Money dec2016

D E C E M B E R 2 0 1 6 • MO O NE NEY.COM

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*Comedian d and d Co onsumer Crusader

» CHARITY: HOW TO GIVE YOUR BEST P 82 P.

TOP TECH GIFTS FOR $50 OR LESS P. 18

12 Otherr People, Productss, and Iddeas That Are Chhanging Your Finances foor the Bettter PAGG E 5 2 OUT

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2 MONEO GRE AT Y FOR 2OMOV ES P. 60 1 7

W H Y B E AV E R A G E ? S TA N D O U T. .

Choose Synchrony Bank and enjoy award-winning rates— well above the national average— along with the safety of FDIC insurance† and the rewards of our Perks program. Whatever you’re working forward to, why settle for average? With Synchrony Bank, you can count on more.

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W Annual Percentage Yields (APYs) are accurate as of 10/1/16 and subject to change at any time without notice. Visit synchronybank.com for current rates, terms and account requirements. Offers apply to personal accounts only.

1 A minimum of $2,000 is required to open a CD and must be deposited in a single transaction. A penalty may be imposed for early withdrawals.

Fees may reduce earnings. After maturity, if you choose to roll over your CD, you will earn the base rate of interest in effect at that time.

2 For High Yield Savings Accounts, rates are variable and subject to change any time without notice after the account is opened. No minimum balance required.

3 National Average APYs based on specific product types of top 50 U.S. banks (ranked by total deposits) provided by Informa Research Services, Inc. as of 10/1/16. CD Rates: Average APYs are based on certificate of deposit accounts of $25,000. High Yield Savings Rates: Average APYs are based on high yield savings accounts of $10,000. Although the information provided by Informa Research Services, Inc. has been obtained from the various institutions, accuracy cannot be guaranteed. † FDIC Insurance up to $250,000 per depositor, per insured bank, for each ownership category. © 2016 Synchrony Bank 1,2

DECEMBER 2016 VOLUME 45, NUMBER 11

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Champions of the Year

C L O C K W I S E F R O M TO P L E F T: C O U R T E S Y O F H B O ; J O N AT H A N E R N S T/ R E U T E R S ; C O U R T E S Y O F C H A S E ; M I C H A E L H I C K E Y/G E T T Y I M A G E S ; PA U L S A N C YA /A P P H O TO ; P H O T O G R A P H B Y S H AY L A H U N T E R ; C H R I S G O O D N E Y/ B L O O M B E R G V I A G E T T Y I M A G E S

The 13 people, products, and ideas that had the greatest positive impact on your finances in 2016. by the MONEY staff Page 52

F E A T U R E S

Your Best Money Moves for 2017 Tips for your investments, career, home, spending, and more as we look ahead to the coming year.

by Paul J. Lim, Kristen Bahler, Kerry Close, and Megan Leonhardt

The High Cost of Coping

How to Give Your Best

Anxiety, depression, eating disorders.

Millions of Americans face these challenges—often at great expense.

Here’s how to ease the strain.

by Elizabeth O’Brien and Taylor Tepper

Maximize the impact of your charitable gifts—and minimize your tax bill—when you contribute to the causes you care about this holiday season.

by Kerri Anne Renzulli DECEMBER 2016

m o n e y. c o m

1

Chase your dreams.

This should help.

The 2017 Outback takes you wherever the heart leads. Symmetrical All-Wheel Drive with ®

X-MODE, plus 32 mpg.* It’s a 2016 IIHS Top Safety Pick+ with EyeSight. And it’s enabled ®

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with available SUBARU STARLINK™ Automatic Collision Notification.† Prepare to find yourself in a very happy place. Love. It’s what makes a Subaru, a Subaru.

Outback. Built to take you to the place you’ve never been. Well-equipped at $25,645** Subaru, Outback, EyeSight, and X-MODE are registered trademarks. *EPA-estimated hwy fuel economy for 2017 Subaru Outback 2.5i models. Actual mileage may vary. †Activation with subscription required. Includes one-year trial subscription to Safety Plus connected service. See your retailer for details. **MSRP excludes destination and delivery charges, tax, title, and registration fees. Retailer sets actual price. Certain equipment may be required in specific states, which can modify your MSRP. See your retailer for details. 2017 Subaru Outback 2.5i Limited pictured has an MSRP of $32,390.

