While you may have all that information safely stashed in a file box or drawer at home, it’s not easily accessible until they find your house keys!

And that’s the point of Quicken’s new product called LifeHub: It’s a place to store and manage all your important information in one secure, easily accessible location in the Cloud where your spouse, adult child or trusted friend can find and access it instantly. And where you can access it from any place you travel.

Even if you still want to keep your paper files and documentation — which I do myself, and still recommend — it’s worth taking the time to assemble this information in one digital location or simply add notes about how to access the documents and contact your advisers. And being Quicken, they’ve made the LifeHub process an easy one.

Even if you don’t consider yourself a techie, it’s worth going to Quicken.com and signing up for LifeHub to use on your desktop or laptop (an app is coming for both Apple and Android). The cost is $3.99 per month with a 50% discount, so $1.99 a month to set up this secure product for all your important information.

Getting started

Do the easy stuff first by following the logical categories on your screen. If you currently use Quicken or Simplifi for online bill payment, budgeting and investment tracking, it’s easy to import all that information into LifeHub. But importantly, you do not have to use those programs to get started with LifeHub.

Simply skip to the next task: creating your contact list. You can create your own or import your contact list directly from Google, iCloud or Outlook.

Next, move on to the section called “Institutions,” where you can list important institutions and contact info for physicians, lawyers, brokers, insurance agents and more — all organized and accessible, without searching through your contacts.

Collecting your personal IDs is the next step. You can scan and upload your driver’s license, your passport, your birth certificate, and marriage and divorce and even death certificates. Or your Social Security and Medicare cards, or veteran’s ID. When will you — or someone — need them? You never know! Now they are stored securely in the cloud inside LifeHub.

The next category involves uploading legal documents — your Will or revocable living trust documents, your healthcare power of attorney, and your living will, detailing end-of-life instructions. Yes, your physician should have a copy of the latter documents. But if you’re in an accident out of town, your spouse or adult child may need immediate access to prove your instructions.

Access to passwords is critical, especially if those you authorize to help need to get into your online accounts. By now you’re probably storing your passwords securely in a password manager, such as Dashlane or Keeper. But who knows your “master password” that unlocks everything from your bank account sign-ins to your investment accounts? Store that main password in this section.

Tax returns are easily downloaded into a special section, where you can also scan and store everything from 1099s to real estate tax receipts needed for tax prep every year.

LifeHub has thought of everything. There’s a section for your pet’s information — everything from rabies shots to microchip info. If you have multiple real estate locations, such as a residence and a vacation home, you can store purchase documents and contact information for the people who provide services. Include the information on your homeowner’s policy, and contact information or log-in info for your online insurance account.

There’s even a special section called “After I’m Gone” to share information about your funeral and burial plans, useful details for your obituary, and guidance to others, such as your children’s guardians or successor trustees.

Best of all, you can designate who gets access to each of these sections of LifeHub, preserving your privacy while assuring that your critical information is available when needed.

The challenge

If you think it will be challenging to sit down at the computer and gather all this information in one place, just think about how challenging it would be for your heirs without your guidance! Sure, you can leave notes that some stuff is in the top left drawer, and other stuff is in the little file cabinet, and more in the safe deposit box. But where is that box, and the key, and who is the signatory?

You’ve spent a lifetime accumulating and enjoying your assets. Now, it’s time to make sure they are taken care of if you are incapacitated or when you die. And that’s The Savage Truth.

(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

That’s the simple and essential premise of Roth conversions — paying taxes now on regular IRAs, 401(k)s and other tax-deferred retirement accounts (except those from your current job) in exchange for tax-free withdrawals of those balances, plus all their growth, down the road.

Many Americans have spent the last 40 years growing tax-deductible retirement savings inside traditional 401(k), 403(b) and IRA accounts. But when you withdraw those funds, the money is taxed as ordinary income at your then-current rates — on top of any other taxable income you may be receiving, such as a pension or even your Social Security benefit.

If you have a traditional pre-tax retirement account such as an IRA, 401(k) or 403(b) account, the government mandates you take required minimum distributions (RMDs) at age 73 — even if you don’t need the withdrawals to live on. (The RMD age will rise to 75 in 2033.) The government wants to get its share of your tax-deferred savings windfall by forcing these taxable withdrawals. Doing a Roth conversion now avoids RMDs later.

