Social Security Recipients to Get Delayed Third Stimulus Checks After SSA Sends Data to IRS

Nearly 30 million people who receive Social Security or Supplemental Security Income (SSI) benefits have been waiting to get a third stimulus check because the Social Security Administration failed to send critical information to the IRS. Fortunately, that wait should come to an end soon, now that the SSA has finally forwarded the necessary data to the tax agency.

It took a letter from four Congressmen to get the SSA to send the requested information, which they did the day after the letter was sent. However, according to the Congressmen, the necessary payment files arrived a month after the IRS requested them. That delay held up payments to millions of Americans.

The IRS has already sent approximately 127 million third-round stimulus payments worth about $325 billion over the past two weeks. More payments will be sent on a weekly basis going forward. So, hopefully, payments to the Social Security and SSI recipients who have been waiting can be sent in one of the next few batches.

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Amount of Your Third Stimulus Check

Every eligible American will receive a $1,400 third stimulus check “base amount.” The base amount jumps to $2,800 for married couples filing a joint tax return. You also get an extra $1,400 for each dependent in your family (regardless of the dependent’s age).

Not everyone will receive the full amount, though. As with the first two stimulus payments, third-round stimulus checks will be reduced – potentially to zero – for people reporting an adjusted gross income (AGI) above a certain amount on their latest tax return. If you filed your most recent tax return as a single filer, your third stimulus check will be phased-out if your AGI is $75,000 or more. That threshold jumps to $112,500 for head-of-household filers, and to $150,000 for married couples filing a joint return. Third-round stimulus checks will be completely phased out for single filers with an AGI above $80,000, head-of-household filers with an AGI over $120,000, and joint filers with an AGI exceeding $160,000.

You can use our handy Third Stimulus Check Calculator to get a customized estimated payment amount. All you have to do is answer three easy questions.

Why Does the IRS Need Data From the SSA

Third-round stimulus checks are generally based on information taken from 2019 or 2020 tax returns. However, since many Social Security and SSI recipients don’t have to file a tax return every year, the IRS tries get the information it needs for these non-filers from another source – like the SSA. But if the SSA doesn’t provide the information, the IRS can’t send out payments to these people.

Even though the SSA finally sent the requested files, Social Security or SSI recipients who have dependents might not get all the money their entitled to in their stimulus payment. That’s because the IRS won’t necessarily know anything about the dependents, which means they can’t send the additional $1,400-per-dependent payment authorized by the new stimulus law.

However, if you don’t get the extra $1,400 for a dependent now, you won’t lose out on the money — you’ll just have to wait until next year to claim it. Third-round stimulus checks that will be sent now are really just advance payments of the 2021 Recovery Rebate tax credit. So, if the IRS doesn’t send you a third stimulus check – or doesn’t send you the full amount – you can claim the credit and get a refund or reduction of the tax you owe when you file a 2021 tax return next year (you can file a return just to claim the payment).

How to Track the Status of Your Third Stimulus Check

The IRS’s online “Get My Payment” tool will let you know when your third stimulus payment is expected to arrive. Actually, it does more than just that. It also lets you:

  • Check the status of your stimulus payment;
  • Confirm your payment type (paper check or direct deposit); and
  • Get a projected direct deposit or paper check delivery date (or find out if a payment hasn’t been scheduled).

For more information about the tool, see Where’s My Stimulus Check? Use the IRS’s “Get My Payment” Tool to Get an Answer.

Seniors Living with Adult Children

Will seniors who live with an adult child get a stimulus check? The answer depends on whether the senior parent is claimed as a dependent on the adult child’s tax return. If the parent is claimed as a dependent, then he or she won’t get a stimulus check. That’s because anyone who can be claimed as a dependent on someone else’s tax return doesn’t qualify for a third stimulus check.

However, an adult child supporting an elderly parent will get the extra $1,400 added on to his or her third stimulus check if the parent is a dependent. As mentioned earlier, the age of the dependent doesn’t matter for third-round stimulus checks, which is different than for first- and second-round stimulus payments.

For more information about third-round stimulus checks, see Your Third Stimulus Check: How Much? When? And Other FAQs.

Source: kiplinger.com

Get Free Weekly Credit Reports for Another Year

The three major credit bureaus—Equifax, Experian and TransUnion—will continue to offer a free credit report to consumers each week at AnnualCreditReport.com until April 20, 2022.

The extension follows the bureaus’ move in spring 2020 to provide free weekly reports as the coronavirus pandemic struck the U.S., causing financial hardship for Americans who lost their job or faced a pay cut. Before the recent announcement, the availability of free weekly reports was scheduled to expire in April. Typically, a free report is available from each bureau only once every 12 months through AnnualCreditReport.com.

Check each report for errors or signs of fraudulent activity, such as the presence of a credit card or loan that you never opened or a collection account for a debt that you don’t owe. The most effective way to block identity thieves from opening accounts in your name is to put a free security freeze on your report from each bureau. (You can add a freeze at www.transunion.com/freeze, www.experian.com/freeze and www.equifax.com/personal/credit-report-services.) When a freeze is in place, a creditor cannot access your report in response to an application for new credit, thwarting crooks. If you want to open a credit account, you can temporarily lift the freeze.

Source: kiplinger.com

6 Biden Stimulus Benefits That Pack the Biggest Punch

The American Rescue Plan Act – the massive, $1.9 trillion economic stimulus package that President Biden signed on March 11 – sends a lot of money in many different directions. Almost every American will be impacted in one way or another. But when it comes to providing significant financial relief directly to Americans suffering the most through the COVID-19 pandemic, a lot of the American Rescue Plan’s provisions really don’t provide a lot of bang for the buck. In other words, they won’t necessarily make an immediate and/or meaningful impact on the financial health of Americans who need help the most.

However, there are a handful of provisions in the new stimulus law that go above and beyond when it comes to putting (or keeping) substantial amounts of money in the pockets of millions of Americans who are struggling financially right now. These six American Rescue Plan provisions will provide the most financial relief for the greatest number of people. As outlined below, most of them involve some sort of tax break, a couple of them provide direct payments, but all of them provide (or could provide) financial assistance that is both deep and wide.

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$1,400 Stimulus Checks

The American Rescue Plan authorizes a third round of $1,400 stimulus checks for each eligible person ($2,800 for couples), plus an additional $1,400 for each dependent (regardless of the dependent’s age). However, as with the first- and second-round payments, the third-round stimulus checks will be reduced – or eliminated – for people with an income above a certain amount.

If you filed your most recent tax return as a single filer, your third stimulus check will start to be “phased-out” (i.e., reduced) if your adjusted gross income (AGI) is $75,000 or more. That threshold jumps to $112,500 for head-of-household filers, and to $150,000 for married couples filing a joint return. Third-round stimulus checks will be completely phased out for single filers with an AGI above $80,000, head-of-household filers with an AGI over $120,000, and joint filers with an AGI exceeding $160,000. Use our Third Stimulus Check Calculator to estimate the amount of your stimulus payment.

Nonresident aliens and anyone who can be claimed as a dependent on someone else’s tax return do not qualify for a stimulus check.

Eligible Americans who don’t receive a third stimulus check, or don’t receive the full amount, can claim the difference as a Recovery Rebate credit when they file their 2021 tax return next year.

For more information, see Your Third Stimulus Check: How Much? When? And Other FAQs.

Unemployment Benefits

Last March, the CARES Act was a life saver for people who lost their job because of the pandemic. Unemployment benefits were provided to self-employed people, independent contractors, and others out of work because of the coronavirus pandemic who don’t otherwise qualify for benefits. Weekly unemployment checks were also increased by $600 through July 2020. Benefits were made available for a longer period of time, too.

In December, the COVID-Related Tax Relief Act extended benefits for people who usually don’t qualify for unemployment. An extra payment was also authorized, but at $300 per week instead of $600 per week. The number of weeks of benefits someone may claim was increased from 39 to 50, too. However, these benefits were set to expire on March 14.

Under the American Rescue Plan, the enhanced unemployment benefits are extended to September 6, 2021. That includes the $300-per-week of additional payments beyond the normal unemployment compensation allowed. (Progressives wanted a minimum of $400 in extra weekly benefits, but the amount was pushed back down to $300 during negotiations in the Senate.)

