“We’re getting more and more older people who lived through this experiment with do-it-yourself pensions, and they’re coming into this age group without the same kind of incomes that older people have,” said Teresa Ghilarducci, an economics professor at the New School who specializes in retirement policy. “I don’t think it’s a blip.”
More on Social Security and Retirement
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Claiming Social Security: Looking to make the most of this benefit? These online tools can help you figure out your income needs and when to file.
Even though the share of elderly people officially below the poverty line is low by historical standards in the United States, it remains among the highest in the developed world, according to the Organization for Economic Cooperation and Development. The average poverty rate for older Americans also masks far higher shares among more vulnerable groups, with nearly one in five Black and Hispanic women 65 or older falling below the official poverty threshold in 2021. It’s higher for single people, too — a reality forced on hundreds of thousands of older Americans whose spouses died of Covid-19.
The poverty rate is also not a bright line when it comes to financial hardship. It doesn’t take into account debt, which more seniors have accumulated since the Great Recession. Moreover, nearly one in four people 65 or older make less than 150 percent of the federal poverty line, or $19,494 on average for those living alone. Another measure, developed by the Gerontology Institute at the University of Massachusetts Boston and called the Elder Index, finds that it takes $22,476 for a single older person in good health with no mortgage to cover basic needs, with the cost escalating for renters and those with health problems.
“To some extent we’re splitting hairs when we talk about people who fall just above and just below, because they’re all struggling,” said Jan Mutchler, a demographer at the University of Massachusetts at Boston who helped devise the Elder Index. “The assumptions that go into what we’re calling hardship are just flawed.”
That’s true for Juanita Brown, 77, who lives on her own in Galax, a small town in Virginia’s Blue Ridge Mountains. A farmer’s daughter, she worked as a nanny, and then a certified nursing assistant, and then a preschool teacher. Her husband worked in the local textile industry, and after raising two children, they had built a substantial nest egg.
But then Ms. Brown’s mother developed Alzheimer’s disease and couldn’t support herself. Ms. Brown stopped working to take care of her, which cost another $500 per month in expenses. Her husband got prostate cancer, which required extended trips to the hospital in Winston-Salem, N.C.
If we want higher education to cost less, we should make it cheaper when people enroll.
But that’s not how we do things in the United States, where the first rule of personal finance is that it should never be simple.
Instead, we befuddle people with a menu of a half-dozen retirement accounts. We fetishize the tax code and its deductions and credits and refunds. We name gold, silver and bronze health insurance plans after precious metals but award no medals for clearing the enrollment hurdles.
And so it goes with President Biden’s executive action around student loan debt cancellation. The potential $20,000 in relief per person gets the headlines. But the sleeper element here is a new income-driven debt repayment plan that would help many people pay much less of their student loan debt over time, if they’re not big earners.
choose among H.M.O., P.P.O., P.F.F.S., S.N.P., H.M.O.-P.O.S. and M.S.A. plans. The Centers for Medicare & Medicaid Services website has an acronym glossary with 4,420 entries, because personal finance is its own language. You learn as you go, or not at all.
Pamela Herd is a professor at Georgetown University’s McCourt School of Public Policy, with an expertise in these “administrative burdens.”
What to Know About Student Loan Debt Relief
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What to Know About Student Loan Debt Relief
Many will benefit. President Biden’s executive order means the federal student loan balances of millions of people could fall by as much as $20,000. Here are answers to some common questions about how it will work:
What to Know About Student Loan Debt Relief
Who qualifies for loan cancellation? Individuals who are single and earn $125,000 or less will qualify for the $10,000 in debt cancellation. If you’re married and file your taxes jointly or are a head of household, you qualify if your income is $250,000 or below. If you received a Pell Grant and meet these income requirements, you could qualify for an extra $10,000 in debt cancellation.
What to Know About Student Loan Debt Relief
What’s the first thing I need to do if I qualify? Check with your loan servicer to make sure that your postal address, your email address and your mobile phone number are listed accurately, so you can receive guidance. Follow those instructions. If you don’t know who your servicer is, consult the Department of Education’s “Who is my loan servicer?” web page for instructions.
What to Know About Student Loan Debt Relief
How do I prove that I qualify? If you’re already enrolled in some kind of income-driven repayment plan and have submitted your most recent tax return to certify that income, you should not need to do anything else. Still, keep an eye out for guidance from your servicer. For everyone else, the Education Department is expected to set up an application process by the end of the year.
What to Know About Student Loan Debt Relief
When will payments for the outstanding balance restart? President Biden extended a Trump-era pause on payments, which are now not due until at least January. You should receive a billing notice at least three weeks before your first payment is due, but you can contact your loan servicer before then for specifics on what you owe and when payment is due.
With certain social welfare benefits, Professor Herd explained in an interview this week, the original program designers believed that obstacles were appropriate. Anyone desperate enough should find a way to muddle through and prove their poverty, or so the logic went.
More recently, administrative burdens have resulted from the conviction that private sector actors — who are often seeking profits — would be the most efficient intermediaries between people and federal programs that involved money.
You see it in those Medicare Advantage Plans, and it was a feature of federal P.P.P. loans during the early stages of the pandemic. Rather than give employers money up front to keep people on the payroll, there were forgivable loans that required frazzled small business owners to beg a banker to bum rush a balky government website on their behalf.
And so it goes with the federal student loan system.