DECEMBER 2016 VOLUME 45, NUMBER 11

Plan 23 / DRIVE HOME A BETTER DEAL December is the best month to score bargains on new cars.

26 / 8 TIPS TO TRIM YOUR TAX BILL Ditch your stock losers now.

27 / LEAPING OFF THE LADDER He turned down a VP spot to bootstrap his own company.

31 / TOP COLLEGES FOR

72

OUT-OF-STATERS These 10 major public universities can be a real deal for nonresident students.

The depression was like any other physical ailment, except that it affected my mind and emotions.”

—Stan Brodsky, “The High Cost of Coping,” page 72

IN THIS ISSUE

P H O T O G R A P H B Y C E L E ST E S L O M A N

4 / Money.com 10 / Editor’s Note 88 / The Numbers

FIRST 13 / THE BIG NUMBER 14 / FAST TAKES 16 / READERS TO THE RESCUE 17 / TRAVEL 18 / TECH 20 / AMERICAN VOICES

COVER PHOTO ILLUSTRATION BY C.J. BURTON Photograph by Ilya S. Savenok/Getty Images for Academy of Motion Picture Arts and Science

Retire 37 / SAFE AT HOME Continuing-care communities offer comfort, safety, and fun.

40 / HIS OR HERS? Molly and Timothy can’t agree on their retirement locale.

COLUMN

Invest

92 MONEY WELL SPENT

45 / BRACE YOURSELF

At Peace in the Sun

Diversify your portfolio to prepare for rising volatility.

For this mother-daughter duo, a $500 vacation in Hilton Head marked a fresh start.

by Jean Tomlinson

47 / STOCK X-RAY Can Wells Fargo recover from its fake-account scandal?

MONEY (ISSN 0149-4953) is published monthly (except one in January/February) by Time Inc. PRINCIPAL OFFICE: 225 Liberty Street, New York, N.Y. 10281-1008. Periodicals postage paid at New York, N.Y. and additional mailing offices.

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Return undeliverable Canadian addresses to: Postal Station A, P.O. Box 4326, Toronto, Ontario M5W 3H4. GST No. 888381621RT0001. © 2016 Time Inc. All rights reserved. Reproduction in whole or in part without written permission is prohibited. MONEY is a registered trademark of Time Inc. U.S. subscriptions: $15 for one year. SUBSCRIBERS: If the Postal Service alerts us that your magazine is undeliverable, we have no further obligation unless we receive a corrected address within two years. Your bank may provide updates to the card information we have on file. You may opt out of this service at any time. CUSTOMER SERVICE AND SUBSCRIPTIONS: For 24/7 service, go to MONEY.COM/CUSTOMERSERVICE. You can also call 800-633-9970; write MONEY, P.O. Box 62120, Tampa, FL, 33662-2120; or email help@money.customersvc.com. MAILING LIST: We make a portion of our mailing list available to reputable firms. If you would prefer that we not include your name, please call or write us. PRINTED IN THE U.S.

DECEMBER 2016

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DECEMBER 2016 VOLUME 45, NUMBER 11

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THE RIGHT GIFTS FOR EVERYONE ON YOUR LIST Everything you need to know to be a master giver this holiday season. Check out our roundups of money books for kids, best and worst online shopping deals, creative presents for the money-obsessed, and more.

Plus: the etiquette of regifting and last-minute ideas for procrastinators. money.com/giftguides

WHAT THE PROS KNOW We went backstage at FinCon, the annual conference of personal finance bloggers, to quiz money experts about your best moves now. money.com/fincon

MONEY IN YOUR IN-BOX! Sign up for our weekly newsletters: Ask the Expert, Retire With Money, and our latest, the MONEY College Planner. money.com/newsletters

COLUMNIST

CHARITY STRATEGIES STUDENT-LOAN GUIDE Answers to frequently asked questions about lightening the burden of college debt.

money.com/studentloans

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If you’re inspired by our feature on charitable giving (see page 82), learn more ins and outs, from how to use donor-advised funds to the best way to contribute when you’re short on cash. money.com/giving

DECEMBER 2016

KELLEY HOLLAND finds “teachable money moments” that parents and kids can share. @KKelleyHolland

G E T T Y I M A G E S ( G I F TS , S T U D E N T- L O A N G U I D E ) ; A N DY C R O S S / T H E D E N V E R P O S T V I A G E T T Y I M A G E S ( C H A R I T Y ST R AT E G I E S )

instagram.com/ moneymag

The strong case for short-term bonds as interest rates rise.

