule that says all your shopping has to be done at one store in one day. Look for sales throughout the year on school supply staples like notebooks, backpacks and planners. Compare store prices to make sure you're not overpaying by buying everything at the same place. Also check for ads saying the store will match a competitor's price. That can save you a trip out to the competitor to buy the same item. Outlet malls and consignment or resale stores are great places to get quality clothing for less money.

4. Decide how to pay for everything. The temptation is simply to charge everything to your credit card, but this isn't always the best method. Buying some items - like pens, pencils, markers, etc. - with cash, checks or a debit card will keep your credit card bill from skyrocketing. Big ticket items like laptops or tablet computers can often be bought on layaway or a payment plan from the store. Look for low- or no-interest plans to keep the total cost of the item down.

Finally, use this opportunity to teach your kids about personal finance. Go over your budget with them in advance, then take them shopping with you and let them help decide which items to buy. This real-world practice helps develop budgeting and problem-solving skills early.

Source: WBA Consumer Column for 7.30.12

Keep a Lid on Kids’ Sports Costs

At age 4, Catherine Holecko's daughter visited an ice skating rink for the first time. She asked for lessons. Later that year, the little girl skated in an ice show, and she was hooked.

Now 10, the figure skater practices three times a week and regularly competes. Ice time and coaching cost $200 to $300 a month. Holecko recently bought her new skates for $250, while a local competition set them back $300, and that contest didn't require a hotel stay or other travel costs.

Holecko, who lives in Wisconsin and writes about family fitness for, said she could be spending a lot more. Skates can cost hundreds more, and Holecko recently saw a competition costume with a $400 price tag. "The most we've spent for a costume is $70. I've paid $10 to buy used ones," she said.

Other extracurriculars, including karate and cello lessons, have fallen by the wayside -- which helps offset the sport's costs somewhat, although Holecko worries her daughter is too young to specialize. Holecko also knows the costs will only increase if her daughter continues her interest in the sport.

"The plan is, we take it as it comes. . . . I can take on more freelance writing jobs," said Holecko. "She absolutely loves it. She never complains, and she's eager to keep going."

The spiraling cost of kids' sports is a hot topic as parents brace for the start of school amid the lingering buzz about what young athletes accomplished at the Olympics.

Susan Gregory Thomas, a memoirist and journalist, reckons her family spends more than $15,000 a year on her daughter's sport: The 11-year-old is a nationally ranked gymnast. Most of that is spent on twice-a-week classes; the one-on-one coaching top-level contenders need would cost a lot more.

Even if you're clear that your kid is no future Gabby Douglas or Michael Phelps, you can still end up shelling out a small fortune. Equipment, uniforms and league fees are just the start. Traveling teams, which can cost $1,000 to $3,000 a year, have morphed from a privilege for elite players to an option for kids with less spectacular abilities. (USSSA Baseball, which had a roster of 1,000 teams in 1997, now has 60,000.) Many parents pay for specialty camps and extra coaching to get that competitive edge. Even those who don't can be surprised by how seemingly incidental costs -- gas, snacks, trophies and coach gifts -- can add up.

MSN asked parents, including a few experts, to offer advice on ways to contain the cost. Here's what they said:

Start cheap. Janet Bodnar, who is editor of Kiplinger's personal finance magazine, author of "Raising Money Smart Kids" and the mother of three competitive swimmers, cautions against devoting too much time or money to a sport until it's clear your child has the aptitude and interest for it. Check out the local Y and the community recreation center rather than signing up with private teams, gyms and pools. Picking the right sport helps, too: Soccer is relatively cheap; ice hockey, golf and horseback riding are not.

"We go through the local community center for gymnastics, (which has) very reasonable rates compared to private gyms," David Anocibar of Yucaipa, Calif., wrote. "We also do karate through a nearby Portuguese-American club. The instructors are able to rent the hall for a couple hours a week and keep their overhead very low. As a result they are able to offer very low prices."

Try used. After first offering a tongue-in-cheek suggestion to reduce sports costs -- "Give birth to nerds" -- Antoinette Patterson Smith of Katy, Texas, recommended asking friends with older children if they have outgrown equipment they're willing to sell or trade.

"Posts on your (Facebook) page are especially helpful -- you never know what your kindergarten classmate from 30 years ago might have for you," she noted.

Some organizations coordinate such swaps, either formally or informally.

"One way we have kept our costs down is by sharing uniforms for the team, and track cleats," said Tony Reynolds of Columbus, Ohio, who started a crowd-funding website for athletics and whose two sons, 10 and 11, compete in the USA Track and Field Junior Olympics.

