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NEW YORK: As yet another bank faces collapse, consumers are worried about their cash.So far this year, 72 banks have failed, according to the Federal Deposit Insurance Corporation. Struggling southern regional bank Colonial Bank could be the 73rd.But individuals with deposits at Colonial, or any other troubled bank, are insured by the FDIC for up to 250,000. And in the FDIC’s 75-year history, no customer has ever lost an insured deposit.”When your money is in a bank that is FDIC insured it is backed by the full force of the United States government, and it doesn’t get any better than that,” said Carol Kaplan, a spokeswoman with the American Bankers Association.So, if your cash is in an account with less than 250,000 at a bank insured by the FDIC, “there is virtually no way you are going to lose your money,” Kaplan said.0:00
/1:26Bank failure: What next?Consumers who are worried that their account may exceed the 250,000 mark can spread funds around by opening additional accounts within the same bank — as long as they are under different names, like a joint account with your spouse or a trust for your children. Consumers can also shield themselves from losses by opening up different accounts with less than 250,000 under the same name, as long as they are at different banks. Kaplan suggests that account holders speak to a bank employee about strategies to get additional FDIC insurance. Banks will help people reorganize their funds to get full coverage or set up a sweep account, which will automatically move any amount in excess of 250,000 to another bank.To calculate their personal exposure, consumers can go to http://www.fdic.gov/ and click on the Electronic Deposit Insurance Estimator, also known as EDIE.When your bank failsIn the case of a bank failure, the FDIC assumes control of the troubled institution and will try to arrange a quick sale to a different bank. If another buyer does not immediately step up, the FDIC will remain in control of the bank until a buyer can be found.Even under these circumstances consumers can access their deposits within a couple of days, if not immediately, Kaplan said.But the odds of a bank failure are still relatively rare. The current crop of bank failures hardly comes close to what happened during the savings & loan crisis two decades ago. Between 1987 and 1991more than 1,900 financial institutions went under — with 534 failures in 1989 alone.The FDIC disclosed that it was closely watching 305 financial institutions on its “problem bank list” at the end of the first quarter. While that number is higher than it has been in the last few years, there were 2,165 on the list in 1987. The FDIC does not publish the names of the troubled banks for fear of spurring a bank run.

Source:CNN

NEW YORK (Money) — Question: I’m single, 38 years old and have about 900,000 saved up. I’m tired of the stress of the corporate world and am wondering: If I live a very simple life, can I afford to retire and not have to worry about going through all my money? –Don H., Marietta, GeorgiaAnswer: I’m sure that almost all of us, at some point in our lives, have considered such a fantasy. I know I have. There are days when you just feel overloaded for any number of reasons — pressure on the job, demands from the home front, perhaps a growing sense that you’re on a treadmill moving ever faster making it harder and harder to keep up.So I can relate to your impulse to drop out and live a simpler, slower-paced life, sort of the modern-day equivalent of Henry David Thoreau’s move to Walden Pond.But if you think it through, I believe you’ll find what you’re contemplating is really more a fantasy than a realistic plan, at least from a financial point of view.I know that 900,000 sounds like a lot of money. And it is. At age 38, however, you need to plan on living at least another 40 to 50 years, so your savings are going to have to carry you a long, long way.Making your money lastAs a practical matter that means you must be very careful with withdrawals if you want to be sure you don’t run through your stash. Advisers typically recommend that 65-year-old retirees limit themselves to an initial draw of 4% of their portfolio, and then adjust that dollar amount for inflation each year. By doing that, they have roughly an 80% to 90% chance that their savings will last at least 30 years.So if you apply that standard, you would begin with an initial withdrawal of about 36,000, which you would then increase annually by the inflation rate to maintain your purchasing power.But you need to be sure your money will last a lot longer than 30 years. So to be on the safe side you may want to withdraw even less initially, which would bring your income down.Even then there’s no assurance you won’t go through your money. A lot will depend on how you invest your 900 grand. You could play it safe by keeping most of it in cash and bonds. But that would make it more difficult for you to maintain your draws should inflation rise in the future.Devoting some of your savings to equities would give you a better shot at long-term growth that could keep your income growing as fast, or even faster than, inflation. If you hold withdrawals down and the markets perform well, your portfolio could even balloon in value. But the more stocks you own, the more you would be vulnerable to downturns in the market.Downgrading your lifestyleEven if you were confident that the 4% approach would allow your money to last the rest of your life, there are other reasons you might want to reconsider whether going ahead with your plan makes sense. One is whether you can actually live off an inflation-adjusted 36,000 or less a year.As recent census figures show, many people obviously do. In fact, many get by on smaller amounts. But you won’t have much margin for setbacks or room for frills. And if you’ve been making enough money to allow you to set aside 900,000 by your mid 30s, it’s likely that you’ve been earning a lot more than 36,000 a year, in which case you may have quite a lifestyle adjustment to make.Even if you’re okay with that, you’ve also got to consider that, in real life, things happen that may prevent you from living within your budget. Cars break down. Unexpected medical bills pop up. You want to splurge once in a while.So I think it’s reasonable to assume there will be years when you’ve got to pull more than you anticipate from your savings. In some years it could be a lot more. And those extra draws could significantly raise your odds of running out of money sooner than you expect.I’m not saying that it’s impossible for you pull this off. But do you really want to? Retiring at your age strikes me as, well, a tad extreme.Emotional satisfactionEven beyond the financial issues I’ve raised, I have to wonder whether dropping out of the workforce at your age would lead to a very satisfying life. For most people, work is more than just a way to generate income to pay for life’s necessities. It’s also a way to stay socially connected, to interact with people. That’s why so many retirees like to keep a hand in the job market even aside from financial reasons. A job can also create a sense of accomplishment, a feeling of fulfillment. Work, dare I say it, can even be fun.If you’re stressed out, there may be other ways to deal with the strain. Perhaps an extended vacation that allows you to recharge would help. Or maybe you should consider switching to a new career, or moving to another part of the country.Or instead of dropping out completely, you could work fewer hours or even move in and out of the workforce (although moving back in when the unemployment rate is as high as it is today could be difficult).My advice would be to try a scaled-down version of the simple life and see how it goes. This would give you a taste for a slower pace of life and more free time without requiring you to live solely off your savings.Ultimately, this is a personal decision. If you’re willing to deal with the financial challenge of living off your savings for the next four decades or longer, maybe you’ll be able to fashion a very fulfilling life for yourself.But the mere fact that you’ve asked the question indicates that you have at least some concerns about financial security.I may be wrong, but my guess is that retiring at 38 and living off your 900 large will require a much bigger lifestyle adjustment — and be less satisfying — than you think. After all, even Thoreau’s experiment with bare-bones living lasted only a little over two years.