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less sensitivity to interest rate changes than the overall U.S. credit bond market1

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Before investing in any mutual fund or exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses.

Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.

Past performance is no guarantee of future results.

ETFs are subject to market uctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.

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Write the Editor: editor@moneymail.com

Old and New Holiday Traditions

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DECEMBER 2016

I L L U ST R AT I O N B Y A L E X A N D R A C O M PA I N -T I S S I E R ; P H O TO G R A P H B Y L A C E Y B R O W N E

HEN MY CHILDREN WERE GROWING UP, our family had a unlikely consumer crusader, as the person holiday ritual that I loved: exchanging gifts of service. who had the greatest positive impact on the In mid-December, we’d pick names out of a hat, and finances of everyday Americans in 2016. See you had to think of something special to do for the famwhy on page 52, along with our awards to 12 ily member you got, write it down, put it in a box, wrap other notable people, products, and ideas that it, and present it, just as we did with more tangible gifts. Making somedramatically improved our financial lives this one’s bed or doing the person’s laundry for a week or two was a popular year. Then turn to page 60 for our annual offering; one year my teenage daughter gave me makeup lessons; anOutlook story, identifying the big trends that other year my husband prepared our son’s favorite meal, grilled cheese will shape your finances in 2017—hello, Pressandwiches and hot cocoa, on demand throughout January. ident-elect Trump!—and the best moves you A heartwarming way to counter the commercialism of the season, can make to capitalize on them.

Here’s to a healthy and prosperous New right? That’s what I thought, except for this fact: My kids and husband Year. Enjoy your holidays—and the issue. apparently hated the tradition. Though they dutifully followed through, they tell me now the whole gifts-of-service thing was a giant pain, as they bellyached to one another when I wasn’t around. Ditto my annual attempts for us to go caroling. Only the ritual of baking holiday cookies together to distribute to friends and family escaped their scorn.

DIANE HARRIS Yet I don’t view my gifts-of-service tradition as an epic fail. Despite twitter.com/dianeharris my family’s teasing complaints, when they look back on the holidays, this is what they remember— the shared experiences and laughter, not the loot ON THE ROAD TO GOOD HEALTH We appreciate the people who shared their perthey got as presents. And I’m convinced that, when sonal stories for our feature on mental-health costs (page 72). Among them: Stan Brodsky, photographed by Celeste Sloman on his property in Hillsboro, N.M. the time comes, my children will make their spouses and kids exchange gifts of service too.

If you haven’t gotten it by now, I’m a big believer in traditions that reflect who you are and who you want to be, and ones that serve the people who matter to you most. In that spirit I’m proud to present two of our own MONEY seasonal traditions in this issue. The most recent addition is our December cover story, which names our first annual Champions of the Year. After two months of poring over nominations from staff, experts, and readers, we picked John Oliver, the comedian and

Carpe dirt.

Introducing the new Golf Alltrack with 4MOTION® all-wheel drive.

Soon to be everywhere.

Let’s rethink dirt. Because with dirt also comes green grass, tall trees, and roads far less traveled.

That’s why we equipped the Golf Alltrack with 4MOTION all-wheel drive and an Off-Road Mode*, so you can go out there and seize the beauty of this dirt-covered world, get your wheels muddy, and wash off all that civilization. After all, dirt is the greatest of cleansers.

vw.com

*Optional accessories shown. Always ensure that your vehicle is equipped with appropriate tires and equipment and always adjust your speed and driving style to the road, terrain, traffic, and weather conditions. See Owner’s Manual for further details and important limitations. ©2016 Volkswagen of America, Inc.

NINETY SIX The Fidelity Retirement Score.

Another way we’re making retirement planning clearer.

We introduced the Fidelity Retirement Score to make it easy to know where you stand.