"When our child outgrows theirs, they donate them to the team, and when other children outgrow theirs, they do the same. We also donate uniforms. . . . Our first year, we benefited from that generosity of other parents, and this year we (reciprocated)," Reynolds said.

Other parents mentioned buying used equipment at places such as Play It Again Sports, using online classifieds such as Craigslist or on eBay.

Don't go overboard. Sometimes you can't buy used, but that doesn't mean you have to pop for top-of-the-line anything. "Look for coupons for sporting goods stores, and buy the cheapest things -- they're probably going to demolish or lose them anyway," advised my friend Marla Jo Fisher, who blogs for The Orange County Register as Deals Diva and who has two teenagers involved in sports. "A 9-year-old doesn't need a $160 bat he's going to leave at practice."

There are always ways to spend more on a sport, whether it's joining a traveling team (maybe your kid would be happy staying with the rec league) or paying for professional pictures rather than taking your own, said Holecko, who's also the mother of a 7-year-old baseball player.

"If I bought the professional shots offered at every skating event -- on top of the baseball team pictures and everything else for both kids -- I'd be spending hundreds if not thousands of dollars," Holecko said.

Financial planner Ted Jenkin, who has three kids ages 10, 12 and 14, says he sees parents wasting money "all the time," sometimes with the help of the coach.

"Local sports today seem to be more of a way for the local coaches to sell their side private business versus coaching," said Jenkin, founder of oXYGen Financial in Alpharetta, Ga. "We shouldn't feel pressured our kid won't get attention if we don't pay $75 or $100 an hour to get some extra help."

Speak up. The post-game snack is one example of a tradition that can quickly escalate into an arms race. One parent brings orange slices. The next brings orange juice and cookies. Not to be outdone, Parent No. 3 proffers decorated cupcakes and sodas. Finally, somebody shows up with White Castle burgers, Doritos and beer. (OK, the beer's just for the grown-ups.)

Not only can the snacks be nutritional nightmares, but they get darned expensive. So can team parties, gifts to the coach and even banners. If you want to keep a lid on costs, get involved.

"Be proactive in team planning, and make it clear from the beginning that you vote for frugality," Fisher wrote. "Many team organizers don't even think about these things, but other parents will breathe a sigh of relief when you do."

Don't delude yourself. I've had parents tell me, in all seriousness, that the money they were spending on kiddie sports was an investment that would pay off in college scholarships. Only a tiny fraction of high school athletes get any kind of scholarship. Only 1.6% of male undergraduates and 1.1% of female undergraduates received a sports scholarship during the 2007-08 school year, according to a study by publisher Mark Kantrowitz. The average amount: $7,855. All told, athletic scholarships are worth about $1 billion a year; Americans pay more than $460 billion for post-secondary education.

One Texas dad told me he spent about $2,500 a year, plus travel expenses, on his son's various sporting activities. Once the boy entered high school, he narrowed his sports down to two: football and track.

"I again still spent money on training, camps, equipment," the dad said. "The goal with most of the parents is to get college paid for."

That didn't work out. No recruiters dangled scholarships. The young man did get accepted to Oklahoma State and was promised a spot on the team, but decided he didn't want to play.

Falling Behind? 5 Warning Signs

Upward mobility seems to have become harder, and a lot of people are having trouble staying in the middle class, let alone getting ahead.

We know what happened during the recession: The economy quaked, joblessness soared, home values plunged, and a big chunk of the middle class fell way behind.

Economists and other experts are now trying to figure out what's likely to happen next. It's well known that income inequality has worsened over the past couple of decades. The incomes of top earners have risen sharply, while median income has stagnated. By some measures, the concentration of wealth among the top 1% of earners is at the highest levels since the 1920s. Nobody disputes that the rich are getting richer while others are stuck in a rut.

The real problem, though, isn't that the wealthy are doing well. It's that people who used to be able to improve their lives and move up the social ladder are having a harder time doing so. "The American Dream, to me, is about social mobility, not equality," Harvard historian Niall Ferguson said at the recent Milken Institute conference in Los Angeles. "What we need to figure out is 'Why has mobility declined?'"

America's stalled social escalator is fueling the Occupy movement, the incendiary debate over wealth in this year's elections and perhaps even long-term cultural change. Experts still aren't entirely sure why it has gotten harder to get ahead, but they're forming and testing a variety of theories. Here are five signs that your prospects may be declining, even if it doesn't feel that way right now.