Source:CNN

NEW YORK (Money) — Question: I’m 63 and my employer has eliminated my health insurance and dramatically cut my pay. If I retire now, I’ll get about 1,300 a month in Social Security, plus I can collect another 2,000 a month by investing my 310,000 in savings in an immediate annuity with lifetime payments. All in all, I should have about the same income I have now. So I figure why work without health insurance when I can retire and not have health insurance? Do you think my plan makes sense? –Bill P., Martins Ferry, OhioAnswer: Sorry, but I think you need to reconsider your plan, as I believe it has a few potentially dangerous flaws in it.To begin with, you’re apparently assuming that you will forego health insurance until you reach age 65 and qualify for Medicare. That’s not a good idea.It’s no secret that the older we get, the more medical issues we’re likely to face. Maybe you’ll be the happy exception, one of those hale and hearty types who rarely sees the inside of a doctor’s office.But do you really want to chance going without coverage for two years? If you develop a significant health problem — or have an accident of some sort — your treatment options probably won’t be as good if you lack insurance and you could find yourself overwhelmed by medical bills.Another chink in your plan concerns that immediate annuity you plan to buy. Generally, I think plain-vanilla immediate annuities can be an excellent way to turn money in a 401(k), IRA or other savings into reliable income payments for life.But you don’t want to put all your savings into such an annuity. The reason is that once you buy an immediate annuity, you usually give up access to your principal in return for the guaranteed lifetime payments. (There are immediate annuities that allow you some access to your principal, but it’s usually pretty restricted and reduces the size of your payments.) So if you’ve plowed all your money into an annuity, you’ll have less flexibility to deal with emergencies or unexpected expenses, especially if you need to come up with a large chunk of cash.That’s why I typically recommend that people who want the security of lifetime payments from an immediate annuity devote only a portion of their savings to the annuity, and keep the rest in a diversified portfolio of stocks and bonds (or stock funds and bond funds) that can provide both liquidity and long-term growth as a hedge against inflation.Finally, I’d note that by collecting Social Security now instead of at your “normal retirement age” — which in your case is 66 — you will be locking yourself into payments for the rest of your life that are substantially lower than what you might get by waiting a few years.The case for staying employedSo what do I recommend instead of your plan?First, I think you ought to keep working. Whether you do that at your current job or move to a new one, it’s your best shot at regaining, and being able to pay for, the health insurance you need until Medicare kicks in.If you stay at your present job, you first ought to see whether you qualify for continuing coverage under COBRA. Although COBRA is designed primarily as a way for people who’ve lost their jobs to stay insured under their old plan for time, there are other circumstances under which you might qualify. For example, you may still be a candidate for COBRA if you lost your coverage because the number of hours you work has fallen below the minimum level your company requires for health insurance.Whether you would also qualify for the discounted COBRA premiums that are part of this year’s stimulus bill is hard to say, as the COBRA subsidies are meant for people who were involuntarily terminated from their job. Still, there’s enough murkiness about the rules governing COBRA and the subsidy that you ought to at least call the Employee Benefits Security Administration’s consumer hotline (866-444-3272) to see if you can somehow squeeze in under the rules.Even if you qualify for COBRA, however, that coverage generally lasts no longer than 18 months. So sooner or later (sooner if COBRA isn’t an option for you) you’ll likely need to come up with new health insurance coverage.One way to do that is to buy a private policy. Granted, that can be very expensive, but you may be able to keep costs down by looking for high-deductible coverage at sites like eHealthInsurance.com.If you can’t find affordable private insurance because of a pre-existing condition or some other reason, you may be able to find an alternative type of coverage, ranging from short-term policies to high-risk pools.And while the latest employment report shows this is hardly a good time to be looking for work (as if we needed such confirmation), it’s worth a shot to see if you can land a new job that provides health benefits and, possibly, higher pay than you’re now getting. Sites that cater to older employment seekers like RetirementJobs.com and RetiredBrains are a good place to begin that search.Staying employed has other advantages as well. You can postpone collecting Social Security and thus boost the size of your monthly check for life. The amount of the increase will depend on how much you earn while you’re still employed, but by waiting until age 65, for example, you might be able to get more than 1,500 a month instead of the 1,300 you mentioned and if you hold off until 66, your benefit could climb to 1,700 or so. (For a more accurate estimate, see the social security administration Web site.)The longer you work, the longer you can also put off tapping your nest egg, which means you’ll be less likely to run through your savings early in retirement.If you do decide to put some (but remember, not all) of your money in an immediate annuity, you might get a larger income by holding off until, since, all else equal, you’ll get a larger payment the older you are when you buy the annuity. For example, a 63-year-old who puts 100,000 into an immediate annuity today would get roughly 660 compared with 700 a month for life compared for someone who’s 66 and 775 a month for a 70-year-old.Who knows, maybe you’ll luck out and do just fine retiring at 63 without health insurance. But I think you can boost the odds of having a better life today and in the future if you stay employed even for just a few more years.