Both the income-driven repayment plans that have existed for years and a special debt cancellation program for public servants are already poster children for administrative burdens. Tracking your progress is a part-time job, complete with self-help Facebook groups of frustrated debtors and companies to help people manage the process.
And wouldn’t you know it? There are several third parties to which the federal government has outsourced the work of collecting student loan payments and enforcing the rules.
would go to 5 percent from 10 percent of discretionary income; the amount of a person’s income that doesn’t meet the definition of discretionary would rise; and there would be a new, more generous way of calculating how balances shrink or grow over time. There are plenty of reasons to be skeptical that something this complex would roll out smoothly or quickly.
And it would not be cheap. Estimates from the Penn Wharton Budget Model put the 10-year cost of the new repayment plan at anywhere from $70.3 billion to over $450 billion, depending on the implementation details and how students and schools change their borrowing and tuition-setting behavior. Again, it’s complicated.
By comparison, Mr. Biden had proposed spending $45.5 billion over five years to make up to six semesters of community college free nationwide. That would have paid for most of the cost, with states contributing the rest. No debt for tuition, no hoops to jump through.
Politics got in the way of free community college, and the Inflation Reduction Act that Mr. Biden signed last month did not include it. Instead, students who borrow would get a subsidy on the back end through the more generous repayment program, years later, if they know it exists, enroll without incident, clear every hurdle over a decade or two and their loan servicer doesn’t make a hash of it.
There are bad words and associated acronyms that we could use to sum all of this up as we scream into the void. But our framing could just as easily center on a single word: Respect.
Professor Herd surprised me this week when she said the word in passing. I asked her to elaborate.
“Respect includes everything from respecting people’s time to not treating them as if they are trying to cheat or game a system,” she said. “It’s about treating them as if they are full-fledged citizens and human beings who have basic rights to access services and benefits for which they’re eligible.”
It seems simple enough. But too much of our personal finance infrastructure becomes adversarial through its complexity. The “prove it” nature of Mr. Biden’s executive action, with its income measurements and repeated checking in with third-party servicers, does not help, as generous as it may turn out to be for people who would eventually pass muster.
Disrespect is calling student debt cancellation “forgiveness” when it’s really an apology for a dysfunctional higher education financing system. Disrespect is doing little to make tuition cheaper on the front end of this process. Disrespect is letting many for-profit schools continue to put people of color deep into debt for certificates or degrees that don’t mean much in the labor market.
Disrespect guarantees full-time employment for personal finance journalists, too. I’m lucky to have the work, but it shouldn’t be necessary in the first place.
Rachel Nagler, 39, has worked part time since she was 22, but she will never be financially independent, according to her father. She is legally blind with a seizure disorder and mild cognitive impairment, the result of birth trauma.
For her parents, Sam and Debra Nagler of Concord, Mass., planning for retirement required them to focus on Rachel’s future as well as their own.
“She has very limited earning capacity,” Mr. Nagler, 70, said. “The concern is, is this sufficient for her for the rest of her life?”
His wife, who is 68, has been their daughter’s primary caregiver since her birth.
“Nobody knows Rachel, and takes care of Rachel, and knows every need of Rachel, and is on top of everything other than my wife,” Mr. Nagler said. “That’s a worry because she’s not going to live forever.”
For parents of children who have serious disabilities or special needs, the challenges of growing and preserving their wealth are magnified exponentially, and the stakes are much higher. While they are trying to plan for their own retirements, these parents need to simultaneously secure the stability of a son or daughter who will be dependent on them until — and even after — their deaths.
“We want to make 100 percent sure that after we’re gone, there’s no issue,” Mr. Nagler said.
Under the best of circumstances, caring for an adult child with special needs is physically and emotionally taxing. As these parents age, the question of who will house, feed and drive their son or daughter after they no longer can becomes an urgent one.
But not all parents in this situation are aware of the myriad challenges they face. “Getting them to understand that they need to think differently about their retirement in this scheme of things is a key step. And it’s not simple,” said Mary Anne Ehlert, a certified financial planner and founder of Protected Tomorrows, a financial planning firm that specializes in families with special needs.
For example, Ms. Ehlert said, she has to consider a multigenerational time horizon for these clients’ portfolios. “We might be a little more conservative, but we still need growth. We need growth longer,” she said. But a conservative-leaning asset mix has drawbacks, too. “Conservative doesn’t always give us the growth we need,” she said. In addition, many families opt for a portion of their portfolio to be in cash or cash-like liquid investments in the event that their child suddenly needs a new piece of expensive equipment, like a speech-assistive device.
Often, one spouse will sideline a career or leave the work force entirely to provide care, reducing their own ability to save for retirement.These families find their budgets strained by a host of ancillary costs: paying for gas to drive their children to therapy appointments and day programs; buying supplies like adult diapers and waterproof bedding, compression tights to promote circulation, specialized diets — the list goes on.
Even when the disabled individual qualifies for public health assistance, finding affordable, adequate housing is especially difficult. Some people require supervised care in a group home, while others need in-home care in a dwelling modified to accommodate physical limitations. In both cases, waiting-list times are measured in years.
As a result, many parents feel they have no choice but to keep their son or daughter at home, said Harry Margolis, an estate planning lawyer near Boston who works with families with special needs. “Often, they’re still living with parents even when everybody’s getting older,” he said.
This can be expensive in terms of lost opportunity costs. To spare their child the upheaval, parents might forgo the opportunity to downsize into a less-expensive or more accessible home while they are still healthy enough to do so.