You've stopped learning. It goes without saying that education is the single most important contributor to success. Those with college and advanced degrees earn far more than those who merely graduated from high school, and many of the manufacturing jobs that used to be pathways to prosperity for high school grads no longer exist. "We have to have kids who, after high school, learn how to do things that will allow them to make a good living," says political scientist Charles Murray, the author of the new book "Coming Apart."

But beyond simply getting a degree, people who are striving to move upward need to continue learning and adding to their skills, to keep up with an economy that changes faster than ever. That could mean formal courses, on-the-job training programs or informal tutorials from friends or colleagues. One hallmark of innovators is the ability to apply ideas from one discipline to another.

You don't associate with influential people. In "Coming Apart," Murray describes a kind of socioeconomic segregation that has occurred in America since 1960, as disparate income groups that used to live in the same communities have drifted into closed enclaves that tend to be made up of people much like themselves. So well-educated high earners tend to meet, marry and do business with people just like themselves, and live in towns where things that matter to the affluent -- such as good schools -- are priorities. Less-educated lower earners, meanwhile, have less access to the kinds of influences that might help them, or their kids, climb the social ladder. Murray's research is controversial, but it does seem self-evident that exposure to successful people is more helpful than exposure to strugglers.

Technology threatens your livelihood. One bright spot in the economy is the tech sector, with companies like Apple, Facebook and Google adding jobs, creating new markets and racking up profits. But technology, of course, can upend and transform old industries -- as it has already done with music, travel and publishing and may soon do with entertainment, law, accounting and even medicine.

The U.S. manufacturing sector, for example, seems to be poised for an impressive revival, as improved costs, favorable currency rates and other factors lure many companies back to U.S. factories. But modern plants are no longer filled with assembly-line workers handling every small task. They're high-tech marvels that rely heavily on specialized equipment and small numbers of well-trained workers with the skills to operate it. Just about everybody in this economy should be looking around the corner to see how technology is likely to change the way they earn a living -- or make it obsolete.

You're flying solo. Murray and others have highlighted the difficulties that single parents face keeping up with their kids' education, along with their own job demands and career opportunities, as well as the need for social involvement. Women have made impressive economic strides over the past 30 years that have left them far less dependent on men. But one consequence of that may be more economic isolation, especially for lower-earning women.

Baby Boomers Plan to Keep Working but in a Different Way

A succession of surveys over the past decade makes plain the plans of a new generation of older Americans to keep working. 

Most of this research reveals that 4 of 5 boomers are expecting to continue working at the point when earlier generations moved to the sidelines.

Indeed, there is already evidence of shifting labor patterns on the part of the pre-boomers, as early retirement levels off and millions of older workers remain in the workforce.

These polls also find that most people who keep working want more than an endless incarnation of midlife work. Instead, they are keen on renegotiating their relationship to work, looking for more flexibility and liberation from the long hours characterizing midlife labor in America today.

The 2005 MetLife Foundation/Civic Ventures New Face of Work Survey broke important new ground, moving beyond the research to date by focusing on a set of central questions that have been little explored: What kind of work does the current and coming generation of Americans in their 50s and 60s actually want to do? What are these individuals looking to accomplish through work after the traditional working years? Do these priorities fit with where we are likely to need people? Or is there a great disjuncture between what the new generation of aging workers want and what the economy—and society—need?

The findings constitute an in-depth look at the pre-boomers and leading-edge boomers’ priorities for the next stage of work, and offer heartening indications of what might well be a win-win opportunity of staggering proportions.

In analyzing this research, 10 critical trends were found:

1. The freedom to work
The pre-boomers and leading-edge boomers surveyed are poised to swap the old dream of the freedom from work for one that might be characterized as the freedom to work. When asked about whether this is a time to take a well-deserved rest or an opportunity to begin a new chapter characterized by making important contributions, they break with earlier generations in embracing engagement. And most are planning to do so through continued work: A full 65 percent of leading-edge boomers say work will continue to be a part of their life throughout what used to be the retirement years. These individuals appear to be inventing not only a new stage of life between the middle years and true old age, but a new stage of work.

2. Doing well by doing good
The desire to do work that enhances the well-being of others is widespread. Fully half of all adults age 50 to 70 (and 58% of those 50 to 59) aspire to work in seven areas that combine the seriousness, income, and other benefits associated with work with the desire to contribute to the greater good. Indeed, when asked specifically to name the kind of work they would prefer to do in the future, those surveyed named education and social services as two of their three top choices. Both finished just behind retail work—an area where much recruitment of aging Americans is underway. Health care jobs also finish high on the priority list.

