Saturday, November 25, 2023

Fraud Prevention Tips

 

It seems like everyday we hear stories about people who become victims of fraud. They are tricked into sending advance deposits for products or services they never receive or making wire-transfers to fraudulent accounts, or divulging sensitive information that can be used to wipe out bank accounts or commit identity theft.

What to do? Nobody can completely reduce their risk of being defrauded because not all of our personal information is under our control. For example, our employer could be hacked or our utility company or a hospital or hotel that we recently stayed at. All of these places hold individuals’ personal information including credit card and Social Security numbers.




Below are five fraud risk reduction tips:


Look for Red Flags- Never invest in an opportunity that promises “guaranteed” or “risk-free” returns or astronomical yields in a short period of time. Many people have lost substantial sums investing in non-existent or worthless oil wells, land, securities, businesses, and other fraudulent schemes. Always remember that, if something sounds too good to be true, it probably is!

 

Beware of Electronic Contacts- In recent years, as more people started blocking robocalls on cell phones, fraudsters have taken a different approach. Many now contact victims using text messages and e-mails. Never click on a link or a file in an unsolicited message from someone you don’t know. It could unleash malware on a device or prompt you to divulge personal data.

 

Beware of Pretexting- Many fraudsters trick victims into believing they represent a financial institution, utility company, or government agency. This is called pre-texting, i.e., where victims are contacted under false pretenses. Fraudsters often claim there is something wrong with a victim’s account (or tax return) and need personal information to “verify” or “confirm” its accuracy. Again, an unsolicited request for data from a stranger is a major red flag.

 

Guard Your Credit Cards- A strict interpretation is to never hand your credit card to anyone who can take it out of your sight and potentially steal the numbers. Think waiters in restaurants, for example. Either pay in cash, use a credit card reader (some restaurants have these), or pay with a credit card at a cash register or bar. Another tip: beware of loose or scratched credit card readers at stores or gas stations. This could indicate tampering with a credit card skimmer.

 

Set Up Two-Factor Authentication (2FA)- The objective here is to make it difficult for fraudsters to access financial accounts (e.g., bank and brokerage) to steal money. 2FA is an extra layer of security beyond a user name and password and requires users to insert a unique passcode (texted to their phone) or answer a series of challenge questions.

 

In summary, there are many proactive steps that people can take to reduce their risk of becoming a crime victim. To learn more, read this useful article from AARP.


This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 


 

Friday, November 10, 2023

How to Negotiate Lower Prices

 

Whether you shop in person at “brick and mortar” stores or prefer to shop online, price discrimination is a fact of life. In simple terms, price discrimination is the practice of charging different customers a different price for the same product or service. Think airline seats, hotel rooms, cars, auto insurance, credit card interest rates, cell phone plans, and items sold at garage sales. 


It is common for consumers to pay different prices for these items (e.g., coach seats on the same flight or prices for the same room at the same hotel just like the Trivago television ad). 



In this time of sustained high inflation for many items, price discrimination is particularly concerning. One way to fight back against price discimination is to become a better "haggler." In other words, learn to negotiate the price (downward) on more items that you buy.


Below are some experts tips for haggling:



Ask Better Questions- Questions that require a “yes-no” response (e.g., “Will you lower my interest rate?”) should be avoided because salespeople will likely say “no.” Instead, use phrases that require a conversation. Examples: “What discounts are available?” and “This is more than I want to pay. Tell me what I can do to get a lower price.” You can also negotiate by suggesting a lower amount than the posted price. Example: “I can go $2,500. That’s my limit.”

 

Develop a Script- Negotiation experts recommend preparing a script or list of bullet points to refer to when haggling. Ideally, practice negotiating with a friend or family member to get the timing down right. A negotiation request should be positive and show respect to company staff. The more data available to support the request (e.g., competitor pricing), the better.

 

Cast a Wide Net- Not every item for sale has negotiable prices but many more items do than most people think. As an example, research by Consumer Reports (CR) found that 63% of CR members who haggled for a better price on a mattress succeeded and they saved a median of $258. However, only 22% of the sample of more than $6,000 members tried negotiating for a mattress. Take-away: If you don’t try to request a lower price, you will never get one.

 

Question Questionable Items- If items on a hotel, rental car, or parking lot bill are not fully disclosed or services are not provided, this is a “hook” to question fees and request to have them removed. A common example is hotel resort fees. If they are supposed to cover a pool or fitness center and these facilities are closed, there is a legitimate case to be made to lower your bill.

 

Drop Names- Price discrimination is rampant when affiliation-related discounts are involved. If you have connections that will save you money, speak up. For example, military veterans and service members often receive discounts when shopping and from some cell phone carriers and members of AAA and AARP receive a variety of travel-related and other discounts.

 

In summary, the best antidote for price discrimination is smart negotiation. To learn more about how to haggle effectively, review this article from The Wall Street Journal.


This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.


Thursday, November 9, 2023

Maximizing Your “Financial Gap Years”

 When someone uses the phrase “gap year,” we often think immediately of young adults who plan experiential learning activities (e.g., traveling, volunteering, and working) between high school and post-secondary education or college graduation and graduate school. In other words, something that young adults do in their late teens and 20s. Think Malia Obama and Elon Musk.