But getting your score is just the beginning. If you move your old 401(k) to a Fidelity Rollover IRA, you’ll get much more: • Clear, transparent language to help you understand your options • A one-on-one assessment of your plan to help you determine what to do next, and why • Simple, straightforward pricing with no fees to open or maintain your account It’s your retirement. Know where you stand.

800.FIDELITY | Fidelity.com/score IMPORTANT: The projections or other information generated by the Fidelity Retirement Score regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results may vary with each use and over time.

There is no opening cost or annual fee for Fidelity’s traditional, Roth, SEP, and rollover IRAs. A $50 account closeout fee may apply. Fund investments held in your account may be subject to management, low-balance, and short-term trading fees, as described in the offering materials. For all securities, see Fidelity.com/commissions for trading commission and transaction fee details.

Guidance provided by Fidelity through the Fidelity Retirement Score is educational in nature, is not individualized, and is not intended to serve as the primary basis for your investment or tax-planning decisions.

Be sure to consider all your available options, including staying in plan, and the applicable fees and features of each before moving your retirement assets.

The Fidelity Retirement Score is a hypothetical illustration and does not represent your individual situation or the investment results of any particular investment or investment strategy, and is not a guarantee of future results. Your score does not consider the composition of current savings and other factors.

Investing involves risk, including the risk of loss.

The trademarks and/or service marks appearing above are the property of FMR LLC and may be registered.

Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2016 FMR LLC. All rights reserved. 773775.6.0

THE BIG NUMBER + FAST TAKES + READERS TO THE RESCUE + TRAVEL + TECH + AMERICAN VOICES

D E CE M B E R 2 0 1 6

P R O P ST T Y L I N G BY E D GA L L AG H E R FO R B I G L EO

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13

FIRST

FAST TAKES

CAREERS

LinkedIn Makes It Easier to Sneak In a Job Hunt

STORE CARDS POSE CREDIT HAZARDS Before you get a credit card from your favorite retailer, read the fine print: Many storebranded cards charge extra-high interest rates.

A recent report

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from CreditCards .com found that store cards chargee an average of 23.8% interest on balances, vs. the national average credit card rate of 15.2%. Discounterr Big Lots led the report’s list of major retailers, with a whopping 29.99% rate,

DECEMBER 2016

ffollowed ll db

by Zales Z l (29.24%) 29 2 and Staples (28.24%).

WHEN YOU’RE GAINFULLY EMPLOYED, looking for a new job without tipping off your employer can be a challenge.

Taking too many long lunches to squeeze in job interviews can arouse suspicion. And accidentally emailing your résumé and cover letter to your current boss, instead of a prospective future one, could be disastrous.

A new tool from professional networking site LinkedIn is designed to make the process a little easier.

Open Candidates, as the feature is known, lets you send a private signal to recruiters to indicate that you’re open to new opportunities—without alerting your current employer. The tool, which is free for job seekers (but not for recruiters), is accessible from the “Preferences” tab on the site’s Jobs page.

To use it, specify which types of companies, roles, and industries you’re interested in, as well as what kind of work you’re looking for: full-time, part-time, freelance, internship, remote, or contract.

“This has a real value for candidates,” says Kevin Raxter, managing partner at the IT staffing and recruiting firm the Centrics Group. “It gives your application another push, another opportunity to speak on your behalf.”

LinkedIn, which has 133 million registered U.S. users, reports that more than 1 million people have switched their settings to the Open Candidates option. The tool officially debuted in October, a month when the number of people applying for jobs via the site tends to spike.

Open Candidates users are, on average, getting twice the recruiting inquiries than they did before, says LinkedIn executive Eduardo Vivas. —KRISTEN BAHLER

While many W stoores offer sign-up bon nuses, not all aree generous. Just 13 3 ccame in at more thaan $25 for a $200 pu urchase. One goood deal: Best Buy’s 10% bonus, which could w kknock $100 off the price of a $1,000 TV. —KERRY CLOSE —

QUOTED

“Buy the deal, and then figure out why you want to go there.”

Radio host Clark Howard, explaining to MONEY his strategy for minimizing vacation costs: Pick your destination based on the bargains you find.

Read CreditCards.com’s full report on store-branded cards at money.us/storecards.