Source:CNN

NEW YORK (Fortune) — Dear Annie: I know this probably sounds nutty, with so many companies cutting pay or freezing pay in order to avoid layoffs (or, further layoffs), but I’m thinking of asking for a raise. First of all, my employer has not cut or frozen anyone’s pay — at least not to my knowledge. However, we have had layoffs here, so I’m now doing the work three people used to do.But the main reason I want to bring up money with my boss is that I was hired exactly one year ago at the low end of the salary scale for my position (production-line supervisor), and was told at that time that my pay would be reviewed – with an eye toward increasing it to at least the middle of the range – in six months. Then the recession hit, and no more was said about it. But I think I should ask, especially since my performance has been pretty great. I’ve introduced new efficiencies, cut costs, increased productivity, etc. Any advice on how to approach this? -MartyDear Marty: It takes chutzpah to ask for a raise in this economic climate, but it’s not quite as crazy as it sounds. It seems that a little over two-thirds (67%) of U.S. employers are planning pay hikes for at least some of their employees before the end of this year, according to a new survey of 850 companies by compensation consultants Mercer.Interestingly, however, the extra moolah won’t be doled out evenly across all job categories. Only 56% of executives will get pay hikes, versus 69% of professionals (a group that includes, for example, in-house attorneys), and 73% of those in “trades, production, and service” jobs (that would include you). Positions in manufacturing, engineering, and information technology are most likely to see pay increases, Mercer’s research found, while marketing, sales, and finance jobs earn stagnant or even declining wages. Overall, salary budgets in 2009 will rise by about 3.2%, roughly the average pay hike that prevailed before the recession started.Why the sudden loosening of the pursestrings? “Companies realize that they need to be poised for a turnaround,” says Steve Gross, global leader of Mercer’s compensation consulting practice. “Continuing cost-cutting measures like salary freezes may put them at a disadvantage once the economy recovers.”The fact that your job performance has been, as you put it, “pretty great” is crucial to your argument in favor of more money. Tim Schoonover, CEO of leadership-development and coaching firm OI Partners, has noticed lately that more companies are focusing attention on how to keep their best performers happy.”Top talent will be needed more than ever once the economy picks up again,” he says. “And those people have to feel the love now, because now is when employees who believe they are undervalued make the decision to leave as soon as more opportunities open up. By the time the recovery actually arrives, it will be too late to hold on to them. Their decision to go elsewhere will already have been made.”With that in mind, here are five ways to maximize your chances of getting a raise:1. Document your achievements over the past year. Don’t assume your boss already knows about the efficiencies you’ve introduced and how much they’ve boosted productivity. Prepare your case and back it up with hard facts and figures.To make sure you’re properly valued, it’s essential to “have a very clear idea of higher-ups’ expectations, and then show exactly how those expectations have been met,” Schoonover says. Clear, quantified evidence of your wonderfulness, he adds, will make it easier for your boss to justify a higher salary to anyone else in the company who has to approve it.2. Empathize with the company’s point of view. “This doesn’t have to be an adversarial conversation. In fact, it shouldn’t be,” says Schoonover. “Make sure your boss knows that you understand budgets are tight right now, and that you want to be part of the team and keep helping your employer meet its goals.” In other words, it isn’t all about you.3. Be politely assertive. You were all but promised a raise six months ago, so it’s perfectly valid to broach the subject. But if your boss replies, “Gee, I’m sorry, we just don’t have the money,” don’t just slink away. Instead, Schoonover recommends you politely press for another review, asking: “When can we revisit the subject? Maybe in three months? Six months? What would be a reasonable time frame?” Your boss may have to check with someone and get back to you, Schoonover says, but you’ll at least have made the point that you’re not just going to forget about it.4. Stay open to the idea of other forms of compensation. Many employers are trying to keep base salaries flat, Schoonover observes, but a performance bonus may still be available.”You could look at this discussion as a chance to set goals with your boss, and agree on a bonus for reaching them,” he says. “It’s one way he can give you more money without adding to fixed costs. Or you might ask for more paid vacation time instead of a raise, if that appeals to you, at least until a raise is forthcoming.” If there’s anything else you’ve been hankering after, especially if it’s cheap (a reserved parking space, maybe?), now is the time to ask.5. Keep in mind that, as they say in Brooklyn, “You don’t ask, you don’t get.” As long as you do it in a non-confrontational way, asking for a raise can’t hurt. The worst that can happen is your boss says no, so don’t hesitate to speak up. And who knows, you may be pleasantly surprised.Readers, what do you say? Has your company cut or frozen pay in the past few months? Have you asked for a raise lately? Did you get it? If so, what do you think helped you the most in persuading your boss you’re worth more? Did asking help or hurt your relationship with higher-ups? If you’re in a position to give raises, how do you decide who gets one? Post your thoughts on the Ask Annie blog.

