Places to retire abroad

This video covers 5 options for Americans who want to retire abroad, focusing on Costa Rica, Italy, Spain, France and Ireland.


Should you consider a biweekly mortgage?

This video does a pretty good job of explaining exactly how a biweekly mortgage works and the benefits. The benefits really go to making extra payments each year which can cut years off of your mortgage. It also aligns well with your biweekly paychecks, so it’s extremely convenient.

Just be careful in case you bank ties fees to this payment structure.


Savings rate down

Here’s some interesting news on the national savings front.

The nation’s savings rate has dwindled as consumers try to juggle rising prices and stagnant wages.

According to government data released Wednesday, the national savings rate was 3.5 percent in October, a slight improvement from the previous month but significantly below the 5 percent rate seen for most of the past two years. During the throes of the recession, the savings rate had skyrocketed above 8 percent.

“They spent it. That’s the short answer,” said Paul Dales, senior U.S. economist for Capital Economics. “It might be a lot of households don’t have a choice.”

Economists blamed higher gas and commodities prices for sending the savings rate to its lowest point since 2007. After remaining virtually flat in 2010, the consumer price index inched up this year as prices rose for essential products such as cotton and corn. Although consumers received bigger paychecks this year thanks to a payroll tax holiday, many found that the extra money was eaten up by increased fuel costs.

Another item to consider is that frugality is becoming less popular. Of course people are still looking for deals, but overall spending is up. We just had a record Black Friday and Cyber Monday, so people are flocking to the stores. Unemployment is still high, but more people perhaps are secure in their jobs after years of downsizing slows down.


Collapsing home prices are good for the young

Robert Samuelson is usually bringing bad news. He’s a respected economist, but nobody will accuse him of being an optimist. In fact, he’s very bearish on our fiscal future and he believes that life will be more difficult for the next generation of Americans given our massive debt and the inevitable need for higher taxes or cuts in benefits like Medicare and Social Security.

But he sees a silver lining with the collapse of housing prices. It’s terrible for anyone who bought a home in the past decade, but it’s good news for young people who home to buy a home some day.

But housing’s troubles may have a silver lining. If you’re a homeowner, the steep fall in prices is calamitous. But if you’re a future buyer, it’s a godsend. What we’re seeing is a massive wealth transfer from today’s older homeowners to tomorrow’s younger homeowners. From year-end 2006 to 2010, housing values fell $6.3 trillion, reports the Federal Reserve. Assuming there’s no sharp rebound in prices — a good bet — that’s $6.3 trillion the young won’t pay.

Up to a point, the lower home prices merely deflate the artificial “bubble.” But there’s evidence that the declines transcend that. The National Association of Realtors routinely publishes a housing “affordability” index, which judges the ability of median families to buy the median-price home at prevailing interest rates. By this measure, existing homes are the most affordable since the index started in 1970.

Young buyers “will be able to enter the housing market at bargain prices,” argues NAR economist Lawrence Yun. When home prices again rise, increases will parallel income gains, meaning that the relative burden of housing costs will remain roughly stable, Yun says. He expects only modest increases in interest rates. (A rise of one percentage point — say, from 5 percent to 6 percent — on a $150,000 mortgage boosts the monthly payment about $95.)

The important thing for young people, however, is learning to avoid credit card debt. If they don’t learn this lesson, lower housing prices won’t matter much as they wont be able to afford a mortgage payment if they’re loaded up with credit card payments.


The Medicare debate

House Budget Committee chairman Paul Ryan, R-WI, arrives for a hearing to mark up his 2012 budget proposal called “The Path to Prosperity” on Capitol Hill in Washington on April 6, 2011. UPI/Roger L. Wollenberg

With the radical new budget proposed by Paul Ryan and passed by the House Republicans, we have a full-fledged debate about the future of retirement in America. Ryan’s budget removes the guaranteed Medicare entitlement and replaces it with vouchers (or premium supports, depending on who you listen to). According to the Congressional Budget Office, the subsidy from the government will not be enough for most seniors to purchase medical insurance, assuming private insurers even want to cover them.

This is a radical departure from the social safety net. The Republicans argue that this will not apply to current seniors, just those under the age of 55. But that cold comfort for everyone else, including seniors who care about the future of their children, relatives and friends.

It’s doubtful that anything like this will pass with the current President and Senate, but everyone needs to pay attention. Who knows, the next election may affect your retirement years.