Since most of the public benefits available to special-needs and disabled people are administered at the state level through Medicaid, parents of a special-needs child might not be able to move to a state with a lower cost of living. Doing so could mean the adult child would lose access to their benefits and be placed at the bottom of waiting lists for services in a new state.
Some families, however, move to states that offer more generous benefits, even if it means a higher cost of living. “That’s a real struggle for these families, particularly as Mom and Dad age,” said Debra Taylor, founder of Taylor Financial Group in Franklin Lakes, N.J. “Some look to relocate to different states because some states are more hospitable than others.”
Hefty costs, and less income
Douglas and Susan Rohrman moved out of the Chicago area five years ago, alarmed at the declining health of their daughter Liz, who suffered a traumatic brain injury just before the age of 2. Now, 38, the younger Ms. Rohrman has a host of physical challenges, including partial paralysis that impairs her mobility and ability to swallow and cognitive impairment.
“Liz was not getting great care in Illinois, so it was time to sell the house and move everything,” Ms. Rohrman, 74, said. “I researched this up the wazoo.”
The Rohrmans moved to the San Diego area because resources such as housing and day programs were more readily available. But when Covid struck, the couple felt that the only way they could keep their daughter safe — she had been hospitalized with pneumonia three times in 2019 — was to take her out of the care home they had moved her into just a few years earlier, the one they’d uprooted their lives for.
It was an enormous adjustment in responsibilities, but also in finances.
“When we were doing our taxes, I sort of sat down to see where my money was going. And Liz is a large part of it,” Ms. Rohrman said,ticking off items for which she has to pay out of pocket now that her daughter is living at home.
For example, swallowing difficulties mean that the younger Ms. Rohrman has to have a thickening agent added to her water. That alone costs several thousand dollars a year, her mother said, and there are a host of other unique expenses, such as for stabilizing footwear that helps her daughter walk. “I came up with like $9,000, not counting everything I buy at the grocery store and Walmart,” she said.
Mr. Rohrman, 80, had deferred his retirement at a law firm several years to keep earning income, but he stopped working when the family moved. The combination of much higher expenses, a drop in income and a flagging stock market demanded they re-evaluate their finances.
Unique challenges for single parents
These financial struggles are magnified for single parents. “Care is inevitably more expensive when you have a single parent,” Ms. Taylor said, because they have to rely much more on paid caregivers.
Laura Weinberg, 59, became the sole caregiver for her son Will, who is autistic and nonverbal, when her husband, a lawyer for the Port Authority of New York and New Jersey, was killed in the Sept. 11 attacks.
“I was in the weird situation of being widowed when I was 38, dealing with a 4-year-old who was a danger to himself,” she said. She was also a caregiver for her ailing mother and maintaining the family home in northern New Jersey. “I was overwhelmed,” she said.
“Estate planning was confusing and extremely expensive when I started to put a toe in the water,” she said. “I got all kinds of wrong information.”
Ms. Weinberg said she would like to have speech-assistive equipment for her son so that he can communicate, but the cost is prohibitive. Instead, she has pieced together a solution with an iPad and specialized apps. “It’s more modest than it might have been, but some of them are in the many thousands of dollars,” she said.
Navigating a ‘byzantine’ system
For parents of special-needs children, retirement planning and estate planning have to take place in tandem. Special-needs trusts and life insurance policies in one or both parents’ names are two of the most commonly used tools. Both have to be structured in compliance with the complex eligibility regulations for public health benefits, since many are means-tested.
Mr. Margolis said that even wealthy families have to navigate the byzantine landscape of government benefits, because many of the services available, including housing, are administered entirely through these programs. “In order to qualify for S.S.I. and Medicaid, in most cases you’re limited to $2,000 in countable assets,” he said.
“For a disabled individual, a lot of time, maintaining eligibility is critical,” said Joellen Meckley, executive director of the American College of Financial Services’ center for special needs. “I can’t tell you how many times family members, with the best of intentions, will name a disabled adult child as a beneficiary, not understanding that getting that money could immediately jeopardize their ability to access public benefits,” she said, referring to parents’ wills, retirement plans or life insurance policies.
This makes it imperative that money intended for a disabled individual be held in a specialized financial instrument such as a special-needs trust.
The money in a trust can go toward quality-of-life enhancements for the special-needs individual like cable TV, a cellphone or computer, better food, care providers and rent or utilities,without jeopardizing their public benefits, Mr. Margolis said.
There are two main categories of special-needs trusts. First-party trusts are established with assets that belong to the individual. The drawback is that these trusts have a payback clause: After the individual dies, any money remaining in the trust goes to reimburse the state for the cost of their care over the years.
Third-party special needs trusts are established and funded by someone else for the benefit of the disabled individual. “A third-party one takes in the assets of other people, like gifts, inheritances or life insurance proceeds,” said Brian Walsh, senior manager of financial planning at SoFi.
These trusts are often funded or supplemented with parents’ life insurance proceeds. “A lot of times, life insurance can be used to kind of create a funding source when one or both of them passes away,” Mr. Walsh said.
A “second-to-die” life insurance policy is a frequently used tool. Both members of a couple are covered under it, and the policy pays out after the second spouse dies, providing a more affordable option than insuring each parent separately.
“The purpose of this policy is that it’s going to pay out a death benefit to fund the child’s remaining needs no matter when the parents die,” Mr. Walsh said.
Since the funds in these trusts are generally conservatively invested, experts say the final challenge is making sure that the amount in the trust will provide an adequate income stream.