INVESTING

GIVE THE GIFT OF TIME

C L O C K W I S E F R O M TO P : I L L U ST R AT I O N B Y TAY L O R C A L L E R Y; P H OTO G R A P H S : C O U R T E S Y O F F I R ST L E A F; M I C H A E L B L A N N /G E T T Y; G E T T Y I M A G E S ; C O U R T E S Y O F T I M E ; G E T T Y I M A G E S ( 2 )

Still on the hunt for holiday gifts? See stocking stuffers for the technorati on page 18.

But if you want something else (or something more!) check out these gifts from other brands affiliated with MONEY’s parent company, Time Inc. GOOD WINES, GOOD PRICES Subscription wine service Firstleaf, a partner of Time Inc., is offering a sixbottle holiday sampler for $70. This assortment was selected by Food & Wine’s executive wine editor Ray Isle, a guest of MONEY’s Snob on a Budget video series. firstleaf.wine/ money2016

Watchdog Lacks Bite?

You’ve probably heard this advice: Before giving money to a financial adviser, look at his or her record on the BrokerCheck website for any history of client disputes or disciplinary measures.

But a new report argues that BrokerCheck (brokercheck.finra.org) is of only “limited value” to investors.

The study, from the Public Investors Arbitration Bar Association (PIABA), a plaintiffs attorneys

group, concludes that despite recent improvements, BrokerCheck fails to give people a complete picture of potential problems in a financial adviser’s history.

4.57

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STRESSING OUT ABOUT MONEY WILL MAKE YOU LOOK OLDER When you’re worrying about finances, that’s not the only thing to worry about.

A study published in the journal Research on Aging in July found that being anxious about finances isn’t just bad for your mental health. It can make you look older too.

The study, which asked participants about their stress levels between 1995 and 1996 and again between 2004 and 2005, found that those who worried about their financial well-

According to another 2016 study, 7.3% of all brokers have some kind of misconduct on their record. But PIABA says the site lacks other potentially relevant

information, such as adviser terminations, bankruptcy filings, and tax liens. FINRA, the securities industry self-regulatory body that operates BrokerCheck, says it welcomes input and will consider topics raised by PIABA. —MEGAN LEONHARDT

Average total charges for an out-of-network ATM withdrawal SOURCE: Bankrate

being looked about two years older than people who did not. In addition, that stress induced by money had a stronger effect on apparent aging than did other stressors.

“Controlling for income, general stress, health, and attractiveness, participants who reported higher levels of financial stress were perceived as older than their actual age to a greater extent” and were judged by others to be aging more rapidly, according to the report. One researcher on the study theorized that money worries caused people to pay less attention to their appearance, exercise, and diet.

—ALICIA ADAMCZYK

FIRST

READERS TO THE RESCUE

Join the conversation: twitter.com/money facebook.com/moneymagazine • pinterest.com/moneymagazine

Collection Rejection THE QUESTION: My office collects donations for charity during the holidays, and everyone typically gives money. I can’t really afford to do so this year.

How should I handle this situation?

THE READERS If you are giving only to look good in the office, then you shouldn’t give, whether you can afford to or not.

connie laubenthal Box Elder, S.D.

If you cannot afford to donate cash this year, offer to help collect the money or distribute it to

the charities involved.

Your time is as valuable as cash.

mark r. lindon Longmont, Colo.

to brag that 100% of the department participated, so there might be more pressure to give a token amount.

SEE 017 Y’S 2 MONE L O O K OUT )

FACEBOOK QUESTION OF THE MONTH

(PAGE WHAT’S YOUR PERSONAL FINANCIAL CIALL FORECAST FOR 2017?

richard key Try this: “The budget’s really tight this year, so I’ll have to pass. Hopefully next year will be better.” This works if you’ve actually given in previous years and have some credibility. But some offices like

THE EXPERT SAYS

Dothan, Ala.

If you are a higher-up at the office, such as a manager, try giving at least a nominal amount. Otherwise, employees will think, “Why didn’t you contribute? If I can afford to give, why can’t you?”

Morale will go down.

“A recent salary increase and a decrease in my fixed expenses are going to allow me to tackle debt.” —holly daniela torres

“I am focusing all my energy into positive outcomes.”