3. The great connect
The widespread desire to do good work is enormously heartening news, indicating a good fit between the desires of a new generation of older Americans and some of the key sectors—education, health care, and social services—where we are wringing our hands wondering how to find the talent to fill growing human resource gaps. What’s even more encouraging is that this desire appears not only to run wide, but deep: More than one in five leading-edge boomers (21%) surveyed say they have a very strong interest in pursuing these options.

4. Beyond volunteering
Much debate over the social contribution of the boomers in their next stage has hinged on whether they will volunteer at levels comparable to their predecessors, most notably the greatest generation. There’s reason for concern, given the boomers’ mixed performance as joiners and volunteers during the middle years. But this survey suggests that when all is said and done, work that is not only personally meaningful but that means something important in service to the wider community may be the most important way that boomers choose to give back.

5. Beyond the retail mode
If the old norm for retirement was the golden years focused on leisure, the new default position seems to be a part-time job in the retail sector. Wal-Mart, Home Depot, and others deserve considerable credit for recognizing this pool of talent and for actively recruiting a population most employers overlook. But survey findings show that a significant segment of Americans moving toward their 60s and 70s wants something distinct from a retail or fast-food work experience. They want to focus their accumulated time, talent, and experience on work that directly contributes to social renewal. Their disposition is a powerful reminder that we will need to do a much better job of opening up opportunities in the realm of good work—in education, health care, the social sector, among others—if we are to have any hope of fully capturing the potential contributions of this experience-rich generation.

6. A new career arc
It has become commonplace to think about retirement jobs as part-time employment, bridging the gap between midlife work and later-life leisure—the work one does after the major body of work is over. As respondents to this survey emphasize, many leading-edge boomers are instead envisioning something that resembles a second half of work. Given that they want to shift toward good work now, not when they’re 65, they’ll have 10 or even 20 years to put into this second career. That makes the prospect of additional education and retraining more appealing for these individuals—as they would be investing in a new stage of work. It also creates a more viable arrangement for potential employers, who would see that those over 50 aren’t likely to be simply passing through on their way to retirement. While this second half of work might not be as long in duration as the first half, in the end, it might well weigh as much, producing a body of work equal in significance.

7. Not fading away
Running throughout these findings is a vision of the post-midlife years that is inimical to the notion of decline, whether that be the precipitous cliff of complete disengagement or the more prevalent notion these days of pulling back gradually but steadily, or phasing out. While those surveyed show strong interest in getting a better balance between work and life, shining through is a vision for work that suggests people believe some of their most important contributions may well lie ahead.

8. The pull of people and purpose
For all its uplifting qualities, simply knowing that there is wide and deep interest in good work is inadequate. The question “why” looms large. This new research reaffirms that additional income and a sense of idealism are important components of the drive toward good work, but perhaps even more important are people and purpose—the connections to others committed to similar goals, and a reason to get up in the morning. For a generation that derived a great deal of its identity and social networks from work—sociologist Arlie Hochschild argues that for this group in midlife, work became a refuge—these aspirations for the second half of work should come as no surprise.

9. All dressed up, but where to go?
Despite strong interest in pursuing new work for the greater good, few of those surveyed thought it would be very easy to find this type of engagement. Their response was striking given the good potential fit between supply and demand in areas such as education and health care. Their answers suggest a pair of barriers: 1) We do a much better job helping people plan financially for the second half of life than we do helping them navigate their way from one phase of life and work to engagement in another. 2) There is as yet little evidence of receptivity by the nonprofit sector in tapping this coming population of aging boomers and pre-boomers. Indeed, a new study by the National Council on the Aging shows that indifference toward the contribution of this group is often the prevailing perspective of these organizations.

10. The second coming of barrier-busters
As this last point underscores, the drive toward good work comes largely from the people themselves—not the organizations that might use their time, talents, and experience. This drive contains many of the features of a social movement—and in many ways it resembles the women’s movement during the 1960s. There were few supportive policies, nor much impetus from employers at that juncture. All the dynamism came from the individuals themselves. It should be little surprise then that this survey reveals that the groups most ready to be pioneers in this new generation are none other than the boomer women and African Americans who broke down so many barriers earlier in their lives.

These survey results hold enormous allure—suggesting that, despite many challenges, the new demographics and the trend toward longer working lives contain the potential for both social and individual benefit.