Consider these issues

So basically, the big math question is whether you are better off paying those taxes now, out of current savings (and preferably not out of your retirement account assets, so they can keep growing) or whether you should leave things alone and take your chances on taxes in the future.

Further, you must decide whether to convert all or just part of your IRA to a Roth. And then decide whether you should do it all in one year or spread it out over time. Note: if you’re still working, you can’t convert your current 401(k).

Figuring out whether to do a conversion and precisely how much to convert in each future year is immensely complicated. Here are some of the interconnected decision factors and tradeoffs.

—Tax brackets. Paying more federal and, potentially, state taxes today will lower these taxes in all future years. That’s a multiplier-type effect, even though we can’t predict future tax brackets.

—Need for liquidity. If you use your liquid savings outside your IRA to pay the income taxes, will you be in a tight position if you need cash for an emergency? (Taking extra money out of the IRA to pay taxes partially defeats the purpose.)

—IRMAA. Because all of the conversion is considered taxable income in the year of conversion, it can raise your Medicare Part B and Part D premiums in the short term. Over the long term, these premiums will be far lower because Roth withdrawals don’t impact IRMAA taxation.

—Taxation of Social Security benefit. If you are receiving a Social Security benefit, and you add your conversion amount to your adjusted gross income, it could make up to 85% of your benefit taxable in the year of the conversion. But future Roth withdrawals won’t impact your benefit taxation.

—Market timing. The last thing you want to do is convert at the top of the market, when your account is most highly valued. Think of how you would feel if you paid taxes on the peak value at conversion, only for the market to decline in the next year. Of course, no one has a crystal ball about when the market has peaked!

—Your longevity. It’s difficult to gauge how long your assets might have to grow on this tax-free basis after conversion. And after your death, your beneficiary will face slightly different withdrawal rules, depending on whether the beneficiary is a spouse, and how the inherited IRA is handled.

Clearly, this is a multi-dimensional computation, and not a matter of guesswork. Further, you want to get advice from someone who is not benefiting from fees on assets under management.

The solution

These complex tradeoffs are a feature of the new Roth Conversion Optimizer that is one part of Maxifi Planner (Maxifi.com) — a comprehensive economics-based lifetime financial planning tool created by Boston University economist Larry Kotlikoff, who also created MaximizeMySocialSecurity.com. (Note: Kotlikoff is my co-author and economic genius behind our book “Social Security Horror Stories.”)

Maxifi’s patented interactive algorithms are designed to answer any and all of your planning and retirement questions, including analyzing whether you should do a Roth conversion. It will calculate precisely how much to convert annually to minimize your lifetime taxes and thus maximize your household’s sustainable living standard.

You won’t know the impact on increasing your lifetime spending until you run the Maxifi premium program. Check out the demo and podcasts at Maxifi.com. At $149, including free online support, it’s well worth the cost.

And that’s The Savage Truth.

(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

The Wall Street Journal recently examined the soaring home prices in Washington D.C. as the new administration of President Donald Trump took office. Wealthy cabinet members and tech executives are paying prices over $10 million for homes where they can entertain and have access to the seat of power.

Meanwhile, housing valued collectively at more than $100 billion has been destroyed in California wildfires. Some of the homes lost were valued at more than $10 million, and others owned for many years by middle class Americans who will now have to pay current prices to rebuild — assuming they have the insurance.

Owning a home has always been a cornerstone of the American Dream. In the rush to build new homes after World War II, suburban developments and highways and school systems powered the post-war economic revival.

In the 1950s, the average price of a new home was $7,354, which adjusted for inflation would be $93,602 in today’s dollars. But today, the median price of an existing U.S. home is $407,500, according to the National Association of Realtors.

Home prices have not always gone straight up. In most recent memory, amid the mortgage crisis in 2007-2008, the median existing home price in the U.S. fell by a record 12.4% in the fourth quarter of 2008 compared to the same period in 2007, as foreclosures and defaults skyrocketed, and some people simply walked their homes and unaffordable mortgages.

For the record, my columns begged people not to walk away from their homes, even at lowered values. If you had kept paying that mortgage, your home would be worth double today — and you could have refinanced below 4% a few years ago.

Affordability is the Issue

It’s not just the price of the home that’s the issue. We all know prices have soared — and not just for the mega-rich. Over the past seven years, home prices have surged by more than 65%. Affordability revolves around the ability to make the necessary monthly payments, including mortgage interest, property taxes and insurance — as a percentage of the average family income.