—hilario tr gonzalez “I hope to be able to start a business in 2017.”

—nathan mccombe

liz yang

A simple “Oh, no thanks—it’s not in my budget this year” is enough. Or if you don’t want to cite your finances, you could say, “I’ve already allocated my donations this year, but good luck with the collection drive.” And, really, your office shouldn’t be interrogating people about donations. It leads to awkward situations like this. alison green, consultant and workplace

Cliffside Park, N.J.

You shouldn’t feel compelled to make a contribution that you can’t afford, nor should you have to explain why. A charitable gift must be made on your own terms and not someone else’s.

tim shaw Catonsville, Md.

Want solutions to a financial dilemma in your life? Email your question to social@moneymail.com. To join our reader panel, go to moneymatterspanel.com.

“I’m working very hard to pay off my car loan within two years, and I’m right on track.” —katrina mcdarment “Stable.” —robert clark

“I will sit on a stack of cash until the crash hits. Then when everyone runs for the door, I will smile :)” —abraham pelayo

m o n e y. c o m

DECEMBER 2016

P H O TO G R A P H B Y S H AY L A H U N T E R

advice columnist at askamanager.org

16

60

FIRST

TRAVEL

THE ACE HOTEL NEW ORLEANS LIES IN THE WAREHOUSE DISTRICT.

TAKE A CITY BREAK With daytime temps in the 60s, New Orleans has mild weather in January, but the city sees a lull in visitors between the December holidays and late February or March, when Mardi Gras and other events send hotel prices higher (up 20%, according to data firm STR). Skip the welltrodden French Quarter to find some of the Crescent City’s best values. Bed down at the new 234-room Ace Hotel New Orleans, located in the gallery-filled Warehouse District.

Rooms start at $135 a night, down from $169 in late December (and $349 over New Year’s).

20% P H O T O G R A P H S C O U R T E S Y O F F R A N PA R E N T E / T H E A C E H O T E L , C A R N I VA L C R U I S E L I N E , A N D K E Y STO N E R E S O R T

OFF

Just Wait Till Next Year December can be one of the costliest times to travel. Delay your vacation a month to score these great deals. —STIRLING KELSO

GO TUBING— AND SKIING TOO— AT KEYSTONE.

65% SAVINGS Find more money-saving travel tips at money.com/travel.

HIT THE SLOPES At the Keystone ski resort, less than two hours west of Denver, $169 a night will get you a studio at River Run Condominiums that sleeps four and has a gas fireplace and full kitchen (keystoneresort.com). Christmas week, by comparison, costs upwards of $483 a night. (Be warned, though: January rates can almost double in price over New Year’s and Martin Luther King weekends.) When compared with sister mountains Vail and Breckenridge, Keystone is heralded for its approachable prices, especially for families.

January lift tickets are $105 ($61 for kids) a day, vs. Vail’s $149 ($103 for kids); get even better deals buying a $459 five-day ticket ($266 for kids).

TULUM’S RUINS ARE A DAY TRIP FROM COZUMEL.

58% LESS

JUMP ON BOARD “You’ll see some of the lowest cruise prices of the year in the first two weeks of January,” says Bob Levinstein, CEO of CruiseCompete.com. One Caribbean deal is a four-night sailing from Miami to Cozumel: $184 per person for an inside room on the Carnival Victory, available via aggregator Cruiseline.com. That same trip on Dec. 26 runs $434. Prefer the Pacific? A 10-day trip to Baja on the Grand Princess, out of San Francisco, will cost you $1,099 for a balcony room, down 21% from late December. Older, smaller ships like these offer the best prices, says Simon Duvall of Cruiseline.com: “They’re an excellent value for your vacation dollar.”

DECEMBER 2016

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17

FIRST

TECH

3 2

UIDE H O L I D AY G I F T G

The Best Tech Gifts for $50 or Less

1

Gadget gift shopping doesn’t have to break the bank.

These affordable items ms will make for a happy high-tech holid liday. —RICK — C BROIDA O

8

9

For more of MONEY’s technology coverage, go to money.com/tech.