There’s also a new tax break for the unemployed. Thanks to the American Rescue Plan, the first $10,200 of unemployment benefits received in 2020 are exempt from tax for households with an adjusted gross income of $150,000 or less (although unemployment compensation received doesn’t count toward the $150,000 cut off). The IRS is figuring out how people who already filed their 2020 tax return can claim this new tax exemption. They will probably be able to automatically issue a refund to affected taxpayers – so don’t file an amended return at this point. (Also remember that state taxes may still apply to the full amount of unemployment benefits you received in 2020.)

For more information on these new developments, see American Workers Get Enhanced Unemployment Benefits as Biden Signs Stimulus Package.

Child and Dependent Care Tax Credit

Finding and affording childcare is one of the more difficult challenges workers are facing during the pandemic. To help address the childcare affordability crisis, the American Rescue Plan significantly expands the child and dependent care tax credit for one year.

For the 2020 tax year, if your children were younger than 13, you were eligible for a 20% to 35% non-refundable credit for up to $3,000 in child-care expenses for one child or $6,000 for two or more. The percentage decreased as income exceeded $15,000.

The American Rescue Plan makes a number of enhancements to the credit for the 2021 tax year. First of all, the new stimulus law makes the credit refundable for this year. That helps lower-income people the most, since they are more likely to lose all or some of the credit’s worth when it’s non-refundable. It also bumps the maximum credit percentage up from 35% to 50% for 2021.

More of your childcare expenses are subject to the credit, too. Instead of up to $3,000 in childcare expenses for one child and $6,000 for two or more, the American Rescue Plan allows the credit for up to $8,000 in expenses for one child and $16,000 for multiple children in 2021. When combined with the 50% maximum credit percentage, that puts the top credit for this tax year at $4,000 if you have just one child and $8,000 for more kids.

In addition, the full credit will be allowed for families making less than $125,000 a year (instead of $15,000 per year). After that, the credit starts to phase-out. However, all families making between $125,000 and $440,000 will receive at least a partial credit.

See Child Care Tax Credit Expanded for 2021 for more information.

Child Tax Credit

Another way to help families with children is to increase the child tax credit. For 2020 tax returns that you’re filing this year, the credit is worth $2,000 per child age 16 or younger. It also begins to disappear as income rises above $400,000 on joint returns and above $200,000 on single and head-of-household returns. For some lower-income taxpayers, the credit is partially “refundable” (up to $1,400 per qualifying child) if they have earned income of at least $2,500. That means the IRS will issue you a refund check for the refundable amount if the credit is worth more than your income tax liability.

The American Rescue Plan provides a dramatic, one-year expansion of the child tax credit for the 2021 tax year. One of the biggest changes is to the amount of the credit. For 2021, it jumps from $2,000 to $3,000 for most children – but to $3,600 for children 5 years old and younger. The extra amount ($1,000 or $1,600) is reduced – potentially to zero – for families with higher incomes, though. For people filing their tax return as a single person, the extra amount starts to phase-out if their adjusted gross income is above $75,000. The phase-out begins at $112,500 for head-of-household filers and $150,000 for married couples filing a joint return. The credit amount is further reduced under the pre-existing $200,000/$400,000 phase-out rules.

Another important change is that the 2021 credit is fully refundable. That means refund checks triggered by this year’s credit can be greater than $1,400. The $2,500-of-earned-income required is dropped for 2021, too.

Children age 17 also qualify for the 2021 credit. That will make a huge difference for parents with kids turning 17 this year – that’s an additional $3,000 they weren’t expecting.

Last but not least, half of the 2021 credit amount will be paid in advance through periodic payments issued between July and December of this year. We expect the periodic payments to be monthly, but that will be up to the IRS (they might make payments on a different schedule). You’ll claim the other half of the credit on your 2021 tax return, which you’ll file next year. Kiplinger’s 2021 Child Tax Credit Calculator lets you know how much your credit will be for 2021 (including how much your advance payments will be if paid monthly).

For more information about the 2021 child tax credit, see Families Get a $3,000 Child Tax Credit for 2021.

Earned Income Tax Credit

The earned income tax credit (EITC) provides an incentive for people to work. And, for 2021, many more workers without qualifying children will be able to claim this valuable credit, including both younger and older Americans. The “childless EITC” amounts will be higher, too. Plus, there are other changes that will help the bottom line for lower-income Americans as well.

For the 2020 tax returns that people are filing now, the maximum EITC ranges from $538 to $6,660 depending on your income and how many children you have. But there are income limits for the credit. For example, if you have no children, your 2020 earned income and adjusted gross income (AGI) must each be less than $15,820 for singles and $21,710 for joint filers. If you have three or more children and are married, though, your 2020 earned income and AGI can be as high as $56,844. (Note: People can use their earned income from 2019 to determine the EITC for the 2020 tax year if it results in a higher credit amount.) If you don’t have a qualifying child, you must be between 25 and 64 years old at the end of the tax year to claim the EITC.

The American Rescue Plan expands the 2021 EITC for childless workers in a few ways. First, the new law generally lowers the minimum age from 25 to 19 (except for certain full-time students). It also eliminates the maximum age limit (65), so older people without qualifying children can claim the 2021 credit, too. The maximum credit available for childless workers is also increased from $543 to $1,502 for the 2021 tax year. Expanded eligibility rules for former foster youth and homeless youth apply as well.

As with the 2020 EITC, you can use your 2019 earned income instead of your 2021 income if that will boost your credit amount. That will help many people who were laid off, furloughed, or otherwise suffer an income loss this year.

There are also a few permanent EITC changes in the American Rescue Plan. For instance, workers who otherwise wouldn’t be able to claim the credit because their children can’t satisfy the identification requirements can now claim the childless EITC. Certain married but separated couples can now claim the EITC on separate tax returns, too. The limit on a worker’s investment income is also increased from $3,650 (for 2020) to $10,000 (adjusted for inflation after 2021).

Student Loan Debt

Our final power punching piece of the American Rescue Plan won’t affect very many people right now. But it will save millions of Americans big bucks if it’s eventually paired with another financial benefit on President Biden’s wish list – student loan forgiveness.

Normally, the amount of any debt that is canceled, forgiven, or discharged for less than the full amount you owe is taxable and must be reported on your tax return. For example, if you have a $20,000 loan that is forgiven for some reason, you must report $20,000 of additional income on your tax return. There are several exceptions to this general rule, but in most cases forgiven student loans currently result in a higher tax bill.

The American Rescue Plan adds a temporary exception to the general rule for student loans. From 2021 to 2025, forgiven student loan debt is not subject to federal income tax. (To be clear, the American Rescue Plan doesn’t forgive any student loan debt. At this time, the tax exemption only applies to debt cancelled under current student loan forgiveness programs.)

Right now, relatively few people have their student loans wiped away. But President Biden promised to forgive up to $10,000 of student loan debt per person when he was running for office. If he keeps that promise, the tax exemption could save millions of people thousands of dollars. If, for example, you’re in the 22% tax bracket, having $10,000 of forgiven student loan debt taken off your tax return will save you $2,200. So, as you can see, the tax exemption for forgiven student loan debt has a lot of potential.

For more on this development, see Forgiven Student Loan Debt Will Be Tax-Free.

Source: kiplinger.com

Taking a 401(k) Loan to Fill Income Gaps? Tips Before You Dip!

One of my first positions was in a 401(k) call center, where one of the most common questions people asked was about taking a plan loan to pay off their credit card debt.

When I went to my manager for guidance, I was told in no uncertain terms that we were never ever to broach this topic, as it bordered on financial advice. Throughout my career I have seen that employers refuse to discuss 401(k) plan loans as a source of debt financing. To the extent plan materials provide any advice regarding loans, the message is usually centered on the dangers of borrowing from your retirement nest egg.

The reluctance to communicate the prudent use of 401(k) plan loans can be seen in the number of people holding different types of debt.

While numbers vary, 22% of 401(k) plan participants have a 401(k) loan outstanding, according to T. Rowe Price’s Reference Point 2020. Compare this to 45% of families holding credit card debt and 37% having vehicle loans (source: U.S. Federal Reserve Board Summary of Consumer Finances). Yet the interest rate charged on 401(k) plan loans is typically far lower than other available options. The annual interest rate of plan loans is typically set at Prime Rate +1%. As of March 2021, prime +1 is 4.25%. The average annual percentage rate (APR) on credit cards as of March 2021 is 16.5%. And depending on your state, payday or car title loans have an APR varying from 36% to over 600%!

