In a previous post, I mentioned analysts believe there will be a resumption of real growth in the economy in the fourth quarter of this year. This is still true. But, when the economy begins to grow, will you be able to feel it? Probably not. The recovery is expected to be feeble.
The Fed has predicted unemployment will rise to between 9.8% and 10.1% in 2009 before declining modestly next year. The Fed believes that GDP will decline between 1 and 1½ percent in 2009. Hiring of workers is yet to begin, but the rate of firing may have slowed. Jobless claims jumped to 554,000 last week, up 30,000 from the week before. The increase was lower than estimates. Continuing claims fell 88,000 to 6,225,000.
The fuse for our current economic meltdown was the mammoth housing sector bust. Now, there are signs that home sales have bottomed. Housing affordability is still at a record high. Sales of new and existing single-family homes may have bottomed back in January. And what about the production of houses? Is there any sign that production will pick back up? The inventory to sales ratio seems to have peaked and as people buy homes, the inventory will shrink and production will pick up to make up for it. Housing starts rose to an annual rate of 582,000 in June from 562,000 in May. Starts were expected to drop.
How do you feel about the economic recovery? Does it seem to be getting any better for you? Or is it still getting worse? Our area has faced tough times for a while now. Let us know your perspective.
The Credit CARD Act of 2009 will improve consumer disclosure and prohibit certain shady practices. And it goes into effect February of 2010.
Here's an overview of the new credit card rules:
- Consumers will get 45 days notice before rates are increased or terms are changed.
- Issuers cannot raise the rate on an existing balance unless the account is delinquent by 60 days. Rates can be increased on new balances as long as the issuer gives the 45 days notice.
- Consumers will no longer be charged over-limit fees; however, credit card companies can decline purchases that will put the card over its limit.
- Bills must be sent 21 days before a payment is due.
- Gift cards will not expire for at least five years.
These provisions are meant to help consumers, but may end up bringing some negative consequences for those who pay their balances in full. These changes will cost credit card companies money and to make up for it, some may increase interest rates and other fees, lower credit limits, and pare back rewards programs. Interest-free periods and grace periods could shorten. And this law will undoubtedly have its share of loopholes which will come to light in practice.
Remember, the law does not go into effect until next February. Until then, credit card companies can still increase rates and cut limits without warning. Some have increased minimum monthly payments from 2% to 5%. Card companies urge anyone who will have trouble making their new minimum payments to call the company, but no specific solution has been publicized.
Last week we talked about your finances and health. I emphasized that your health plays a major role in your financial picture. This is especially true as you age. Many of us over the age of 55 will be forced into retirement due to health issues and most of those people with health issues could have prevented their early retirement through regular check ups and physicals.
Let's talk about your finances and health and some steps that you need to take for yourself and your loved ones.
Step 1 - Check out your health insurance policy. I'm sure you know the deductible and extent of your coverage but do you know what happens if you go on disability both short and long term? Do you know the COBRA rules? Is your spouse covered? Lots of questions, check out your policy!
Step 2 - Disability insurance - Do you have it? If so, what does it cover and for how long? How do you qualify?
Step 3 - Retirement plan - How will it be paid? How much? And who are your beneficiaries? Can you afford to draw from your retirement before you qualify for social security?
Step 4 - Life insurance - This, of course, is a last resort but you need to know what your options will be, who your beneficiaries are, and if you have it at work, will it stop when you leave?
Lots of issues. Deal with them sooner rather than later. Because unfortunately, insurance must be purchased before you need it. Don't wait until you get sick. You and your family will be better off.
Last week we talked about taking control of your retirement accounts. This week we will talk about the relationship between health and finances.
Older Americans are living longer and acquiring greater wealth than in previous generations. That's good news; however, a study performed by the U.S. Department of Health and Human Services reported that 20-25% of Americans age 55-64 stated that a health problem limited their work activity. That's a full 1/4 of the work force in that age group. Think about that, it could be you! Those who experienced a major health problem, such as a stroke or heart attack, commonly left the labor force altogether. By age 65, only a third of men and women still work.
The study found that poor health is often a stronger influence than financial variables on a person's decision to retire. Those retirees are then hit with out of pocket medical costs and the loss of earnings.
Understand that your health is your financial picture. The two are not mutually exclusive. The average household net worth for older Americans was $31,000 when both partners were in poor health versus more than $400,000 when both were in excellent health. No one wants to be forced into retirement with very little chance at re-employment and with less money than they expected.
Preventative behaviors like cancer screenings, vaccinations, diet, physical activity, and not smoking are crucial. Get a physical to find out what your health issues are. They can be frightening to face, but the sooner you find out, the better chance you have of overcoming them.