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m o n e y. c o m

DECEMBER 2016

4

1 R 1.

ROC OCK OCK ST STEA S EADY DY

5. STRAP IN

Listen up fo Listen forr the the new w speake spe akerr of of the the hou housse— s a ba and backy ckyard yard,, beac beacch, or a where anywhe any re els else. e. Thi Thi his Bluetooth too th bla black cck bri brick ck cranks out lo loud, ud, cr all-clear music mus ic fro from m you your u phone or tab tablet let,, runn runnning 24 hours hou rs bet betwee weeen charges.

Anker Ank er Sou Sound nddCore ($36)

It doesn’t look impressive. But this strap, which loops around the back of most phone cases, makes one-handed thumb typing a lot easier—and dropping your phone a lot harder. Ninja Loop ($5)

2. D DR. R. SPEAKER SP AND M ADPHONE MR.. HEA MR HEA Theese Bluetooth These B headp ness look like …headphones pho phone pho nees. But flip a switch a ssuddenly they’re and speaakers. spe a The splitperrsonality ear cups can dirrect tunes inward, just to you, or outward, when yyou want to share. Monoprice two-in-one Bluetooth headphones with external speakers ($40)

5

3. I LIKE STREAMING By now the “Roku box” is almost synonymous with streaming video. This iteration does it for $50 less than Roku’s higherresolution Premier box, making it the single most affordable gateway to the likes of Amazon Video, HBO Go, Hulu, and Netflix. Roku Express ($30)

6

4. POCKET QWERTY

7

Your phone’s on-screen keyboard is fine for tapping out texts, but longer stuff demands the real deal. This mobile keyboard is a nearly full-size mechanical model that folds up small enough to carry in a pocket. It works with Android, iOS, and Windows devices. Battop folding keyboard ($28)

6. DUDE, WHERE’S MY CAR? This cigarette-lighter adapter doesn’t just have two USB ports for charging mobile devices. It also serves as a homing beacon so you can find your way back to your car. Nonda Zus ($30)

7. A SMALL ECHO When you talk, this smart-home gizmo listens. And responds.

Using a less powerful speaker than Amazon’s $180 Echo, it can tell you the weather, play music, and do other tasks.

Amazon Echo Dot ($50)

8. REVIVE OLD GEAR Pump new life into old speakers with this plugin gadget that streams music over Wi-Fi from your phone or tablet.

(Apple and Amazon tunes aren’t supported.)

Google Chromecast Audio ($35)

9. A MIGHTY PEN This ballpoint’s curved barrel can prop up a phone or even a tablet for comfortable hands-free viewing. A stylus tip at the top lets you sketch on-screen.

Ace Teah three-in-one stylus pen ($8 for six)

P H O TO G R A P H S C O U R T E S Y O F T H E C O M PA N I E S ( 1 1 )

FIRST

AMERICAN VOICES

ODYSSEAS PAPADIMITRIOU 38, WASHINGTON, D.C. BACKSTORY: Emigrated

from Greece for college in 1996.

Creating Smart Tools WHEN ODYSSEAS PAPADIMITRIOU

EDUCATION: Degrees in economics and civil engineering from Brown University, MBA from Duke University.

PROFESSION: CEO and founder of WalletHub. VISION: Create the

smartest free web-based financial adviser.

left home for college in the U.S., he had every intention of returning. Greece was gearing up for the 2004 Olympics, and the economy was booming. But then he saw the chance to gain more experience by way of a job in banking.

Eight years and an MBA later, he saw another opportunity—“build the brain of a financial adviser” online. First up: a credit card comparison site. “What existed seemed out of date,” he recalls.

Today WalletHub has more than 80 employees and 18 million visitors a year to its financial services review site.

HIS CREDIT LESSONS DON’T BE IN THE 1%. Never settle for a card that gives you less than 1.5% cash back (unless you carry a balance). “People have cards from 10 years ago getting 1% because they don’t know they could get 2%,” Papadimitriou says.

CLEAN OUT YOUR WALLET. Once a year, revisit your card choices: what you are earning, what you are paying, and how your spending has changed (more overseas travel, say).

“Companies rely on your brand loyalty and raise fees accordingly,” he says. “They know most people are too lazy to switch.”

20

m o n e y. c o m

DECEMBER 2016

For more stories in this series, go to time.com/americanvoices.