The basics of how it works

Participants in an employer-sponsored defined contribution program, such as a 401(k), 457(b) or 403(b) plan, can typically borrow up to 50% of their plan account balance, up to $50,000.

Loans other than for purchase of a personal residence must be repaid within five years. Repayments are credited to your own account as a way to replenish the amount borrowed, and there are no tax consequences so long as the loan is repaid.

What’s at stake

I still think about my call center experience and wonder why we couldn’t have been more helpful. I would never recommend tapping your retirement savings to pay for current expenditures, but the need for short-term borrowing is an unfortunate reality for many people.

If you have to borrow, why not at least examine the advantages of tapping your plan over other short-term financing options? Besides lower interest rates here are some potential advantages of 401(k) loans: 

  • A 401(K) loan is not reported to credit bureaus such as Equifax, TransUnion and Experian, and therefore not considered in the calculation of your credit score.
  • Your credit score will not suffer in the event that you “default” on a 401(k) loan by not repaying any outstanding balance if you leave your job.
  • In the event that you miss a payment (for example, by going out on an unpaid leave of absence), you are not charged any late fees. (However, the loan may be reamortized so repayments are completed within the original term.)
  • The interest rate on your plan loan is fixed through the term of the loan and can’t be raised.

Of course, there are disadvantages as well, including:

  • Beyond the interest payments, there is the cost of the investment gains you’re giving up on the outstanding loan balance, ultimately reducing your retirement assets.
  • Most plans charge fees of $25 to $75 to initiate a loan, as well as annual charges of $25 to $50 if the loan extends beyond one year. If you are borrowing small amounts, this may eliminate most if not all of the cost advantage over credit debt.
  • Since you make repayments using after-tax dollars, you are being double-taxed when you eventually receive a distribution from the Plan.
  • Unlike other consumer debt, you can’t discharge the debt in the event of bankruptcy.
  • If you leave your job during the repayment period, you may be required to make a balloon payment to repay the loan in full — either to the original plan or a Rollover IRA. Otherwise, the outstanding balance is then reported as taxable income, and you can also be assessed an additional 10% early withdrawal fee on the outstanding balance. (Although some plans do permit terminated participants to continue repaying their loans from their personal assets rather than through payroll deduction, but this is not the norm.)

Good news 

Final regulations have been issued by the IRS on a provision (Section 13613) of the Tax Cuts and Jobs Act of 2017 (TCJA) extending the time that terminated employees can roll over their outstanding 401(k) loan balance without penalty. Previously, you had 60 days to roll over a plan loan offset amount to another eligible retirement plan (usually an IRA). The new rules stipulate that effective with loan offset amounts occurring on or after Aug. 20, 2020, you have until the due date (with extensions) for filing your federal income tax return, to roll over your plan loan balances.

By way of example, if you leave your job in 2021 with an outstanding 401(k) plan loan, you have until April 2022 (without extensions) to roll over the loan balance.

Make the right choice – but tread carefully

After all other cash flow options have been exhausted — including such possibilities as reducing voluntary (unmatched) 401(k) contributions or reviewing the necessity of any subscription services which are automatically charged to your credit card – ,) — participants should compare plan loans to other short-term financing options. Some of the points to specifically consider include:

  1. Do you expect to remain in your job during the loan repayment?  As noted above, if you leave your job you may be required to make a balloon payment of the outstanding balance or face taxes and penalties on the outstanding balance. 
  2. If you are uncertain about remaining in your job, do you have the ability to pay off the outstanding balance if required?  The research behind plan loans shows there is real damage to your long-term retirement income adequacy from defaults, considering the accompanying taxes and penalties.
  3. If you take a plan loan, can you still afford to contribute to your retirement plan? In particular, you should strive to contribute enough to receive the maximum matching contribution provided by your employer. 
  4. If you are still considering a loan after answering these gating questions, you should compare the total cost of different debt options.  Vanguard has a tool available on its website that lets you compare plan loans to other debt options and includes the forgone investment experience during the term of the loan. (You should also include any loan fees in the cost comparison.)

Again, no one advocates this type of borrowing except if it’s more advantageous than your other alternatives. So, if your employer  isn’t walking you through the pros and cons of a taking a loan against your 401(k), investigate them for yourself.

Principal, Buck

Alan Vorchheimer is a Certified Employee Benefits Specialist (CEBS) and principal in the Wealth Practice at Buck, an integrated HR and benefits consulting, technology and administration services firm.  Alan works with leading corporate, public sector and multi-employer clients to support the management of defined contribution and defined benefit plans.

Source: kiplinger.com

Social Security Basics: 12 Things You Must Know About Claiming and Maximizing Your Social Security Benefits

For many Americans, Social Security benefits are the bedrock of retirement income. Maximizing that stream of income is critical to funding your retirement dreams.

The rules for claiming Social Security benefits can be complex, but this guide will help you wade through the details. By educating yourself about Social Security, you can ensure that you claim the maximum amount to which you are entitled.

Here are 12 essential details you need to know.

Your Social Security ‘Full Retirement Age’ Plays a Big Role – Know It

First things first: Determine your Social Security full retirement age. For people born between 1943 and 1954, full retirement age is 66. It gradually climbs toward 67 if your birthday falls between 1955 and 1959. For those born in 1960 or later, full retirement age is 67.

You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. More on that in a moment.

How Your Social Security Benefits Are Earned

To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn as many as four credits a year, so it takes 10 years of work to qualify for Social Security.

In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.

How Your Social Security Benefits Are Calculated

Your Social Security benefits are based on the 35 calendar years in which you earned the most money. If you have fewer than 35 years of earnings, each year with no earnings will be factored in at zero. You can increase your Social Security benefit at any time (even via part-time work in retirement) by replacing a zero or low-income year with a higher-income year.

There is a maximum Social Security benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2021, the maximum monthly benefit is $3,113. For someone filing at age 70, the maximum monthly amount is $3,895.

You can estimate your own benefit by using Social Security’s online Retirement Estimator.

There’s an Annual Social Security Cost-of-Living Adjustment (COLA)

One of the most attractive features of Social Security benefits is that every year the government adjusts the benefit for inflation. Known as a cost-of-living adjustment, or COLA, this inflation protection can help you keep up with rising living expenses during retirement. The Social Security COLA is quite valuable; it’s the equivalent of buying inflation protection on a private annuity, which can cost a pretty penny.

Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. In 2021, Social Security beneficiaries will see a 1.3% COLA in their monthly Social Security benefits. 

The Kiplinger Letter forecast in March that the 2022 COLA would be 3%, which would be the largest increase since 2012 when Social Security benefits ticked up 3.6%.  

Here’s what COLAs have been in other recent years:

  • 2009: 5.8%
  • 2010: 0%
  • 2011: 0%
  • 2012: 3.6%
  • 2013: 1.7%
  • 2014: 1.5%
  • 2015: 1.7%
  • 2016: 0%
  • 2017: 0.3%
  • 2018: 2%
  • 2019: 2.8%
  • 2020: 1.6%
  • 2021: 1.3%

Your Monthly Social Security Benefits Grow the Longer You Wait to Claim

You can collect Social Security benefits as soon as you turn 62, but taking benefits before your full retirement age results in a permanent benefits reduction — of as much as 25% to 30%, depending on your full retirement age.

If you wait until you hit full retirement age to claim Social Security benefits, you’ll receive 100% of your earned benefits. Or you can keep waiting to claim your Social Security benefits – all the way to age 70. There’s a big bonus to delaying your claim — your monthly Social Security benefit will grow by 8% a year until age 70. Any cost-of-living adjustments will be included, too, so you don’t forgo those by waiting.

Waiting to claim your Social Security benefits can benefit your heirs as well. By waiting to take his benefit, a high-earning husband, for example, can ensure that his low-earning wife will receive a much higher survivor benefit in the event he dies before her. (More on Social Security benefits for surviving spouses in a moment.) That extra income of up to 32% could make a big difference for a widow whose household is down to one Social Security benefit.

There’s a Social Security Spousal Benefit

Marriage brings couples an advantage when it comes to Social Security. Namely, one spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s Social Security benefit. Put simply, if your monthly Social Security benefit is worth $2,000 but your spouse’s own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 — bringing in $500 more in income per month. (Note: The higher-earning spouse must apply for his or her own Social Security benefit first.) Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earner’s benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.