Getting that balance right is something that the Rohrmans, in California, struggle with.
When Mr. Rohrman stopped working, that meant not only paring back household spending, but revisiting their investing strategy as well.
“We’re financially very conservative. We know we can’t be like we were in our 30s and 40s in terms of our investment mix, spending and so forth,” Mr. Rohrman said. “We think about it a lot. We don’t let it dominate us.”
In its earnings report, Ally Bank, a big auto loan maker, provided data on past-due auto loans in the second quarter for borrowers at a range of income levels. Past-due loans were either at or close to prepandemic levels for borrowers with lower incomes.
Ally declined to provide the same data for earlier quarters, making it impossible to know how quickly past-due loans might have risen. On its earnings call, Jenn LaClair, Ally’s chief financial officer, said, “We have continued to invest in talent and technology to enhance our servicing and collection capabilities and remain confident in our ability to effectively manage credit in a variety of environments.”
Some analysts think the pullback in spending could spread to wealthier households.
“You’re going to see it go up the income scale as the year unfolds with people sitting there, saying, ‘I’ll go without rather than spend this much on that’ or ‘I’ll trade down to something more affordable,’” said Mr. O’Rourke, the JonesTrading strategist. He added that he was waiting for earnings from Macy’s and Nordstrom, which are scheduled to report in August, to see if that was happening.
The concern is that the heavy summer spending that has recently bolstered the earnings of the hospitality industries and the airlines is not sustainable. “There’s a faction of the market that’s quite convinced that when we get to the fall and the bills from the summer spending come home to roost, the consumer will be in a much trickier spot,” Mr. Barnhurst of PGIM said.
An exchange this earnings season reveals how chief executives and companies can keep the economy going, even when they fear that a downturn may be at hand.
Jamie Dimon, the chief executive of JPMorgan Chase, warned in May that storm clouds were gathering over the economy. On JPMorgan’s second-quarter earnings call, Mike Mayo, an analyst at Wells Fargo, asked Mr. Dimon why the bank had committed to investing such large sums this year if things could turn dire.
Digital payments are the default for millions of women of childbearing age. So what will their credit and debit card issuers and financial app providers do when prosecutors seek their transaction data during abortion investigations?
It’s a hypothetical question that’s almost certainly an inevitable one in the wake of the overturning of Roe v. Wade last week. Now that abortion is illegal in several states, criminal investigators will soon begin their hunt for evidence to prosecute those they say violated the law.
Medical records are likely to be the most definitive proof of what now is a crime, but officials who cannot get those may look for evidence elsewhere. The payment trail is likely to be a high priority.
HIPAA — which governs the privacy of a patient’s health records — permits medical and billing records to be released in response to a warrant or subpoena.
“There is a very broad exception to the HIPAA protections for law enforcement,” said Marcy Wilder, a partner and co-head of the global privacy and cybersecurity practice at Hogan Lovells, a law firm. But Ms. Wilder added that the information shared with law enforcement officials could not be overly broad or unrelated to the request. “That is why it matters how companies and health plans are interpreting this.”
Card issuers and networks like Visa and Mastercard generally do not have itemized lists of everything that people pay for when they shop for prescription drugs or other medications online, or when they purchase services at health care providers. But evidence of patronage of, say, a pharmacy that sells only abortion pills could give someone away.
a new state law authorizes residents to file lawsuits against anyone who helped facilitate an abortion.
“With the ruling only coming down late last week, it’s premature to understand the full impact at the state level,” Brad Russell, a USAA spokesman, said via email. “However, USAA will always comply with all applicable laws.”
American Airlines Credit Union, Bank of America, Capital One, Discover, Goldman Sachs, Prosperity Bank USA, Navy Federal Credit Union, US Bank, University of Wisconsin Credit Union, Wells Fargo and Western Union did not return at least two messages seeking comment.
American Express, Bank of America, Goldman Sachs, JPMorgan and Wells Fargo have all announced their intentions to reimburse employees for expenses if they travel to other states for abortions. So far, none have commented about how they would respond to a subpoena seeking the transaction records of the very employees who would be eligible for employer reimbursement.
Amie Stepanovich, vice president of U.S. policy at the Future of Privacy Forum, a nonprofit focused on data privacy and protection, said warrants and subpoenas can be accompanied by gag orders, which can prevent companies from even alerting their customers that they’re being investigated.
“They can choose to battle the use of gag orders in court,” she said. “Sometimes they win, sometimes they don’t.”
In other instances, prosecutors may not say exactly what they’re investigating when they ask for transaction records. In that case, it’s up to the financial institution to request more information or try to figure it out on its own.
Paying for abortion services with cash is one possible way to avoid detection, even if it isn’t possible for people ordering pills online. Many abortion funds pay on behalf of people who need financial help.
But cash and electronic transfers of money are not entirely foolproof.
“Even if you are paying with cash, the amount of residual information that can be used to reveal health status and pregnancy status is fairly significant,” said Ms. Stepanovich, referring to potential bread crumbs such as the use of a retailer’s loyalty program or location tracking on a mobile phone when making a cash purchase.
In some cases, users may inadvertently give up sensitive information themselves through apps that track and share their financial behavior.
“The purchase of a pregnancy test on an app where financial history is public is probably the biggest red flag,” Ms. Stepanovich said.
Other advocates mentioned the possibility of using prepaid cards in fixed amounts, like the kinds that people can buy off a rack in a drugstore. Cryptocurrency, they added, usually does leave enough of a trail that achieving anonymity is challenging.