Despite the Fed’s recent cuts in short-term interest rates by one full percentage point since last September, mortgage rates have moved in the opposite direction — rising more than one percentage point since the Fed started cutting. Fears of future inflation, borrowing demand because of deficits, and just plain economic growth have kept longer-term rates moving higher.

This affordability crisis is accelerating. According to the Realtors, in 2021, when mortgage rates were around 3% and the median home price was around $357,000, it took only 16.9% of the median family’s income to pay for that home. In 2024, it takes 27% of that median family income to afford the median family home.

Or, to put it more specifically, for today’s median priced home (around $410,000) with a 10% down payment, a 30-year fixed rate mortgage for $370,000 would cost you $2,610 per month (including PMI).

A small change in mortgage rates makes a big difference. At the 6% rate available on the same mortgage earlier last year, the monthly payment was $2,304 including PMI — a $300 difference every month.

And those numbers don’t include property taxes and insurance! Does anyone think either of those will decline in the year ahead as insurers recoup the losses of their hurricane and wildfire coverage?

No wonder sales of existing U.S homes fell in 2024 to the lowest level since 1995!

What to do now?

Housing affordability is a problem that confronts buyers and sellers and renters. The market is in a logjam — with those who have low-rate mortgages from a few years ago mostly refusing to sell. Tariffs on imported building materials from Canada will only accentuate pricing problems. And rebuilding demand on both coasts will keep raw materials and labor costs high.

Markets will solve this problem. At some point, builders will be forced to cut prices to liquidate inventories. Or sellers will relent and list their homes, creating more supply. Or builders will keep building at even higher prices until the affordability bubble bursts and transactions take place at more reasonable prices.

The one optimistic outcome is that new, private incentives are created for tiny homes and community solutions to solve the housing problem. We did it in the 1950s, and we can do it again. That’s The Savage Truth.

(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

In early February, the headlines revolved around potential tariffs that the United States would charge on goods imported from Canada and Mexico, two countries on our border with whom we already have extensive two-way trade. After some last-minute diplomacy, President Donald Trump set aside plans to impose tariffs on Canada and Mexico, although he left open the possibility that they could be imposed in the near future. Meanwhile, Trump imposed a new 10% tariff on goods imported from China and scrapped the “de minimis” exception that allowed packages worth less than $800 to enter the U.S. without duties.

What is a tariff?

Basically, a tariff is a tax at the border on imported goods. Tariffs are already collected by U.S. customs on a variety of imported products. Customs brokers collect the tariffs from the U.S. companies that purchase the goods. That raises the costs of the goods to the ultimate consumer — unless the company absorbs the cost of tariffs, which cuts into their profits and growth and job creation.

So, if a U.S. company imports Canadian lumber or plywood to sell to homebuilders, a 25% tariff would significantly increase the cost of homebuilding in the United States — raising the ultimate price of the home or remodeling job. These higher prices lead to inflation. If customers can’t or won’t pay the higher home prices, it leads to a slowdown in homebuilding and remodeling projects, impacting jobs.

Tariffs could compel homebuilders to turn to U.S. domestic lumber companies for their supplies. But those prices would move higher, as well, since free market prices will rise to nearly match the cost of imported wood. That’s what happened when tariffs were put on imported washers and dryers. Domestic manufacturers increased prices too.

Tariffs are two-way streets

But higher prices on imports are only one side of the tariff story. What happens if the country on which the tariffs are placed decides to “get even” — by putting tariffs on the goods they import from the United States?

In 2023, the United States imported approximately $426 billion worth of goods from Canada. In the same year, Canada was our largest export market, worth $352 billion. Canada bought $53 billion worth of vehicles from the United States, $38 billion of machinery and nuclear reactor equipment, and $24 billion worth of agricultural products.

If Canada were to retaliate with its own tariffs, raising prices on its imports, it will hurt manufacturers in the United States who export to Canada.

Let’s take a simple case. In 2023, Canada imported $262 million worth of distilled spirits such as Kentucky bourbon from the United States. Suppose, because of retaliatory tariffs, the price of Kentucky bourbon goes up in Canada — and Canadians stop drinking as much Kentucky bourbon. Workers in the U.S. may lose their jobs. The effect ripples through both economies, distorting prices and slowing production and impacting jobs.