Another spousal-benefit tactic: In some cases, a spouse who is delaying his or her own benefit but still wants to bring some Social Security income into the household can restrict their application to a spousal benefit only. To use this strategy, the spouse restricting his or her application must be at full retirement age and he or she must have been born on or before January 1, 1954. So the lower-earning spouse, say the wife, applies for benefits on her own record. The husband then applies for a spousal benefit only, and he receives half of his wife’s benefit while his own benefit continues to grow. When he’s 70, he can switch to his own, higher benefit. 

Children Can Collect Social Security Benefits, Too

Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18 (or up to age 19 if they are full-time students who haven’t graduated from high school) and disabled children older than 18 may be able to receive up to half of a parent’s Social Security benefit. The disability must have occurred before the age of 22. As long as the disability prevents the person from working, the adult child can continue collecting the benefit even after the parent has died.

There Are Social Security Benefits for Surviving Spouses and Children

If your spouse dies before you, you can take a Social Security survivor benefit, but not in addition to your own benefit. You must choose one or the other. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death (or 100% of what your spouse would have been eligible to receive if he or she hadn’t yet taken benefits).

A widow or widower can start taking a survivor benefit at age 60, but the benefit will be reduced because it’s taken before full retirement age. If you remarry before age 60, you cannot get a survivor benefit. But if you remarry after age 60, you may be eligible to receive a survivor benefit based on your former spouse’s earnings record.

Eligible children who are under age 18 (up to age 19 if attending high school full time) or were disabled before age 22 can also receive a Social Security survivor benefit, worth up to 75% of the deceased’s benefit.

You Can Claim Social Security Benefits Earned by Your Ex-Spouse

Just because you’re divorced doesn’t mean you’ve lost the ability to get a Social Security benefit based on your former spouse’s earnings record. You can receive a benefit based on his or her record instead of a benefit based on your own work record if you were married at least 10 years, you are 62 or older, and single.

Like a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex’s record has no effect on his or her benefit or the benefit of your ex’s new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still take a benefit on the ex’s record if you have been divorced for at least two years.

Note: Ex-spouses can also take a survivor benefit if their ex has died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.

A claiming strategy if you’re divorced: Exes at full retirement age who were born on January 1, 1954, or earlier can apply to restrict their application to a spousal benefit while letting their own benefit grow.

You Can Undo a Social Security Claiming Decision

There aren’t many times in life you can take a mulligan. But Social Security offers you the chance for a do-over. Say you claimed your benefit, but soon thereafter wish you had waited to take it. Within the first 12 months of claiming Social Security benefits, you can withdraw the application. You will need to pay back all the benefits you received, including any spousal benefits based on your record. But you can later restart your Social Security benefits at the higher amount you’ll earn by waiting.

Early claimers have another opportunity for a do-over: They can choose to suspend their Social Security benefit at full retirement age. Say you took your benefit at age 62. Once you turn full retirement age, you can suspend your benefit. You don’t have to pay back what you have received, and your benefit will earn delayed retirement credits of 8% a year. Wait to restart your benefit at age 70, and your monthly payment will get up to a 32% boost — which could erase much of the reduction from claiming early.

Your Social Security Benefits Will Be Taxed

Most people know that you pay tax into the Social Security Trust Fund throughout your career, but did you know that you may also have to pay tax on your Social Security benefits once you start receiving them? Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven’t been increased since then.

As a result, it doesn’t take a lot of income for your Social Security benefits to be pinched by Uncle Sam. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.

You may also have to pay state income taxes on your Social Security benefits. See our list of the 13 States That Tax Social Security Benefits.

Beware the Social Security Earnings Test

Bringing in too much money in earned income can cost you if you continue to work after claiming Social Security benefits early. With what is commonly known as the Social Security earnings test, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2021 is $18,960. Once you are past full retirement age, the earnings test disappears, and you can make as much money as you want with no impact on benefits.

Any Social Security benefits forfeited to the earnings test are not lost forever. At your full retirement age, the Social Security Administration will recalculate your benefits to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full year’s worth of benefits to the earnings test, at a full retirement age of 66 your benefits will be recomputed — and increased — as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits would be 20% rather than 25%.

Source: kiplinger.com

Stock Market Today: Energy, Industrials Lead a Slow Day for Stocks

An afternoon slide sent the major indices lower Wednesday, though the Dow’s losses were minimal amid a rebound in energy and industrial stocks.

Oil prices rose sharply thanks in part to a logjam in the Suez Canal. (Really: A Panamanian container ship ran aground Tuesday, clogging the Egyptian passage through which 10% of the world’s seaborne oil trade passes.)

While the impact on prices is expected to be short-lived, U.S. crude oil futures jumped 5.9% to $61.18 per barrel, sparking strong gains in Dow component Chevron (CVX, +2.7%) as well as other large energy stocks including ConocoPhillips (COP, +2.9%) and EOG Resources (EOG, +4.2%).

Also Wednesday, IHS Markit’s “flash” reading of the service industry’s February performance revealed the strongest growth in more than six years, while manufacturing also sped up.

The Dow Jones Industrial Average, which had traded in the black for all but the final couple minutes of Wednesday’s session, declined marginally to 32,420. Chevron provided ballast, as did industrial firms Caterpillar (CAT, +1.4%) and Honeywell (HON, +1.7%).

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Financials (XLF, +0.4%) also exhibited a little relative strength. In her Congressional testimony on Wednesday, U.S. Treasury Secretary Janet Yellen “made an interesting comment on stock buybacks,” notes Anu Gaggar, senior global investment analyst for Commonwealth Financial Network. “She said that financial institutions look healthier and should have the flexibility to return capital to shareholders. Greater flexibility for buybacks and dividends could be a positive for bank stocks.”

Other action in the stock market today:

  • The S&P 500 dipped 0.6% to 3,889.
  • The Russell 2000 had another brutal session, finishing 2.4% lower to 2,134. The small-cap index has dropped nearly 9% in the past week.
  • GameStop (GME, -33.8%) was in the spotlight after reporting its fourth-quarter earnings Tuesday evening, and its shares provided fireworks … just not the right kind. “Sales declined 30.2% to $1.0B, missing consensus, with comps falling 24.6%, also missing expectations,” says CFRA analyst Camilla Yanushevsky. “After surging 135% year-to-date, very little has changed in GME’s fundamental story. We hold concerns over GME’s ability to maintain competitive positioning, namely due to high dependence on brick-and-mortar and secular shift away from physical gaming and toward digital and mobile.”
  • Gold futures improved by 0.5% to settle at $1,733.20 per ounce.
  • Bitcoin prices tumbled 4.4% to $54,770. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
stock chart for 032421stock chart for 032421

The Nasdaq’s Turbulence Continues

Other parts of the market traversed much choppier waters. The on-again, off-again Nasdaq Composite declined 2.0% to 12,961, hobbled by the likes of Tesla (TSLA, -4.8%) and Facebook (FB, -2.9%).

We can’t blame the usual bugaboo, though; Treasury yields were on the decline Wednesday. But that’s not the only problem the index faces.

“The Nasdaq could drop 20% and still be trading at 30 times (earnings), and the S&P could drop 20% and still have a P/E over 20. Those are both historically high,” says Sean O’Hara, president of Pacer ETFs. “We are getting reports of great earnings growth and GDP growth, but both earnings and GDP are still below where they were going into 2020. So, the broad market is expensive.”

Among other things, that means it might pay to identify growthier trends, then wait for the right moments to buy at lower prices, be they video game stocks, 5G plays or a host of other high-quality (but overheated) picks.

Meanwhile, remember: Dividends ensure you get paid, even in sideways markets. While there are dozens of ways to peel that orange, one of the simplest is hunkering down into a diversified income fund or two, and keeping fees low so you enjoy more of your yield. Among your options are a quartet of highly thought-of Vanguard dividend and income funds that we’ve just evaluated – a blend of actively managed and index funds for stock and bond investors alike.

Source: kiplinger.com

The 25 Best Low-Fee Mutual Funds You Can Buy

The Kiplinger 25 list of our favorite no-load mutual funds dates back to 2004, and our coverage of mutual funds goes all the way back to the 1950s. We believe in holding funds rather than trading them, so we focus on promising mutual funds with solid long-term records – and managers with tenures to match.