One thing that every expert emphasized is the lack of certainty. But there is an emerging gut feeling that corporations will be in the spotlight at least as much as judges.
“Now, these payment companies are going to be front and center in the fight,” Ms. Caraballo said.
Millions of amateur investors got into the stock market during the pandemic — some gingerly, some aggressively, some determined to teach Wall Street bigwigs a lesson — and almost couldn’t help but make money, riding a bull market for the better part of two years.
Now they may have to wrestle with a bear.
“It definitely isn’t as easy to trade in this market,” said Shelley Hellmann, a 47-year-old former optometrist in Texas who began actively investing in April 2020 while isolating from her family.
Tracking stock movements on an iPad Mini in her bedroom, she banked big gains as the market soared. Within a couple of months, she was considering making day trading a full-time gig. But since the S&P 500 peaked on Jan. 3, profits have been harder to come by.
“Sometimes I am glad to not be red for the year,” she said.
Five months of bumpy declines have put the S&P 500 on the precipice of a bear market — a drop of 20 percent or more from its most recent high, which is considered a psychological marker of investors’ dimmed view of the economy. Including a tumble of 4 percent on Wednesday, the index is down more than 18 percent from its peak on Jan. 3.
bored sports bettors or meme-stock aficionados who piled into GameStop — have tapped the brakes, or scrambled to shuffle their portfolios into more defensive positions.
grim reaper slaying low interest rates and stock market bulls.
bid-ask spread — the small difference between the highest price a buyer is willing to pay and the lowest a seller is willing to accept — kept costing him fractions that added up.
By January, some of his classes had resumed in person, and with them his onerous commute from the Bronx. Instead of trading for an hour every morning, he cut back to twice a week. The market was also becoming a lot choppier, and it was increasingly difficult to hold his positions. He had always used stop-loss orders — instructions to sell when a stock dropped to a certain price — to prevent disastrous declines. But with constant drops, he kept getting pushed out of his trades.
which measures retail investors’ behavior and sentiment, based on a sample of accounts that completed trades in the past month. Their interests have been shifting toward less volatile names and more stable holdings like shorter-term bonds, the firm said.
Ms. Hellmann, who started actively trading in the early days of the pandemic, said she was sticking with it, learning more and refining her approach as she goes along.
She often rises at 3 a.m. and turns on CNBC to begin plotting her strategy for the day, which involves studying stocks’ price movements, a process she compared to learning to catch a softball — watching its arc, then trying to figure out the physics of where it will land. “That is what I’m doing with price and volume,” she said.
Long a buy-and-hold investor, she began with roughly $50,000 — money that came from shares of ConocoPhillips that she inherited in 2014 after the death of her grandfather, who had been a propane salesman. Her approach has grown increasingly complex over the past two years: Last fall, she took a large position in an exchange-traded fund that bets against the price of natural gas — which has gone up as Russia’s invasion of Ukraine roiled energy markets.
“The war causing natural gas to spike up at a time when it seasonally comes down did not help me much,” she said.
Even so, she’s more than quintupled her money since early 2020, riding the strength of a rally that has the S&P 500 up nearly 80 percent since it bottomed out in March 2020, even with its recent fall.
Experiencing losses after a period of gains can be instructive, said Dan Egan, vice president of behavioral finance and investing at Betterment, which builds and manages diversified portfolios of low-cost funds and provides financial planning services.
“If you have a good initial experience with investing, you see this is part of it, it will be OK,” he said. “We get bumps and bruises that you need to learn what pain feels like,” he said.
Eric Lipchus, 40, has felt plenty of pain in his nearly two decades of full-time day trading — he owned options on Lehman Brothers, the investment bank that imploded during the financial crisis of 2008-9. Before that, he had watched his older brother and father dabble in the markets during the dot-com boom and bust.
“I have been on a roller coaster,” he said. “I am making OK money this year but it’s been up and it’s been down. It seems like it could be a tough year — not as much upside as in previous years.”
Challenging conditions like investors are now facing can get stressful in a hurry, Mr. Lipchus said. Right now, he’s keeping half his portfolio in cash — and is taking a fishing trip to the Thousand Islands in a couple of weeks to clear his head.
Justin Nelson’s letter, one of the thousands that arrived at the White House this month, said he was proud to vote for President Biden back in 2020. Now he had a request: Would the president please honor a campaign promise and use the enclosed pen to wipe out thousands of dollars he owes in student loans?
The letter-writing campaign — #PensForBiden — is the latest attempt to sway Mr. Biden on a high-stakes dilemma as the midterm elections approach and much of his domestic agenda remains stalled: What to do about the $1.6 trillion that more than 45 million people owe the government?
So far, Mr. Biden has extended the pandemic pause on student loan payments four times, most recently until Aug. 31. Payments have now been on hold for more than two years, over two presidential administrations.
But all that time poses problems. Many of the issues that have long bedeviled the loan system have only grown more complicated during the pause, and receiving bills again will infuriate and frustrate millions of people who feel trapped by a broken system and crushing debt.
progressive wing of his Democratic Party. He backed the idea on the campaign trail in 2020. “I’m going to make sure that everybody in this generation gets $10,000 knocked off of their student debt as we try to get out of this God-awful pandemic,” he told an audience in Miami.