Never before have so many Americans had so much experience—and so much time to do something with it. Will our society make the most of this potential windfall, recapturing years of investment in human and social capital and helping direct these human resources in ways that promise the greatest return for individuals and the nation? Or will we write off what may be our only increasing asset, the experience of a generation of Americans soon to represent nearly a quarter of the population?

Realizing the experience dividend will be neither easy nor automatic. Rather, it will require renewed creativity at all levels—new perspectives, new policies, new pathways, and most of all new opportunities to put to good use what individuals have learned through life. That can sound like a tall order, but then again, the history of aging in America is a history of spectacular innovation.

It must continue to be.

The payoff is nothing less than a society that makes sense, one that balances the joys and responsibility of engagement throughout the lifespan and across the generations. In other words, one that works better for everybody.

Beware of These Common Holes in Homeowners Insurance Coverage

Earthquakes, unexpected deductibles, and flooding are just a few of the costs your homeowners policy might not cover. But if you're like most Americans, you probably don't realize it. According to the MetLife Auto & Home Insurance Literacy Survey, many homeowners are clueless about the ins and outs of their policies, which means they could easily end up paying a lot more than they expected after damage to their home.

That's what happened to Aditi Haridat's parents, shortly after they bought the home of their dreams. A lamp overheated while they were out of the house, creating a fire. Not only did they lose their pet cockatiel, but the inside of their home was partially destroyed. That was only the beginning of their nightmare. After their insurance company arranged for a contractor to redo the inside of the house, that contractor ended up inadvertently causing a major flood in the basement, which led to a black mold infestation.

Haridat's parents, who live in New Jersey, were frustrated when the insurance company offered less than the estimated cost to repair the home. The stress took a toll: "My poor parents couldn't sleep. They were completely distraught," says Haridat, a documentary filmmaker. Eventually, the family decided to hire a public adjustor to help them negotiate a higher settlement.

Almost half of all homeowners in the MetLife survey didn't know how much insurance coverage they had for the contents of their home, and 1 in 3 didn't know how much their home was insured for. MetLife warns that this "knowledge gap" can lead to costly surprises and recommends that homeowners review their policies more closely.

Here's a quick way to test your knowledge on six common coverage gaps: 

Do you think your insurance policy would reimburse you for earthquake damage?

The answer, according to MetLife, is almost always "no," unless you purchased a separate earthquake policy. Almost 30 percent of survey respondents thought the answer was "yes," and another 30 percent didn't know.

If your sump pump backs up and your house floods as a result, will your homeowners insurance policy reimburse you for the damage?

Despite the fact that most people believe the answer is "yes," it is unfortunately not the case. That means homeowners could have to shell out cash for costly repairs, unless they specifically added (and paid extra for) coverage for sump-pump failures.

If new building codes mean you need to upgrade undamaged parts of your house, will your policy reimburse you for those costs?

While nearly 2 in 3 survey respondents said "yes," the answer is "no," according to MetLife. In most cases, policies don't pay for upgrades, even those that are mandated by new laws, in undamaged parts of homes, unless you take out additional "ordinance or law" coverage.

If you go away for the winter and your pipes freeze and break, will your policy cover that damage?

While policies remain valid even when you're on vacation or away for a long time, you have to take certain steps to protect your home, or you might be liable for the costs. For example, if you fail to keep the home heated or pipes drained, MetLife explains that any damage that results from freezing might not be covered.

Say you have auto and home insurance with the same company, and both get damaged in a tornado. Will you pay one deductible or two separate ones for each item? 

Chances are, you need to pay two deductibles, even if both the house and car are damaged by the same storm. (Although MetLife adds that a handful of insurance companies, including MetLife itself, offer exceptions to this rule.)

If a fire destroys your house, will insurance pay the full cost to rebuild?

The answer is most likely "no," because most insurance policies cap their coverage—and take depreciation into account when calculating the value of personal possessions. That means homeowners could be insured for far less than they think. Seven in 10 survey respondents said they thought their policy would pay the full cost to rebuild after a natural disaster.

While these gaps could end up costing homeowners a lot of money, policies also provide coverage that many people don't realize they have. For example, policies usually cover the belongings of college students (the sons and daughters of policyholders) who live on campus. They also often cover electronic data (including music) and damage to appliances caused by a power surge.

The bottom line? Policies vary, and if you have a particular concern, it's usually relatively easy to add additional coverage to your existing policy—as long as you know about the risk before any damage takes place.