Over the past 12 months, U.S. stocks hit new highs, and then a viral pandemic snuffed out a nearly 11-year bull market, wiping out gains in just days … and then stocks bounced back into a new bull market just a few months later. The major indices have been roaring ever since, and have been regularly setting all-time highs of late.

That has many (but not all) of our Kiplinger 25 picks looking like their old selves.

Over the past decade, for instance, the 11 U.S. diversified stock funds with 10-year records returned an average of 13.4% annualized, right on par with the S&P 500 Index. Our seven bond funds as a group beat the Bloomberg Barclays U.S. Aggregate Bond Index over the past five and 10 years on an annualized-return basis.

Here are our picks for the best 25 low-fee mutual funds: what makes them tick, and what kind of returns they’ve delivered.

Data is as of March 5, unless otherwise noted. Three-, five- and 10-year returns are annualized. Yields on equity funds represent the trailing 12-month yield. Yields on balanced and bond funds are SEC yields, which reflect the interest earned after deducting fund expenses for the most recent 30-day period.
– Fund not in existence for the entire period.

1 of 25

Dodge & Cox Stock

Composite image representing Dodge & Cox's DODGX fundComposite image representing Dodge & Cox's DODGX fund
  • Symbol: DODGX
  • 1-year return: 39.3%
  • 3-year return: 11.6%
  • 5-year return: 16.0%
  • 10-year return: 12.8%
  • Yield: 1.5%
  • Expense ratio: 0.52%

The focus: Reasonably priced shares in large and midsize companies.

The process: Eight managers select stocks to buy and hold for at least three to five years (but typically longer). They favor firms with steady cash flow and earnings growth.

The track record: The fund’s 10-year annualized return of 12.8% beat 98% of all large value-oriented funds. After lagging their growth-focused counterparts for a decade, value-priced stocks are waking up.  

The last word: This fund is a sturdy option for investors looking to balance FAANG-heavy portfolios. Capital One Financial, Charles Schwab and Wells Fargo are among the top holdings.

2 of 25

Mairs & Power Growth

MPGFXMPGFX
  • Symbol: MPGFX
  • 1-year return: 31.6%
  • 3-year return: 15.1%
  • 5-year return: 14.1%
  • 10-year return: 12.9%
  • Yield: 1.0%
  • Expense ratio: 0.65%

The focus: Growing companies of all sizes trading at a reasonable price.

The process: The Saint Paul, Minn.–based managers like to know their companies well, so they invest a majority of the fund’s assets in firms based in the Upper Midwest. The portfolio has a hefty helping of industrial and health care stocks but less tech than similar funds, on average.

The track record: The fund’s value tilt is part of the reason its 10-year annualized return, 12.9%, lagged the S&P 500’s 13.6% gain. Still, the fund beat the majority of its peers (funds that invest in firms with growth and value characteristics). Last year, graphics chip maker Nvidia and Bio-Techne, which makes biotech research tools, were big gainers.

The last word: The fund is quirky, but it offers diversification from tech-heavy growth funds.

3 of 25

Fidelity Blue Chip Growth

  • Symbol: FBGRX
  • 1-year return: 65.0%
  • 3-year return: 27.4%
  • 5-year return: 26.9%
  • 10-year return: 18.9%
  • Yield: 0.0%
  • Expense ratio: 0.79%

The focus: Fast-growing large firms.

The process: Sonu Kalra’s portfolio can be sorted into three buckets: firms with robust long-term growth (e-commerce companies, for example), companies in a cyclically driven growth phase (financials, say) and a smaller group he calls “self-help stories,” which are businesses with a new manager or product (think of a retailer, for instance, with a growth driver that’s underappreciated).

The track record: The fund’s 10-year 18.9% annualized return beat the S&P 500 and 95% of peers (large-company growth funds).

The last word: Except for the brief bear market in early 2020, Kalra has had a bull market behind him since he took over in 2009. But he beat the S&P 500 as manager of Fidelity OTC between 2005 and mid 2009, a period that included a bigger downturn.

4 of 25

Primecap Odyssey Growth

POGRXPOGRX
  • Symbol: POGRX
  • 1-year return: 41.0%
  • 3-year return: 11.0%
  • 5-year return: 18.1%
  • 10-year return: 14.6%
  • Yield: 0.3%
  • Expense ratio: 0.65%

The focus: Fast-growing firms.

The process: Five managers divide the fund’s assets and run each share independently. Each manager looks for firms with long-term growth potential that the market has underestimated.

The track record: The fund’s three-year return lags the S&P 500, but its five- and 10-year records handily beat the index.

The last word: Patient shareholders are being rewarded. The fund’s six-month return doubled the S&P 500’s gain thanks to recent climbs by top holdings Micron Technology, Tesla and Morgan Stanley.

5 of 25

T. Rowe Price Dividend Growth

PRDGXPRDGX
  • Symbol: PRDGX
  • 1-year return: 22.0%
  • 3-year return: 14.0%
  • 5-year return: 15.0%
  • 10-year return: 12.9%
  • Yield: 1.0%
  • Expense ratio: 0.63%

The focus: Dividend stocks.

The process: Manager Tom Huber focuses on high-quality companies that throw off cash and have the capacity or willingness to raise payouts.

The track record: In its 20-plus years under Huber, the fund has returned 8.3% annualized, which beat the 6.7% gain in the S&P 500.

The last word: Stocks that lean defensive, such as McDonald’s and discount retailer Ross Stores, suffered during the economic shutdown and then didn’t bounce back in the recovery as much as fast-growing tech stocks did. That partly explains why the fund’s one-year return lagged the index.

6 of 25

Vanguard Equity-Income

Composite image representing Vanguard's VEIPX fundComposite image representing Vanguard's VEIPX fund
  • Symbol: VEIPX
  • 1-year return: 19.2%
  • 3-year return: 9.0%
  • 5-year return: 11.7%
  • 10-year return: 11.7%
  • Yield: 2.5%
  • Expense ratio: 0.28%

The focus: Dividend-paying companies.

The process: Wellington Management’s Michael Reckmeyer runs two-thirds of the fund’s assets, focusing on healthy firms with competitive ad­vantages that can sustain and increase dividend payouts. Last year, Reckmeyer added to the portfolio medical equipment firm Becton Dickinson and financial powerhouse Morgan Stanley, among others, at bargain prices. Vanguard’s in-house quantitative stock-picking group manages the rest of the assets.

The track record: Equity-Income beat 90% of large value funds with its 10-year annualized return of 11.7%. The fund’s yield of 2.5% bests the S&P 500’s 1.5% yield.

The last word: “It has been an interesting year, but overall we’ve managed through the dislocation well,” says Reckmeyer. We agree.

7 of 25

DF Dent Midcap Growth

DFDMXDFDMX
  • Symbol: DFDMX
  • 1-year return: 22.9%
  • 3-year return: 18.6%
  • 5-year return: 19.9%
  • 10-year return:
  • Yield: 0.0%
  • Expense ratio: 0.98%

The focus: Growing midsize-company stocks.

The process: The fund’s managers favor “best in class” companies, defined as firms with a leading market share in their industry, strong growth potential, a history of good profitability, and executives who practice good governance and display personal humility and indomitable will. Verisk Analytics and Waste Connections are top holdings.

The track record: The fund’s five-year annualized return of 19.9% beat its peers (midsize growth funds). Performance, red-hot in 2019 and 2020, has cooled lately, in part because the managers have taken some profits in the fund’s tech stocks. Also, firms with less-than-stellar balance sheets and inconsistent profits have flourished recently, and the fund favors high-quality firms.

The last word: Midcap Growth has been a Kip 25 top performer.

8 of 25

Parnassus Mid Cap

PARMXPARMX
  • Symbol: PARMX
  • 1-year return: 20.9%
  • 3-year return: 11.2%
  • 5-year return: 12.9%
  • 10-year return: 11.5%
  • Yield: 0.2%
  • Expense ratio: 0.99%

The focus: Midsize firms that meet high environmental, social and governance standards.

The process: Matt Gershuny and comanager Lori Keith hunt for businesses with in-demand products or services that dominate their industries. Some firms have both defensive and offensive traits. Electronic design automation company Synopsys, for instance, signs multiyear contracts to help design chips for the Internet of Things.

The track record: Mid Cap’s value tilt has hobbled the fund in recent years. But it has kept pace with the Russell Mid Cap index over the long haul.