Now, consider the situation with Mexico and the impact of a 25% tariff. Notable U.S. imports from Mexico include finished vehicles, auto parts, electronics, appliances, agricultural products and beer. Last year, the United States imported $6.4 billion worth of beer from Mexico, about 84% of all imported beer. If Trump’s tariff were put in place, Modelo and Corona would become 25% more expensive, unless distributors absorbed some of the costs!

Of the $3.2 billion worth of tomatoes the U.S. imported in 2022, 86% came from Mexico. We imported 2.8 billion pounds of avocados from Mexico in 2023 (think of guacamole that you eat with your beer), and plenty of other fresh vegetables. So, tariffs on Mexican imports would raise the price of fresh vegetables in winter for American consumers.

And if Mexico were to retaliate by putting tariffs on U.S. exports to Mexico? In 2023, the U.S. exported $51 billion of refined petroleum products and natural gas, $45 billion of machinery, nuclear reactors and $51 billion of electronics, as well as $28 billion of cars and parts. As those goods would rise in price in Mexico as the tariff would undercut demand. And U.S. manufacturers/exporters would suffer.

Bottom line: It’s not just the initial tariffs that distort markets and raise prices for those who must ultimately pay the higher costs. The tariffs can trigger responses that impact not only the prices of imports but the demand for our exports, which also impacts the American economy and jobs.

The lessons of history

The world has once before faced a dramatic round of retaliatory tariffs, initially intended to protect domestic economies. The results were disastrous. If you remember the history of the Great Depression in the 1930s, it is widely attributed to the Smoot-Hawley Tariff Act, which turned a financial and banking crisis at home into a global trade war and worldwide depression.

This time around, the consequences of tariffs could be strategic as well as economic. The United States gets 60% of its crude oil imports from Canada — despite the fact that the U.S. is now the world’s largest oil producer — because the majority of U.S refineries need Canada’s heavier form of crude oil to turn into gasoline. Tariffs on oil imported from Canada could significantly impact our domestic gasoline prices at the pump — again hitting consumers and causing inflation.

Luckily, we seem to have avoided a trade war with our immediate neighbors … for now. Economists on both sides of the political spectrum argue against the temptation to believe that tariffs punish our trading partners. In the end, they wind up hurting Americans. And that’s The Savage Truth.

(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

It’s time to file electronically. And the IRS has made it easier and cheaper, even for non-techies who may also decide to print out and keep a paper copy of that important return.

Plus, even if you owe money or must make quarterly estimated tax payments, you can now transfer that payment securely, directly and easily to the IRS.

Ditch the paper return

Using paper these days is asking for trouble. So what follows is a short guide on how to file your return and pay electronically.

The vast majority of individual returns are filed online — even if you walk into a tax preparation service and watch them fill out your forms on paper. Your actual return — and your refund request — will be processed electronically. That’s why it’s important to know your bank routing number and account number, even if you use a tax preparation service. And make sure not to close that bank account before your refund is deposited!

You’ve seen the advertisements for popular tax preparation services such as TurboTax, TaxAct and H&RBlock. Each has software that will prepare your federal and state tax returns — for a fee. And each offers access in real time to either a chatbox or a tax professional to answer your questions as you go through the process.

IRS FreeFile tax prep

Many people are unaware that the most popular electronic tax filing services also offer FREE service — but only if you link directly to them via www.IRS.gov/freefile. This free service is generally limited to those with less than $84,000 in income.

This offering is from the FreeFile Alliance, a partnership between the government and private tax preparers. When you click on the IRS site, you can compare the offerings from various preparers. Some include a free state tax return, while others charge an extra fee.

Either click to go directly to a partner website, or the webpage will offer a search option to be “matched” with a trusted tax preparer based on your answers to a few simple questions about your filing status, income, state of residence and dependents (if any). All offer accuracy guarantees. And all send you an email when the IRS has accepted your return.

At the IRS.gov/freefile page you can also access blank tax forms, which you can fill out securely online.

IRS DirectFile

This marks the second year of a pilot program in 24 states that allows taxpayers to connect and file their tax returns directly with the IRS. (It has generated some controversy and pushback from tax prep services.) And it will also file state tax returns for participating states.

There is no cost for this service, and it does allow a “chat” function to help with tax preparation. One key caveat: It does not file returns with itemized deductions, only the standard deduction. DirectFile links directly with the IRS to capture income from W-2 forms, 1099s for retirement income, Social Security benefits, interest income and unemployment compensation. But you can’t use Direct File if you have other types of income, such as gig economy, rental or business income. For a link to Direct File instructions, go to www.IRS.gov/directfile.