 

There are also gap years for older adults: the time between age 59.5 (when there are no more early withdrawal penalties on money removed from tax-deferred accounts) and the start of required minimum distributions (RMDs). RMDs must now begin at age 73 (those born from 1951 to 1959) and, starting in 2033, age 75 (those born in 1960 and later).

 

Many people are in a lower marginal tax bracket during their gap years (especially after leaving a primary career) than they will be later when RMD withdrawals must begin. If so, gap years provide an opportunity for proactive tax planning.

 

The key is for older adults to focus on things that they can control during their financial gap years. Full disclosure: I am currently in my financial gap years myself and taking several proactive tax planning steps. 


Below are six "gap planning" strategies that can work for some older adults:

 

Partial Roth Conversions- This involves gradually converting the balance in a traditional IRA to a Roth IRA over a series of years while you are in a lower marginal tax bracket. By doing so, you pay a small amount of additional tax in each gap year so the overall tax impact is less.

 

Social Security Delay- If possible (read: there are other available income sources), delaying Social Security up until age 70 (when delayed retirement credits end), not only results in larger future benefits, but it reduces taxable income during gap years to do Roth conversions or realize capital gains on taxable accounts before RMDs begin.

 

Pension Payment Sequencing- Taxpayers fortunate to have a pension may want to delay their work exit date/pension start date to do Roth conversions or realize capital gains on taxable accounts before RMDs begin. Individuals must “do the math” to see if this strategy will work.

 

Taxable Income Planning- Other income sources, besides Roth conversions and Social Security, must also be carefully managed during gap years so as not to “pile on” taxable income. Examples include limiting earned income from a job or self-employment to a certain dollar amount and using tax-loss harvesting to offset realized capital gains on investments.

 

Charitable Gifting- Financial gap years are a great time to take advantage of strategies that not only help a valued non-profit, but also provide income tax write-offs. Examples include charitable trusts, donor advised funds, and qualified charitable distributions after age 70.5.

 

Postpone Expenses- All of the above strategies involve reducing taxable income. Another way that some people proactively plan is to postpone deductible expenses until RMDs begin as a way to offset higher taxable income. Examples include an older landlord delaying rental property improvements until after RMD age and delayed itemized deduction bunching.




This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 


Thursday, November 2, 2023

Finding Meaning and Purpose in Later Life

 

The statistics are startling! According to a 2020 study, 28% of retirees suffer from depression. That’s almost 3 in 10 older adults! As blogger Fritz Gilbert wrote in his Retirement Manifesto blog, “that’s a shockingly high number and far too little is written about this problem.” He went on to note that “those forced into retirement (i.e., through downsizing or illness) are especially prone to experiencing the challenge of depression.”

 

One reason so many older adults are depressed is lack of a fulfilling sense of purpose (a.k.a., a motive “to get up in the morning” or, as the Japanese call it, ikigai, loosely translated as an overriding passion that adds joy to life). Gilbert notes, “retirement is a big adjustment, with the loss of many of the non-financial benefits once received from the workplace (sense of identity, purpose, relationships, structure, etc.) coming as a surprise to many.”  



Research indicates that people with a strong sense of purpose are happier, healthier, and live longer. Below are five strategies to navigate retirement to find meaning and purpose in later life:

 


Develop a New Descriptor- As I note in my book, Flipping a Switch, retirees need a new off-the-cuff answer to the “What Do You Do?” question to avoid awkward silences or outdated descriptions of previous work. Responses can reflect new jobs, volunteerism, creative works, or care-giving roles. They can also be humorous; i.e., “whatever I want” or “as little as possible.”

 

Focus on Four Pillars- Research by the investment firm Edward Jones and Age Wave noted that there are four key pillars to a fulfilling retirement: good health, family, a strong sense of purpose, and financial security. The Edward Jones online My Priorities quiz is a useful tool to identify personal values from among competing spending choices.

 

Find Role Models- Older adults who are living a joyful and fulfilling life can provide valuable insights. Take the time to interview them and ask questions like “What is a typical weekday like?,” “What activities bring you joy and purpose?”, “What are new activities that you tried for the first time in retirement?”, and “What part of your former job do you miss the most?”

 

Use Planning Tools- Activities in later life typically don’t happen without planning. On page 83 of Flipping A Switch is a reproduceable Financial Bucket List worksheet with over dozen lines to list planned activities (e.g., visiting national parks, sky diving, writing a book, starting a business, taking courses, reconnecting with family or friends, and family genealogy). Another popular planning tool is a Retirement Vision Board with photos or clippings that show memories that people want to create in the future (e.g., travel, encore career, and volunteering).

 

Practice Identity Bridging- Not everything associated with peoples’ pre-retirement life needs to disappear after their final paycheck. Far from it! Instead, retirement transition experts recommend asking the question “What activities (e.g., professional association memberships or volunteer roles) do I want to carry over from my past into my future?


This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 


 

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