The last word: The fund is a solid, core ESG fund.

9 of 25

T. Rowe Price Small-Cap Value

PRSVXPRSVX
  • Symbol: PRSVX
  • 1-year return: 41.7%
  • 3-year return: 12.2%
  • 5-year return: 15.4%
  • 10-year return: 11.1%
  • Yield: 0.3%
  • Expense ratio: 0.83%

The focus: Small company bargains.

The process: Manager David Wagner favors profitable firms with a competitive edge over rivals—especially companies that are healthy enough to survive a one- to two-year downturn. In 2020, he scooped up dozens of stocks at low prices, including Planet Fitness and Papa John’s International.

The track record: Since Wagner took over in mid 2014, the fund has swept past its peers.

The last word: Over the past 12 months, this high-quality fund lagged the Russell 2000 in part because lower-quality fare has led the recent small-stock rally.

10 of 25

T. Rowe Price QM U.S. Small-Cap Growth

PRDSXPRDSX
  • Symbol: PRDSX
  • 1-year return: 37.4%
  • 3-year return: 14.9%
  • 5-year return: 17.3%
  • 10-year return: 13.7%
  • Yield: 0.0%
  • Expense ratio: 0.79%

The focus: Small, growing companies.

The process: A quantitative model developed by manager Sudhir Nanda finds high-quality firms generating steady cash flows and earnings.

The track record: Over the past three, five and 10 years, the fund beat the Russell 2000 small-company index.

The last word: Don’t sweat the fund’s recent lag. A high-quality bias helps in downturns, but when non-profitable, low-quality stocks shine, as in recent months, the fund can lag its peers.

11 of 25

Wasatch Small Cap Value

WMCVXWMCVX
  • Symbol: WMCVX
  • 1-year return: 52.9%
  • 3-year return: 13.5%
  • 5-year return: 16.7%
  • 10-year return: 12.5%
  • Yield: 0.0%
  • Expense ratio: 1.21%

The focus: Small, growing companies that trade at discount prices.

The process: Manager Jim Larkins mixes undiscovered gems with firms undergoing a turnaround and stable, slower growers. Big holdings include Kadant, an engineering-equipment supplier, and Altria Industrial Motion, a maker of brakes and clutches.

The track record: Larkins’s 10-year return beat those of the Russell 2000 and the fund’s peers (small value-oriented funds).

The last word: After a long drought, small value stocks—and thus this fund—are looking like a tall glass of water. Small value funds led all U.S. broad stock categories over the past six months.

12 of 25

Brown Capital Management International Small Company

  • Symbol: BCSVX
  • 1-year return: 44.1%
  • 3-year return: 16.7%
  • 5-year return: 20.6%
  • 10-year return:
  • Yield: 0.0%
  • Expense ratio: 1.40%

The focus: Small companies, mostly in developed foreign countries.

The process: Four managers work together to find what they call ex­ceptional growth companies. Those firms boast solid revenue and earnings growth, a competitive, sustainable position in their industries, and ex­ecutives with a vision of the future and an ability to deliver on it.

The track record: The fund’s 20.6% annualized return over the past five years is nearly double the return of the MSCI ACWI Ex USA Small index. It beat its typical peer, too.

The last word: The fund held up better than its benchmark and peers during the pandemic sell-off.

13 of 25

Fidelity International Growth

FIGFXFIGFX
  • Symbol: FIGFX
  • 1-year return: 20.6%
  • 3-year return: 10.6%
  • 5-year return: 12.1%
  • 10-year return: 8.3%
  • Yield: 0.1%
  • Expense ratio: 1.01%

The focus: Growing foreign firms with a competitive edge in their industry.

The process: Manager Jed Weiss favors companies with attractive valuations, good balance sheets and solid growth prospects. “I make multiyear investments,” he says. In 2020, he picked up wish-list stocks that had fallen in price, including Kone, a Nordic elevator company.

The track record: The fund’s 10-year annualized return of 8.3% beat the 5.0% average gain in the MSCI EAFE index.

The last word: Weiss is focusing currently on businesses that gained share during the pandemic, such as animal health firm Dechra Pharmaceuticals, which is benefiting from a boom in pet adoptions.

14 of 25

Janus Henderson Global Equity Income

HFQTX stock tickerHFQTX stock ticker
  • Symbol: HFQTX
  • 1-year return: 15.3%
  • 3-year return: 3.2%
  • 5-year return: 6.1%
  • 10-year return: 5.6%
  • Yield: 7.4%
  • Expense ratio: 0.95%

The focus: Dividend-paying foreign stocks that are trading at a discount.

The process: Three managers look for firms with strong balance sheets, steady profits and ample cash flow. The fund has a healthy yield.

The track record: Value-style investing, particularly overseas, has been challenging. Relative to other large-company, foreign value stock funds, Global Equity Income has shone over the past three years. But it has lagged over the past year, thanks in part to its low-tech portfolio.

The last word: Value investing is showing signs of life, so we are willing to practice patience with this fund.

15 of 25

Baron Emerging Markets

BEXFXBEXFX
  • Symbol: BEXFX
  • 1-year return: 40.7%
  • 3-year return: 8.1%
  • 5-year return: 14.0%
  • 10-year return: 7.3%
  • Yield: 0.0%
  • Expense ratio: 1.35%

The focus: Emerging-markets companies of all sizes that have big growth potential.

The process: “Growthy” themes—such as cloud computing, financial tech­nology, and China’s pivot to local economies and consumers (instead of focusing on global exports)—drive the fund’s stock picking.

The track record: The fund, now 10 years old, trounced the MSCI Emerging Markets index by an average of three percentage points per year over the past decade and beat 96% of its peers.

The last word: Portfolio manager Michael Kass has been on a roll of late, and he sees more good times ahead. “Emerging markets have entered the early innings of a typical EM bull market,” he says.

16 of 25

Fidelity Select Health Care

FSPHXFSPHX
  • Symbol: FSPHX
  • 1-year return: 27.1%
  • 3-year return: 17.7%
  • 5-year return: 17.0%
  • 10-year return: 17.8%
  • Yield: 0.0%
  • Expense ratio: 0.70%

The focus: Companies that design, make or sell products or services used for health care or medicine.

The process: At the top of the portfolio, Ed Yoon holds hefty stakes in established firms he calls stable growers (UnitedHealth, Danaher). In the rest of the portfolio, he sprinkles in smaller bets on emerging growers—companies that may be reliant on, say, a particular drug approval or product.

The track record: Over the past 10 years, Select Health Care returned 17.8% annualized, which beat the 15.3% average gain of its health-fund peers.

The last word: Yoon is excited these days about gene and cell therapies, as well as medical equipment makers about to turn a profit.

17 of 25

Vanguard Wellington

Composite image representing Vanguard's VWELX fundComposite image representing Vanguard's VWELX fund
  • Symbol: VWELX
  • 1-year return: 15.4%
  • 3-year return: 10.1%
  • 5-year return: 11.1%
  • 10-year return: 9.6%
  • Yield: 1.4%
  • Expense ratio: 0.25%

The focus: A balanced portfolio of 65% stocks and 35% bonds. The fund yields 1.41%.

The process: Dan Pozen picks the stocks, investing in reasonably priced, resilient businesses that are run by trustworthy executives who allocate capital wisely. In recent months, Pozen beefed up tech-stock holdings and eased up on financials. On the bond side, Loren Moran and Michael Stack hold high-quality corporate debt and Treasuries. They’ve gotten defensive lately, shifting assets to sectors such as communications and consumer staples.

The track record: The fund’s 10-year record beats 88% of all balanced funds. But the fund lagged 77% of its peers over the past year in part because the stock side was heavy in financials and energy shares—among the worst-performing sectors over the past year, despite recent gains—and light on technology, the best-performing sector.  

The last word: If you’re new to the fund, you can buy shares through Vanguard; otherwise, it’s closed to new investors.

18 of 25

DoubleLine Total Return Bond

DLTNXDLTNX
  • Symbol: DLTNX
  • 1-year return: 2.9%
  • 3-year return: 4.0%
  • 5-year return: 3.1%
  • 10-year return: 4.1%
  • Yield: 2.8%
  • Expense ratio: 0.73%

The focus: Mortgage-backed securities.