Paying your taxes

Whenever you owe the government money — either as a result of a balance due on your tax return or a requirement to file quarterly estimated taxes, asking for an extension or even to fulfill a payment agreement with the IRS — it’s smarter and safer to pay that bill online.

You can do that easily directly from your bank account (even if you do not use online banking services regularly) by going to www.IRS.gov/DirectPay. It’s easy and doesn’t cost anything. Payments can be made for the current year or any year going back 20 years!

Finding a trusted preparer

Either go directly to a well-known and trusted tax prep service or file directly with the government online as described above. And don’t take a neighborhood recommendation if you want to find an individual tax preparer. The IRS has a directory of accredited Federal tax return preparers. You can find it at IRS.gov by inserting the words “find a tax preparer” in the search box.

You can’t escape tax filing — unless your 2024 income was below $14,600 for single filers or $29,200 for those married filing jointly. Even then, you might want to file to get a refundable credit. And remember, it doesn’t pay to procrastinate. That’s the Savage Truth.

(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

It’s been a long time since we’ve seen a bear market, and this column is not in the business of predicting future market direction. But it is important — especially if you’re nearing or in retirement — to have some money set aside in safe, short-term, liquid investments.

That’s what I call “chicken money.” It’s defined as money you can’t afford to lose. You won’t get rich with chicken money, and you may miss out on some stock market gains. But you won’t get poor, either.

In fact, the mantra of the chicken money investor is: I’m not as concerned about the return ON my money as I am about the return OF my money!

Chicken money belongs in FDIC-insured banks, in money market deposit accounts or CDs with maturities of less than two years. And as I’ve often recommended, Treasury bills are a perfect chicken money investment — IOUs directly from the United States government. You can find a feature article on the subject on the homepage at TerrySavage.com, “How to Buy Treasury Bills.”

Chicken money concerns

In recent days, I’ve been hearing concerns about the security of chicken money investments because of news reports coming out of Washington.

There have been stories about a plan to end FDIC insurance, amid a reshuffling of bank regulatory agencies. There have been stories about unauthorized and unprofessional people getting access to the U.S. Treasury payments systems.

While these fears seem far-fetched, it’s certainly enough to keep savers awake at night. That’s discouraging because the entire idea of having some money set aside safely, is to allow you to sleep well.

So let’s put those concerns in perspective.

The importance of confidence

The entire United States financial system is based on confidence. The dollar is the benchmark of global trade and international finance. The potential consequences of a loss of faith in the dollar are immense.

First, the United States has a $36 trillion national debt. We borrow that money globally, by selling IOUs — Treasury bills (maturities up to two years), Treasury notes (from two to 10 years) and Treasury bonds (longer-term borrowings).

Every year a good portion of that debt matures, and must be “rolled over.” That means the Treasury must find new buyers of its debt — global central banks, pension funds, institutions, and even individual investors who open TreasuryDirect accounts to buy T-bills (minimum purchase $100).

If confidence is lost in the future value of the dollar, or the future of the United States’ economy, global bond buyers will demand a higher rate of interest.

This year, around $9 trillion of existing debt will mature and must be be refinanced — in addition to any new deficit financing the Congress decides to incur. In fact, this year the Congressional Budget Office is predicting a deficit of about $2 trillion. That’s a lot of money to borrow in one year!

Rising short-term interest rates add to the cost of borrowing. The Fed has made several rate cuts last fall — but six-month Treasury bills still yield around 4.3%. Longer-term 10-year bonds (on which mortgage rates are based) have actually risen a full percentage point since the Fed started cutting short rates. The 10-year Treasury currently yields around 4.5%.

Even more concerning, much of the Federal debt that is maturing and being refinanced carried significantly lower rates when it was issued a few years ago — less than 3% on average. Increased interest will increase our debt — just like it does on your credit card balances.

Think about this: Interest on the national debt now adds up to more than all non-defense discretionary spending combined!

That’s why it’s important to attack the deficit in an organized and sensible way — without creating uncertainty and concern among those who continue to lend us money at reasonable interest rates.

As of April 2024, foreign countries own approximately $7.9 trillion in Treasurys — or 22.9% of total U.S. debt. That’s down significantly from nearly one-third of our debt in recent years. Meanwhile, the central banks of China, India, Poland, and Turkey have increased their purchases of gold — diversifying out of dollars. Still, the U.S. dollar remains at high levels compared to other global currencies.