NEW YORK: You are tethered the office 24/7 through your CrackBerry, and as a result probably make a few (dozen?) personal calls from that phone. To the wife? The babysitter? Dinner reservations, perhaps?Odds are, you don’t pay income tax on that “perk” even though the IRS requires companies to treat personal use of a work cell phone as benefit income that can be taxed. But for the two decades the rule has been in place, it has been largely ignored. Nobody – businesses nor individuals – want to go through pages of cell bills to calculate exactly what portion of your bill is personal and taxable. “Trying to track any personal calls versus business calls is a headache to document,” said Gordon Bernhardt, president of Bernhardt Wealth Management. That would certainly be “cumbersome paperwork” for businesses.0:00
/4:27No surprises, just a new iPhone”In the current environment, the rule as it operates now is pretty difficult to comply with,” agreed an IRS official. Jeff Ready, CEO of Indianapolis-based Scale Computing, remembers tracking minutes and what it headache it was. But he no longer worries about work vs. personal calls. “In the past, there were not unlimited plans and you had to track overage,” he said. “But now, everyone is on a standard plan with unlimited voice and data, so it doesn’t matter.”Even though he and others see this rule as an “outdated concept,” the IRS said it has been approached by some businesses wanting it clarified to make it easier to have employees pick up the tab for their personal calls. As such, this week the agency proposed three new plans it says might make the process less burdensome. It is seeking public comment on the options until Sept. 4. Here are the three proposals currently on the table:Minimal Personal Use Method: Under this plan, the Treasury would allow the entire expense of the business cell phone to be excluded from your personal income tax, so long as you can provide sufficient documentation that you are using a personal phone for personal calls during work hoursAnother option under this plan suggested by the IRS would define certain allowable number of minutes or situations when it would be considered acceptable to use a work phone for personal uses. Safe harbor Substantiation Method: The second proposal from the IRS would consider that 25% of employer sponsored plans are considered personal.Statistical Sampling Method: In the third proposal, businesses would use approved statistical sampling methods to average how much time employees spend using business phones for personal purposes. The company would use the average as a multiplier to determine how many minutes the employee would be responsible for covering. No matter what – if any – changes the IRS makes, Ready says he has no plans to charge his employees for any personal minutes. For him, it would be like determining how much to charge an employee for making a local call from a land line at their desk. “It just seems silly if you put it in the context of a land line.”"When I give you a cell phone, I expect you to carry it,” he added. “To get you to carry it, I expect that you are going to give the number to your spouse. To me, that is no big deal.”

Source:CNN