The process: Three managers balance government-guaranteed mortgage-backed bonds – which are sensitive to interest-rate moves (when interest rates rise, bond prices fall, and vice versa) but have no default risk – with non-agency mortgage bonds, which have some risk of default, but little interest-rate sensitivity.

The track record: The fund holds no corporate debt, which has hurt relative returns in recent years. Over the past five years, the fund’s 3.1% annualized return lags the Bloomberg Barclays U.S. Aggregate Bond index.

The upshot: Mortgage rates continue to sit near all-time lows. And the primary risk for most mortgage-backed bonds is the potential that mortgage holders will prepay their principal. We’re watching DLTNX closely. Meanwhile, it yields 2.8%.

19 of 25

Fidelity Intermediate Municipal Income

FLTMXFLTMX
  • Symbol: FLTMX
  • 1-year return: 3.7%
  • 3-year return: 4.4%
  • 5-year return: 3.3%
  • 10-year return: 3.8%
  • Yield: 0.8%
  • Expense ratio: 0.35%

The focus: Debt that is exempt from federal income taxes, issued by states and counties to fund expenses such as schools and transportation.

The process: Four managers choose high-quality, attractively priced muni bonds. Managing risk is a priority, too.

The track record: This fund consistently posts above-average returns in its category. It rarely tops the charts, but it tends to hold up better in downturns.

The upshot: Muni bonds were richly priced until COVID-19 events fueled a selloff. But low rates and steady demand has propped prices back up. The fund yields 0.8%, or 1.4% for investors in the highest tax bracket.

20 of 25

Fidelity New Markets Income

FNMIXFNMIX
  • Symbol: FNMIX
  • 1-year return: 2.5%
  • 3-year return: 1.5%
  • 5-year return: 6.3%
  • 10-year return: 5.5%
  • Yield: 4.1%
  • Expense ratio: 0.82%

The focus: Emerging-markets debt.

The process: Longtime manager John Carlson has retired, but his replacements, Jonathan Kelly and Timothy Gill, are longtime analysts for the fund. Not much will change. The fund will still focus on dollar-denominated government bonds, but Kelly says he will likely hold a more consistent position in corporate debt, now 15% of assets. Mexico, Turkey and Ukraine are its top country exposures.

The track record: Carlson’s 15-year return was in the top 23% of emerging-markets debt funds. We’re watching closely to see how Kelly and Gill do.

The upshot: Yields on emerging-markets debt are still near historic lows. But the exit path from the coronavirus is still uncertain, so while a recovery is expected at some point, a shadow remains over near-term economic growth projections in emerging countries. Even so, the fund’s yield, 4.1%, is attractive.

21 of 25

Metropolitan West Total Return

Composite image representing Metropolitan West's MWTRX fundComposite image representing Metropolitan West's MWTRX fund
  • Symbol: MWTRX
  • 1-year return: 6.8%
  • 3-year return: 6.0%
  • 5-year return: 4.3%
  • 10-year return: 4.4%
  • Yield: 0.9%
  • Expense ratio: 0.68%

The focus: High-quality intermediate-maturity bonds.

The process: Four bargain-minded managers make the big-picture calls on the economy and invest accordingly in investment-grade bonds (those rated triple-B or better).

The track record: The fund got defensive early, nipping returns in 2016 and 2017. But its conservative position – it’s currently loaded up on Treasuries, government mortgage-backed bonds and investment-grade corporates – has been a boon over the past year, especially since the start of 2020. Total Return’s one-year return beats 63% of its peers, and its 10-year annualized return beats 65% of its peers. Both returns beat the Bloomberg Barclays U.S. Aggregate Bond index.

The upshot: The managers are “patient and disciplined,” says Morningstar analyst Brian Moriarty, and that should continue to set this fund’s performance apart over the long term.

22 of 25

Fidelity Advisor Strategic Income

FADMXFADMX
  • Symbol: FADMX
  • 1-year return: 6.9%
  • 3-year return: 5.1%
  • 5-year return: 6.3%
  • 10-year return: 4.8%
  • Yield: 2.4%
  • Expense ratio: 0.68%

The focus: The fund seeks to deliver more yield than the Bloomberg Barclays Aggregate U.S. Bond index by investing in a blend of government debt and junkier, higher-yielding bonds. The fund yields 2.4%.

The process: Comanagers Ford O’Neil and Adam Kramer make broad calls on which bond sectors to emphasize while specialists do the individual bond picking.

The track record: The fund has returned 6.3% annualized over the past five years, which has handily beaten the Agg index.

The upshot: These days, the fund holds mostly high-yield debt (roughly 46% of assets), government securities (20%) and emerging-markets bonds (15%).

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Vanguard High-Yield Corporate

VWEHXVWEHX
  • Symbol: VWEHX
  • 1-year return: 5.0%
  • 3-year return: 5.6%
  • 5-year return: 7.4%
  • 10-year return: 6.2%
  • Yield: 3.0%
  • Expense ratio: 0.23%

The focus: Corporate debt rated below investment grade.

The process: Manager Michael Hong keeps risk at bay by focusing on debt rated double-B, the highest quality of junk bonds.

The track record: The fund struggles to top the charts in go-go years, but it leads in so-so years. All told, its 10-year annualized return beats 86% of its peers. It yields 3.0%.

The upshot: High-yield rates, on average, were near historic lows until the pandemic bumped them above 6% in early March, though they’ve since come back down to record lows from there. (When rates rise, bond prices fall, and vice versa.) We’re watching VWEHX carefully.

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Vanguard Short-Term Investment Grade

VFSTXVFSTX
  • Symbol: VFSTX
  • 1-year return: 4.5%
  • 3-year return: 4.0%
  • 5-year return: 3.2%
  • 10-year return: 2.6%
  • Yield: 0.7%
  • Expense ratio: 0.20%

The focus: To deliver a higher yield than cash and short-term government bonds. VFSTX currently yields 0.7%.

The process: Three managers, who took over in April 2018, invest in high-quality corporate debt, pooled consumer loans and Treasuries, with maturities that range between one and five years.

The track record: The fund has returned 3.5% annualized over the past three years, which outpaces 87% of its peers.

The upshot: Low rates mean low yields for now. But pressing uncertainties, such as the unknown recovery time from coronavirus, negative rates in other parts of the world and geopolitical risks, make this fund a welcome haven.

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TIAA-CREF Core Impact Bond

TSBRXTSBRX
  • Symbol: TSBRX
  • 1-year return: 5.1%
  • 3-year return: 5.3%
  • 5-year return: 4.2%
  • 10-year return:
  • Yield: 1.0%
  • Expense ratio: 0.64%

The focus: Bonds issued by companies that meet high ESG standards, as well as projects that deliver a measurable environmental or social impact.

The process: Veteran bond picker and lead manager Stephen Liberatore invests just under two-thirds of the fund in attractively priced, high-quality debt issued by firms that pass his own carefully honed ESG measures. He devotes about 40% of the fund’s assets to fund projects related to alternative energy, affordable housing or community development. The fund was formerly called Social Choice Bond.

The track record: The fund’s 4.2% an­nualized return over the past five years is just slightly below similar bond funds and the Agg index.

The upshot: Investors don’t sacrifice much performance or yield with these ESG- and impact-focused bonds.

Source: kiplinger.com

14 Social Security Tasks You Can Do Online

If you’ve ever had the chore of going to your closest Social Security office for, say, a name change or a replacement for your ancient (and MIA) Social Security card. . . well, I’m so sorry. The wait was likely interminable and the experience uncomfortable; at least it was for me.

In pre-internet days, you had no choice but to physically go to a Social Security office for many tasks. These days, you can manage your own Social Security profile and execute many critical moves yourself online. (Note: During the COVID-19 emergency, Social Security offices nationwide are staffed but not open for face-to-face services. Call your local office — they’re typically staffed until 4 p.m. weekdays — if you need help.)

Whether you’re a pre-retiree on the cusp of claiming your hard-earned Social Security benefits or a young worker decades away from retirement, you should set up a free MySocialSecurity account. It’s a good way to protect against Social Security fraud, and it’s a prerequisite for many of the items on our list here.

Once you’ve set up your MySocialSecurity account, take charge of your Social Security benefits by reviewing your earnings history, calculating your benefits, ultimately filing for Social Security and Medicare, and much more. Let us show you how.