What to worry about

Americans live, spend, invest and plan our future in dollar terms. So, you should keep your chicken money in those short-term insured deposits and T-bills. If the credibility of the United States financial system is called into question, you’ll have more to worry about than your savings in chicken money. And that’s The Savage Truth.

(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

While inflation is not yet down to the Fed’s goal of 2%, it’s pretty obvious that the “expectations” of future inflation have dropped sharply. That gives the Fed room to cut interest rates in the near future — either by 25 basis points (i.e., one quarter of a percentage point) or by 50 basis points.

No one is saying — or wanting — prices to actually go DOWN. That would signal deflation, which typically occurs only as part of a steep recession. Getting control of inflation simply means prices stop rising at a rapid rate.

So even a “win” on inflation by the Fed will leave consumers paying far more for most goods than they paid a decade ago. Those olden days, and lower prices, are not coming back. The relief is in the knowledge that prices won’t continue to rise dramatically in the future.

That also doesn’t make current budgeting any easier for those living on fixed incomes. Since prices won’t drop, then wages must rise (or people must work longer hours) to get ahead. For retirees, that is an impossible ask. And for retirees with savings, their interest income will also drop since rates will decline on bank CDs and T-bills once inflation fears subside.

The Fed’s “victory” over inflation is mostly a triumph that will be felt in the future, as people can plan for their future needs without worrying about needing ever more money to just break even. That’s a valuable triumph. You don’t want to be living in Venezuela (283% inflation rate) or Zimbabwe (667% annual inflation rate!) where money loses value so quickly that it is treated like the veritable “hot potato” — something to exchange for goods immediately before prices rise.

Since the American dollar is the basis for much of the world’s trade, it’s especially important that it be respected as a store of value and a medium of exchange. The stability of the dollar (lack of inflation) is critical to not only your personal finances but also to the prosperity of the civilized world.

Impact on your finances
With that lesson in Economics 101 completed, the real issue is how this victory over inflation will impact your personal finances.

As I mentioned above, if you’re a saver, you’re about to see rates drop. A few months ago, the rate on six-month T-bills was just over 5.5%. When those T-bills mature in the coming weeks, your renewal rate will be closer to 4.75%. But at that rate, you’d still be far ahead of inflation, which is currently running around 3%. Just don’t plan on getting the same amount of interest dropping into your account at renewal time.

You could stretch out the maturity of your TreasuryDirect holdings. But longer-term rates are actually even lower, reflecting diminished fears of inflation. Two-year Treasury notes now yield less than 4%, down 25% in yield from nearly 5% just two months ago. Chicken money is still beating inflation, but that lead will diminish quickly in the months ahead.

On the other hand, if you’re looking to purchase a home or refinance your mortgage, the Fed’s confirmation that rates are heading down will make a big difference to mortgages. At just below 6.5%, the average rate on a 30-year mortgage is the lowest in 15 months. Mortgage servicers are gearing up for a refinancing rush.

If you’re considering a re-fi (or pushing your higher-rate home equity loan into a refinanced mortgage), you might start shopping lenders now — but hold off on locking in the rate! If the Fed does a series of rate cuts, you could see rates in the 5% area in the next few months.

The stock and bond markets are cheering the prospect of lower rates. Businesses will take this opportunity to refinance some of their higher-rate borrowings, cutting interest expense and potentially raising their profits. That’s good for highly leveraged companies, those with a lot of high-rate debt.

Of course, all of this good news could reverse if there are a few bad inflation numbers, or if the economy slows more than the Fed has anticipated. But in the meantime, the Fed deserves credit for managing through a very tricky situation. And that’s The Savage Truth.

(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

For two decades, target-date funds inside company 401(k) plans have served as the default “safe haven” investment, so they now hold more than $3.5 trillion of company plan assets. The initial goal was to provide a diversified portfolio of investments for novice plan participants. They chose their target retirement year and invested in the fund that matched that goal. The emphasis was on equity and growth for younger workers, transitioning to a professionally managed, “safer” portfolio with less equity exposure as the worker neared retirement.

But that’s not the way it worked out. While major mutual fund companies that provide the plan investments differ in their target-date fund asset allocation, overall these plans maintain a high degree of risk as they reach the “target date” of retirement, according to Surz. In fact, he notes that with an average 55% allocation to stocks, and another 30% allocation to long-term bonds (whose prices fall when interest rates rise), these portfolios typically contain 85% risk exposure.