Senate Democrats lack the votes to help make good on that promise, leaving executive action as the only possible pathway. But close allies say some influential members of Mr. Biden’s team have been reluctant for him to do it — some because they disagree with the idea of forgiveness and some because they don’t believe he has the authority.
“He’s got lawyers telling him he shouldn’t,” said Representative James E. Clyburn of South Carolina, the third-ranking House Democrat and a key supporter of Mr. Biden. But Mr. Clyburn, the most senior Black lawmaker in Congress, said presidential actions had brought sweeping changes before, including Abraham Lincoln’s Emancipation Proclamation and Harry Truman’s order banning segregation in the military.
“If executive orders can free slaves and integrate the armed services, it can eliminate debt,” Mr. Clyburn said.
analysis released by the Federal Reserve Bank of New York last week. A separate study by the bank found that surveyed borrowers reported a 16 percent chance of quickly missing a payment if the moratorium ended.
Mr. Nelson, a 32-year-old bank operations associate in Minneapolis, said the pause had freed up $120 a month for home repairs and other expenses.
recent Morning Consult poll found that more than 60 percent of registered voters were in favor of some level of student debt cancellation. But despite Mr. Biden’s campaign promise, his advisers have been divided, three people with knowledge of the discussions said.
Some view debt cancellation as relief for critical constituencies, said the people, who spoke on the condition of anonymity because they were not authorized to speak publicly. Others oppose it as bad policy or because they fear the economic effects of putting more money in consumers’ pockets when inflation is soaring.
But the pressure on Mr. Biden to act has only grown.
Senator Elizabeth Warren of Massachusetts, whose pledge to cancel up to $50,000 per borrower was a centerpiece of her 2020 presidential primary bid, and Senator Chuck Schumer of New York, the majority leader, led more than 90 congressional Democrats in sending Mr. Biden a letter last month asking him to “provide meaningful student debt cancellation.”
voting rights protections and Mr. Biden’s Build Back Better agenda, as reason for the president to take matters into his own hands.
The New Georgia Project, a group focusing on voter registration founded by the gubernatorial candidate Stacey Abrams, has cast debt relief as an action that would serve Mr. Biden’s pledge to put racial equity at the forefront of his presidency.
“Much of your administration’s legislative priorities have been stymied by obstructionist legislators,” the group wrote in a joint letter with the advocacy group the Debt Collective that was reviewed by The New York Times. “Student debt cancellation is a popular campaign promise that you, President Biden, have the executive power to deliver on your own.”
announcing the latest pause extension last month, Mr. Biden’s press secretary, Jen Psaki, said he “hasn’t ruled out” the idea.
But Mr. Biden’s power to act unilaterally remains an open legal question.
Last April, at Mr. Biden’s request, the Education Department’s acting general counsel wrote an analysis of the legality of canceling debt via executive action. The analysis has not been released; a version provided in response to public records requests was fully redacted.
Proponents of forgiveness say the education secretary has broad powers to modify or cancel debt, which both the Trump and Biden administrations have leaned on to carry out the payment freeze that started in March 2020.
Legal challenges would be likely, although who would have standing is unclear. A Virginia Law Review article this month argued that the answer might be no one: States, for example, have little say in the operation of a federal loan system.
scathing criticism from government auditors and watchdogs, with even basic functions sometimes breaking down.
Some problems are being addressed. The Biden administration has wiped out $17 billion in debt for 725,000 borrowers by expanding and streamlining forgiveness programs for public servants and those who were defrauded by their schools, among others. Last week, it offered millions of borrowers added credit toward forgiveness because of previous payment-counting problems.
But there’s much still to do. The Education Department was deluged by applicants after it expanded eligibility for millions of public servants. And settlement talks in a class-action suit by nearly 200,000 borrowers who say they were defrauded by their schools recently broke down, setting up a trial this summer.
will be restored to good standing.
Canceling debt could make addressing all this easier, advocates say. Forgiving $10,000 per borrower would wipe out the debts of 10 million or more people, according to different analyses, which would free up resources to deal with structural flaws, proponents argue.
“We’ve known for years that the system is broken,” said Sarah Sattelmeyer, a higher-education project director at New America, a think tank. “Having an opportunity, during this timeout, to start fixing some of those major issues feels like a place where the Education Department should be focusing its attention.”
Voters like Ashleigh A. Mosley will be watching. Ms. Mosley, 21, a political science major at Albany State University in Georgia, said she had been swayed to vote for Mr. Biden because of his support for debt cancellation.
Ms. Mosley, who also attended Alabama A&M University, has already borrowed $52,000 and expects her balance to grow to $100,000 by the time she graduates. The debt already hangs over her head.
“I don’t think I’m going to even have enough money to start a family or buy a house because of the loans,” she said. “It’s just not designed for us to win.”
Inflation is high and has been for months. It’s weighing on consumer confidence, making policymakers nervous and threatening to eat away at household paychecks well into 2022.
This is the first time many adults have experienced meaningful inflation: Price gains had been largely quiescent since the late 1980s. When the Consumer Price Index climbed 7 percent in the year through December, it was the fastest pace since 1982.
Naturally, people have questions about what this will mean for their pocketbooks, their finances and their economic futures.
Closely intertwined with price worries are concerns about interest rates: The Federal Reserve is poised to raise borrowing costs to try to slow down demand and keep the situation under control.
furniture and camping gear.
That rapid consumption is running up against constrained supply. Factories shut down early in the pandemic, and in parts of Asia, they continue to do so as Omicron cases surge. There aren’t enough containers to ship all of the goods people want to buy, and ports have become clogged trying to process so many imports.
expanding their profits.