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Request a Replacement Social Security Card

a stack of social security cardsa stack of social security cards

If you’re just looking for a replacement Social Security card, there’s no need to trek to a Social Security office and wait, and wait, and wait. You can do it online. The replacement card should arrive within two weeks.

The Social Security Administration is still rolling out this service, and you cannot request a replacement Social Security card online if you live in Alabama, Minnesota, Nevada, New Hampshire, Oklahoma, Oregon or West Virginia. (If you live in those states, find the Social Security office nearest to you to request a new card in person.)

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Request a Replacement Medicare Card

A social security and medicare cardA social security and medicare card

Can’t locate your red, white, and blue Medicare card? You can request a replacement card through the Social Security website. Sign in to your MySocialSecurity account, hit the “Replacement Documents” tab, then tap “Mail My Replacement Medicare Card.” You should receive it in approximately 30 days.

For other Medicare questions and issues, head over to Medicare.gov, where you should also have a My Medicare.gov account because, c’mon.

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Estimate Your Social Security Benefits

A federal checkA federal check

Hey, you’ve been paying into Social Security for years. It’s only fair to want to know how much you’ll have coming your way when you apply for the benefits.

With your MySocialSecurity online account, you can quickly access and review your Social Security statement that the SSA otherwise mails once a year. (Here’s a PDF of what a Social Security statement looks like). Whatever your age, it’s good to keep up with your Social Security benefits projections — for claiming at 62 when you are first eligible to take Social Security (40% of Americans do so at this age), at “full retirement age” (66 or 67, depending on what year you were born), and at age 70 (the age at which benefits cease to increase.

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Review Your Earnings History

a blurred image of George Washington on the dollar billa blurred image of George Washington on the dollar bill

Take a fun stroll down memory lane by looking at exactly how much money you earned each year since you turned 18.

But the fun can stop if you spot an error in your earnings history. If the SSA doesn’t have that record correct, you could be shorted in benefits (and that’s one of the reasons your earnings history is available). Check it out, and if you see something’s wrong, report it to the Social Security Administration. There’s a link to contact them about errors. See our article How to Fix Your Social Security Earnings Record for more.

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Apply for Social Security Benefits

A senior woman on her laptop computer in her kitchenA senior woman on her laptop computer in her kitchen

You’re of age, and you’ve picked your retirement date. Now, it’s time to apply for the Social Security benefits you’ve earned. You no longer need to drive to a Social Security office or make an appointment with a representative. You can apply online to start receiving your retirement benefits. The online process takes all of 15 minutes, according to the SSA. If there are questions about your application, you will be contacted by the SSA by phone or through the mail.

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Apply for Social Security Disability Payments

A view of the sign on the social security buildingA view of the sign on the social security building

If you have a medical condition that leaves you unable to work for at least a year, you may be eligible for Social Security disability benefits.

On the Social Security website, you can click into the disability planner to see if you qualify. You can also apply online for disability benefits.

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Apply for Medicare Benefits

A social security and medicare cardA social security and medicare card

Turning 65 soon? Take advantage of the Social Security website to enroll in Medicare parts A and B. Note that your initial enrollment period starts three months before your 65th birthday and ends three months after your birthday month. Medicare Part A is hospital insurance, and Medicare Part B is Medicare Part B is medical insurance, which you pay for (and can turn down). The Social Security website answers a ton of questions about Medicare options and offers you plenty of links.

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Check the Status of Your Social Security Application

A senior couple on a laptop computer A senior couple on a laptop computer

Have you already applied for Social Security benefits? You can check the status of your Social Security benefits application online, rather than trucking to your nearest Social Security office or trying to raise somebody on the phone.

Within your My Social Security account, you’ll be able to see your re-entry number for an online benefit application or appeal that has not been submitted; the date the SSA received your application or appeal; your scheduled hearing date and time; the location where your current claim or appeal is being processed; and if a decision has been made.

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Appeal a Social Security Decision

A senior man on his laptop computerA senior man on his laptop computer

What? You were denied Social Security benefits when you applied? You can appeal that negative decision online. You have up to 60 days after you hear about that denial to file an appeal (the reasons for the denial will be in that letter). You have several recourse options: You can request a reconsideration; you can ask for a hearing by an administrative law judge; you can seek a review by the SSA’s Appeals Council; or you can seek a federal court review.

For more, see our article Appeal a Decision by Social Security.

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Change Your Address and Telephone Number

A senior couple smile at the camera in front of their homeA senior couple smile at the camera in front of their home

If you’ve bounced around a time or two in your career, make sure the Social Security Administration knows where to find you. You can update your contact information online via your MySocialSecurity account. Log in, click “My Profile,” then click the “Update Contact Information” button, and make and submit your changes. Simple.

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Set Up or Change Direct Deposit

A direct deposit slipA direct deposit slip

New Social Security beneficiaries (since 2013) must receive their benefits electronically. Older beneficiaries can switch to direct deposit at any time.

It’s easy to set up or change your direct deposit of Social Security benefits online if you have a MySocialSecurity account.

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Print Proof of Social Security Benefits

A senior man takes something off a printerA senior man takes something off a printer

Before you go off and print your proof of benefits — online, people, you don’t have to head to an SSA office — you’ll first probably want to know what Social Security Benefit Verification Letter is. Kinda self-explanatory, this, but here goes: Also known as a benefits letter or Social Security award letter, this document serves as proof of your retirement benefits. It includes your name, date of birth and the Social Security benefits you are receiving. To print it you’ve got to access it and to access it you need (everyone, say it with me) a My Social Security account. Easy peasy.

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Print Your 1099

A senior man on his computerA senior man on his computer

At tax time, you need your documents — and early-bird files may not want to wait for their Form 1099 for any Social Security benefits received in the previous year to arrive in the mail. You can print that Form 1099 from your MySocialSecurity account.

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Get Answers to Frequently Asked Questions About Social Security

A street sign that reads "questions" and "answers"A street sign that reads "questions" and "answers"

Do you have a burning question about Social Security benefits, whether offices are open, how to replace a Social Security card for one of your children or some such? Head over to the Social Security website, and tap the FAQs. They have answers.

Source: kiplinger.com

What Do Mortgage Lenders Review on Bank Statements?

Know which financial weaknesses stand out to lenders so you can strengthen your chances of loan approval.

Trained to spot financial mismanagement, mortgage lenders take careful time to review your finances before approving or denying you for a home loan. The role of the lender in approving a loan is to make sure you have enough money for a down payment and closing costs, and to assess whether you’re able to regularly make your monthly payments. Part of how they do that is by reviewing your bank statements. That’s why it’s important to make sure all your documents and records are sorted and straightforward.

Bank statement warning signs

Overdraft charges
Lenders typically include your last two months of bank statements in their evaluation of your finances. Having a long list of overdraft charges in your account isn’t the best indicator that you’ll be a good borrower. No matter the circumstances, having a history of overdrafts or insufficient funds noted on your statement shows the lender that you might struggle at managing your finances.

Large deposits
Another red flag to lenders is when a bank statement has irregular or lump-sum deposits. This can be seen as iffy because it could appear that those funds are coming from an illegal or unacceptable source. Unless you can provide an acceptable explanation for your large deposit, it’s likely the lender will disregard those funds and apply your remaining dollars to their assessment of whether you qualify for a loan.

Signs of the bank of mom and dad
One way to help ensure that your bank statement won’t raise any red flags with lenders is by having consistent, tracked payments. If, for instance, you have automatic monthly payments to an individual rather than to a bank, lenders could see that as a non-disclosed credit account. This would be the case if you were to take out a loan from your parents and make car payments to them rather than an actual bank, for example.

How to reduce bank statement scrutiny

Take extra care of your transactions for at least a few months before applying for a mortgage. Lenders want to know that the money in your account has been there for some time, not just recently deposited. One or two big deposits into your account right before applying could indicate to lenders that the money you claim to have isn’t actually yours or isn’t a “seasoned” asset, meaning the money hasn’t been in your account for at least two months.

At the end of the day, it’s best to start the process of organizing your bank activity and statements prior to applying for a loan. When you start looking for a home, it’s best to have your financial information sorted in case your dream home hits the market and you have to move fast.

If you keep your bank statements top of mind in the initial search phases, you may have an easier time applying for a loan and ultimately securing it. Remember: Underwriters review your accounts once more, just prior to closing. So, be sure to maintain healthy finances throughout the closing process too.

Photos courtesy of Shutterstock.

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Source: zillow.com