Surz notes that most retirees just coast along, in the belief that the professional money managers of these target-date funds have their best interests at heart. But those allocations in most 401(k) plans are far more aggressive than the Federal Thrift Savings plan at that stage of life, with 70% in safe government guaranteed assets.

What’s the risk?

In 2022, an unusual year in which stock prices fell along with bond prices as the Fed hiked rates, those portfolios sustained huge losses. Now the Fed is more likely to be cutting rates, boosting bond prices in the year ahead. But another spurt of inflation could result in losses in both stocks and bonds.

When big losses occur at the start of retirement, they greatly impact future retirement income and withdrawals. No longer are the retirees taking advantage of buying shares at lower prices, in anticipation of a bounce-back. Instead, during retirement these losses impact a retiree’s ability to fund annual expenses.

It’s a matter of the “odds” – not just market forecasting. The market continues to make new highs and advance after setbacks. But the huge balances in 401(k) accounts at market highs are not guaranteed.

Congress has asked the General Accounting Office why the government thrift plan is so much more conservative than most corporate target-date fund accounts. But In April 2024 the GAO released a report titled “401(k) Retirement Plans: Department of Labor Should Update Guidance on Target Date Funds,” passing the buck to the Labor Department, which oversees company retirement plans. So far, the Labor Department has refused to deal with the issue.

What YOU should do?

Since no one is insisting Target Date plans fully disclose their combined stock and bond risk exposure at the targeted retirement date, it is up to you, the plan participant, to understand that these funds could be hazardous to your wealth if the stock market falls sharply. It’s not that you should sell out of stock market exposure; you’ll need it over the long term of your retirement to offset the ravages of any future inflation. But you need to understand your exposure to potential loss, and make sure you have other, less risky, investments to offset this exposure.

If you “roll out” of your company plan at retirement, you’ll be in the position to choose new investments, which will require you to analyze the portfolios of any target-date funds you might choose. As well, a rollover will give you exposure to government-only money market funds for a portion of your account – making RMDs easier, and letting you sleep better at night.

But if you haven’t retired yet and so must stick with the company plan options, or if you chose to leave your funds in the company plan after retirement, now is the time to look inside your plan and ask what’s in your wallet – and make sure you understand your exposure to stock market risk, before it’s too late. That’s The Savage Truth.

(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

Instead of heading back for senior year in high school hoping to coast for the next nine months, rising seniors should be spending their last few weeks of summer searching for college scholarships online. And this message also applies to those just going into their sophomore or junior years, since many scholarships are offered to high school students in those early years, to be saved for freshman year in college.

According to Kevin Ladd, chief operating officer and co-creator of Scholarships.com (Forbes’ top-rated site for the college money search), this is a classic case of “The early bird gets the worm.” Or in this case, the money. Some scholarships for fall of 2025 will have deadlines in July or August — before this 2024 fall semester even starts. For those already studying in college, the search service also reveals free money to supplement those student loans.

And we are talking about a LOT of money. Aside from the free money federal Pell Grants, which require low parental income on the FAFSA, there is a fortune waiting to be distributed to those who take the time and effort to apply.

We are not talking about needs-based programs. Almost 75% of the millions of scholarships on Scholarships.com do not have any needs-based disclosure, although some may require completing the FAFSA form.

There is no cost for the online search, which matches students with possible scholarships. Emailed updates on deadlines and new matches are part of the program. To offset the costs of running search engines, those who opt in at the beginning of their free search might see marketing campaigns for everything from dorm room furniture to credit cards! You can ignore them — but don’t ignore the emails suggesting you apply for a newly listed scholarship.

Scholarships require work
The online search is the easiest part of the scholarship hunt. Registering at Scholarships.com, or any of the other well-known sites such as Fastweb.com or even using the search engine at College Board.com, is easy for this generation of online experts.

But it’s important to fill in all the search criteria, so the engine can expose you to any free money for which you might qualify. Scholarships.com filters include things beyond just your grade point average, including SAT and ACT test scores, ethnicity, artistic ability, state of residence, academic major and military affiliation. And you should keep updating your profile on the site, triggering more qualification searches as new scholarships are added on a daily basis.

Having an unusual last name, or knowing your future career path can also open up scholarship opportunities. If you know you want to be a medical technician or an engineer or work in government, there are scholarships waiting for you to find them. In fact, according to Ladd, many smaller scholarships find few applicants each year, but the search will reveal them.