In theory, competition should eat away at extra earnings over time. New firms should jump into the market to sell that same products for less and steal away the customer. Existing competitors should ramp up production to meet demand.
But this may be a unappealing time for new firms to enter the market. Established companies may be hesitant to expand production if doing so involved a lot of investment, because it is not clear how long today’s strong demand will last.
“It is a very uncertain environment,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank. “A new firm stepping in is a lot of investment, with a lot of financial risk.”
Until companies can produce and transport enough of a given product to go around — as long as shortages remain — companies will be able to raise prices without running much risk of losing customers to a competitor.
In past periods of inflation, do employers typically increase wages or award higher-than-average yearly increases to help employees offset inflation? If so, in what industries is this practice most common? — Annmarie Kutz, Erie, Pa.
There is no standard historical experience with wages and inflation, Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said during an interview with The New York Times on Twitter Spaces last week.
lower-wage service industries have been competing mightily for workers in recent months, and pay is climbing faster there.
“The history isn’t so clear that cost of living translates into higher wages, but that’s largely because inflation has been low and stable for a very long time,” Ms. Daly said.
in December projected that price gains will drop back below 3 percent by the end of the year, and will level off to normal levels over the longer term.
are adjusted for inflation, so those should keep pace with price gains. Bonds that pay back fixed rates do less well during periods of inflation, while stock investments — though riskier — tend to rise more quickly than consumer prices. Ms. Benz recommends holding assets across an array of securities, potentially including inflation-protected securities such as some exchange-traded funds or Treasury Inflation Protected Securities, commonly called TIPS.
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What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation costs and toys.
What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.
Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains could also lead to higher wages and job growth.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
“It argues against having too much in cash,” Ms. Benz said. “That’s too much dead money.”
Readers wonder how government policymakers will react.
We currently have low unemployment, strong wage growth (largely through attrition / voluntary retirements), easy monetary policy and now rising inflation. What are other periods of time when the United States had these conditions? How did things work out then? — Harshal Patel, Moorestown, N.J.
Jared Bernstein, a member of the White House Council of Economic Advisers, pointed to the post-World War II period as a reference point for the present moment.
“Demand was strong, and supply was constrained,” he said in an interview. “That’s a very instructive path for us.”
The good news about that example is that supply eventually caught up, and prices came down without spurring any greater crisis.
Other, more worried commentators have drawn parallels between now and the 1970s, when the Fed was slow to raise rates as unemployment fell and prices rose — and inflation jumped out of control. But many economists have argued that important differences separate that period from this one: Workers were more heavily unionized and may have had more bargaining power to push for higher wages back then, and the Fed was slow to react for years on end. This time, it’s already gearing up to respond.
about price controls in a recent article, and vocal minority think the 1970s experience unfairly tarnished the idea and that it might be worthwhile to reopen the debate.
“This is a great suppressed topic,” said James K. Galbraith, an economist at the University of Texas. “It was absolutely mainstream from the start of World War II until the Reagan administration.”
If inflation is being caused by supply chain problems, how will raising interest rates help? — Larry Harris, Ventura, Calif.
Kristin J. Forbes, an economist at the Massachusetts Institute of Technology, said that a big part of today’s inflation ties to roiled supply chains, which monetary policy can’t do much to fix.
But trade is actually happening at elevated levels even amid the disruptions. Factories are producing, ships are shipping, and consumers are buying at a rapid clip. It is just that supply is not keeping up with that booming demand. Higher interest rates can relieve pressure on demand, making it more expensive to buy a boat or a car, cooling off the housing market and slowing business investment.
“A good part of the supply chain problems, you can’t do anything about,” Ms. Forbes said. “But you can affect demand. And it is the combination of the two which determines inflation.”
Andrea Jones hadn’t yet settled on a date to retire from her customer service job at United Airlines when Newark airport started looking like a ghost town in March 2020. After 28 years with the carrier, she still loved her work. But by the end of that month, she had hung up her blue uniform for the last time. She is still struggling with a sense of loss.
“I wasn’t at all ready to leave,” she said. “It hit me right between the eyes.”
Ms. Jones, 68, of East Windsor, N.J., retired to protect the health of her husband, George, who has multiple myeloma, a form of cancer. Fortunately, the Joneses had a nest egg, and United offered a retirement package that enabled her to keep their health insurance.
Patricia Scott has not been so lucky. Ms. Scott, a special-education teacher in Stockton, Calif., retired in January to preserve her own health. A grandmother of 10, she survived breast cancer in 2016; her oncologist told her she couldn’t risk catching Covid-19 by returning to the classroom. Now, at age 66, she is on financial quicksand. “My income is half what it was,” she said. She is single and in debt. “I’m stressed, I’m depressed and I’m terrified.”
For many of the nearly three million workers ages 55 to 70 who have left their jobs since March 2020, retiring during the pandemic has inflicted two traumas. Like Ms. Jones and Ms. Scott, most felt they were forced out of work before they wanted to go, said Teresa Ghilarducci, a professor of economics and policy analysis at the New School for Social Research. Among that subset, the majority, like Ms. Scott, were financially unprepared, Ms. Ghilarducci said.
research from the New School, far more older workers retired during the pandemic than during other recessions. After the 2008 financial crisis, for example, 1.9 million older workers left the labor force in the first three months of the recession. In the first three months of the pandemic last year, 2.9 million left the work force. The latest data shows that 1.7 million of the newer wave of retirees left despite financial uncertainty, Ms. Ghilarducci said.
Their departures generally were not a bid for a few extra years of bird-watching. “A lot of people were pushed out of their jobs,” Ms. Ghilarducci said; she attributed that push partly to age discrimination. “It used to be that employers would let the ones they just hired go first in a recession, but this time older people who have been in their jobs the longest have been hit hardest.”
Lack of enforcement of anti-discrimination laws was a factor, she said. So was what some employers saw as a rare opportunity created by the pandemic to get rid of older workers, who are perceived to be less productive and more expensive.
Regardless of the reason, the new army of reluctant retirees, disproportionately made up of Black workers and those who lack a college degree, according to June data from the New School, is in trouble. One key reason: Debt rates among Americans 65 and older are the highest they’ve ever been, Ms. Ghilarducci said. And they are likely to rise as more people are forced to draw down their assets to make ends meet. Collecting Social Security earlier than anticipated will add to their vulnerability, since claiming earlier will permanently reduce their benefits.
Even for people with a financial safety net, the hurdles can be significant. “There’s a lot of stress that comes with having retirement forced on you,” said Malcolm Ethridge, a financial adviser in Washington who has several newly out-of-work older clients. “It takes time to get past the disruption.”
Jovan Johnson, a certified financial planner in Atlanta, said Ms. Scott and others in her situation should start looking for a pro bono financial adviser who can help make sense of their money. “There are a lot of us out there who will help people out for free during a crisis,” he said. He recommends searching sites like the XY Planning Network.
The primary benefit of sitting down with a professional may be relief from panic, he said. But the 15 new retirees who have contacted him for pro bono help since the pandemic started, among them nurses and teachers, have also gained a better understanding of how to manage limited funds. “Everybody deserves to have a plan,” he said.
Pen and Brush after 23 years as executive director, the stress started last year, when she contracted Covid-19 and spent several weeks in an intensive care unit. She was not psychologically ready to retire, but because she has still not fully recovered, she felt she had to. “I was one of those people who was going to have to be wheeled out of there, I loved it so much,” she said.
Now she is adjusting to what she said was a more limited routine. Sunday nights and Mondays flummox her the most. “It’s like when you have that dream where you have a final exam and you’ve never been to class, or you forget your locker combination. I keep thinking, I have to go to work.” Instead, she takes walks with her husband, Wallace Munro, a retired actor, and visits the grocery store more than she thought she would ever want to.
“It’s something to do,” she said. “You have to restructure your life when something like this happens to you. It’s so easy to get depressed.”
Managing money in a sudden retirement
Mr. Johnson, the financial planner, offered tips on juggling your income and expenses when you’re thrust into joblessness with little warning.
Make sure that you do not have any old pension or 401(k) money out there from previous employers. People who have rolled over retirement accounts from previous employers often forget about them.
Don’t feel guilty for taking Social Security early — especially if you have no other option. You can begin claiming your benefits as early as age 62. However, the downside to claiming before your full retirement age (you can look it up on the Social Security website) is that your total monthly payments will be permanently reduced. If your income is below a certain threshold, your full Social Security payments might be tax-free.
Use Social Security payments for your nondiscretionary, fixed expenses and retirement assets for discretionary expenses, such as travel and entertainment.
Bridge the gap to Medicare, because the age of eligibility is 65. Consider plans under the Affordable Care Act. Typically, if your income is low enough, you may receive premium tax credits and other benefits if you choose a plan on the marketplace.
If Social Security and retirement savings cannot sustain your lifestyle, it’s time to consider Medicaid, Supplemental Security Income and similar programs.
“The advance of the credit reduces the total amount of taxes paid,” said Rob Seltzer, an accountant in Los Angeles. “So there could be a problem with an estimated tax penalty,” depending on how much the taxpayer earns this year compared with last. It may make sense to run a tax projection with a professional to see if it makes sense to opt out.
If you’ve left the country
You need to live in the United States for more than half of 2021 to be eligible for the advanced payments, but expatriate taxpayers can still claim the expanded credit on their return, according to the I.R.S. (The refundable portion of the credit, however, will be curtailed to the prior $1,400 limit.) Military members stationed abroad are still eligible for the advanced payments.
If you rely on a big refund
Some households are simply accustomed to getting a large refund when they file, using it as a forced savings plan. If you have come to depend on a big refund, you can opt out of all future payments and receive the full value of the credit when you file your return next year.
“Opting out or making changes to the payment comes down to personal preference of when and how you want to receive the money,” said Andy Phillips, the director of the Tax Institute at H&R Block. “If you prefer monthly payments of smaller amounts, no need to make changes.”
If you’re still unsure what to do
Sheila Taylor-Clark, a certified public accountant and secretary of the National Society of Black C.P.A.s, has practical advice for clients who don’t necessarily want to opt out but who may be uncertain on where they stand: “Drop that money into an interest-bearing account, so if you owe money you can just send that back next April,” she said.
How to make changes and opt out
To opt out of receiving the payments, taxpayers should visit the Child Tax Credit Update Portal. If you don’t already have an account, you’ll need to create one. And if you’re married and file a joint return, both spouses will need to create accounts and opt out; spouses who don’t opt out will continue to receive half of the advance monthly payment.
Besides stopping the checks, the portal can be used to check the status of your payments; change the bank account receiving them; or to switch your payments to direct deposit from paper checks.