Next, the work comes in. Many scholarships require thoughtful essays, although Ladd says there is now a trend toward accepting videos in applications — a nod to the TikTok generation. So, there’s plenty of room for creativity, making you stand out. However, it takes time and effort to pursue the search.

How much money?
Even smaller scholarships can add up to a significant amount of free money. But there are many listed that offer $10,000 or more. Among the most popular grants are the Taco Bell Live Mas scholarship (which pays $10,000 and may be renewed every year) and the Horatio Alger scholarship, which awards the same amount.

Ladd says it becomes a sort of mental contest. Knowing that you’ve won one scholarship inspires a search to collect more. The Scholarships.com website even has a “success stories” section. One high school senior won more than $130,000 in free college money this year — including 18 scholarships, some as small as $1,000.

That should inspire some action. After all, you’re not just paying for college; you’re also avoiding another small fortune in interest on student loans in future years.

And that’s The Savage Truth.

(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

When it comes to tax fraud, the statute of limitations is usually three years from when the tax return was filed, but it can be extended to six years if the person omitted more than 25% of their income. There is no statute of limitations for civil tax fraud, which means the IRS can audit and collect tax debt indefinitely. (If you’re worried, consult a tax attorney about the meaning of “willful,” civil and criminal as they might apply to you!)

Why is the statute of limitations the lead paragraph in a personal finance column? Because the one place where there is NO statute of limitations is the “clawback” process of Social Security!

And let’s be clear from the start: When the Social Security Administration discovers that it has been overpaying benefit recipients based on its own mistakes in calculating the benefits, it is clawing back money from elderly and disabled people who innocently received the monthly checks.

Not fraud but ineptitude

These miscalculation cases are all about errors, not fraud. And Social Security clawbacks now total $21.6 billion from more than 2 million benefit recipients. The mistakes were made by the Agency in its own processes. Recipients relied on Social Security’s benefit calculations.

For many years, the agency failed to offset some non-covered public pensions, despite the W-2 forms given to the IRS, thus “overpaying” millions of teachers and other public servants because they didn’t calculate the Windfall Elimination Provision. They also failed to track the reported work income of people receiving Social Security Disability Insurance payments. If a recipient earned only slightly more than the limit in any month, benefits could be denied.

Now, in one fell swoop the agency demands clawbacks of $75,000 or more, of money paid out going back 20 years or longer. That is money long ago spent by the recipients who had nothing to do with the calculations, and counted on the SSA to determine the amounts of their benefits.

Despite the promises of the new Social Security Commissioner Martin O’Malley in his recent public testimony to Congress, there appears to be no effort to limit Social Security’s clawback reach. Even worse, the Commissioner’s well-publicized clawback “limitation” of 10% of the monthly benefit check does not apply to those who are deemed ineligible for any disability benefits because their small earnings may have exceeded monthly limits. They are just cut off completely, before any chance to appeal.

Consider these current horror stories reported to me by my readers in the past month:

—Christine is a 42-year-old deaf and disabled person, who works part time scrubbing floors in a hospital. She just received a clawback letter for $55,048 — dating back to December 2006! Even worse, her disability benefit — and her Medicare insurance payment — were stopped immediately. She will be homeless and have to rely on Medicaid. All because, years ago, she might have earned “too much” during a few months to qualify for SSDI — a mistake SSA just discovered in recent months — and fails to document.

—Therese is an elderly woman who mortgaged her home to pay an $18,504.70 clawback demand from Social Security for payments going back many years. After our pressure, the SSA agent agreed that the clawback demand was an error — and said they would process a return of the money.

Then, two weeks ago, Therese received another, separate demand for a recalculated clawback amount going back to 2006, saying she now owes $75,343.50 and announcing that her retirement benefit would be cut off. Therese will lose her house if she cannot pay the mortgage out of her monthly check.

Clawback limitation needed now

In our “60 Minutes” segment last fall, and updated two weeks ago, economist Larry Kotlikoff and I demanded an 18-month limitation on clawbacks in cases where the agency committed the error. That 18- month period could start from the moment the SSA discovered its mistake — or 18 months from the original miscalculation (resulting in a lower clawback).

Let’s make it clear. These recipients did not commit a crime! Social Security made the mistake in its calculations — and these beneficiaries relied on the agency’s determination of benefits.

It’s time to set a statute of limitations on Social Security clawbacks. And that’s The Savage Truth.

(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)