P H OTO G R A P H BY E L I M E I R K A P L A N

GIVE YOUR TEEN CREDIT. Get a secured credit card and have your kid put allowance money toward the $200 to $500 cash collateral.

“If they put money on their own card,” he says, “they will build good habits.” —JOAN CAPLIN

I spy, with my little eye, something beginning with “S.” Who knows what you’ll see in the backup camera1 of your new 2017 Corolla, but that’s kind of the point, isn’t it? That’s why it comes standard, along with Toyota Safety Sense™ P.2 Because, even though you might see almost anything, one thing we think you should definitely see is safety. How many things can you spy that start with the letter “S”?

Toyota Safety Sense™ Standard

Active Matters in taking care of the ones who matter most.

Life isn’t a passive activity. Investing shouldn’t be either.

Whether it’s navigating your career, raising kids, or planning for retirement, being actively involved matters in achieving better results.

When it comes to managing our funds, we share the same active philosophy.

Our investment teams navigate down markets and help manage risk so you can stay on track in reaching your goals.

Over

85% of T. Rowe Price mutual funds beat their 10-year Lipper average as of 9/30/16.*

Put our active investment approach to work for you today.

Call our investment specialists at 877-773-1370 or go to troweprice.com/activematters.

Request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. *138 of our 285 mutual funds had a 10-year track record as of 9/30/16. (Includes all share classes and excludes funds used in insurance products.) 121 of these 138 funds (88%) beat their Lipper averages for the 10-year period. 218 of 270 (81%), 179 of 212 (84%), and 147 of 179 (82%) of T. Rowe Price funds outperformed their Lipper average for the 1-, 3-, and 5-year periods ended 9/30/16, respectively. Calculations are based on cumulative total return. Not all funds outperformed for all periods. (Source for data: Lipper Inc.) T. Rowe Price Investment Services, Inc., Distributor.

Drive Home a Better Deal DECEMBER IS THE BEST TIME TO SCORE LOW PRICES ON NEW CARS. HERE’S HOW TO REV UP YOUR SAVINGS. by Daniel Bortz

Photograph by darren

brau n

IF YOU’RE IN THE MARKET for a new vehicle, get serious about shopping now. December tends to deliver the deepest discounts of the year, with buyers receiving an average 7.7% off MSRP, TrueCar .com finds—vs. 6.8% in January, for instance. For an average buyer, that’s more than $300 in savings.

Why December? “Dealers and manufacturers are looking to meet their annual sales goals, so many offer rich incentives,” says TrueCar senior analyst Cari Crane. Meanwhile, prices are slashed on 2016 vehicles as next year’s models move onto the lot, says Brian Moody, executive editor DECEMBER 2016

m o n e y. c o m

23

Plan

CAR BUYING | TAXES | SECOND ACT | COLLEGE

at Autotrader.com. Follow these steps to drive down the price of your new vehicle.

in-person sales pressure, specify the options you want so that you get true comparisons. (If you’re looking for specific features on 2016 models, you may need to cast a wider net, says Cars.com executive editor Joe Wiesenfelder.)

Say upfront that you won’t pay fees for marketing, administrative, or “dealer prep” (often just car washing)—all of which are negotiable. And haggle on price, not monthly cost, says Jack Nerad, Kelley’s executive editorial director: You don’t want the dealer to lower payments just by extending the loan term.

Finally, ask for extra discounts.

Many automakers give rebates to students, seniors, and military, for example. These incentives are typically not promoted but can range from $300 to $1,500, says Nerad.

HONE YOUR HAGGLING To do even better than the average December deal, shop when temperatures plunge. Cold, snowy days draw fewer buyers, giving you a further advantage, says Moody. End-of-day shopping can yield better prices, too, if a weary salesperson wants to go home.

Also, because dealers and manufacturers have monthly as well as annual goals, you can save by waiting till the end of the month, suggests Crane—although you risk a more limited selection, particularly on 2016 models.

To set an upper limit, use Kelley Blue Book’s Price Advisor to identify a vehicle’s “fair purchase” price: what you’d realistically expect to pay. Then get bids from three or more dealers. If you do it online to save time and avoid

CUT BORROWING COSTS To trim the cost of your loan, if you’re not paying cash, get a

Best in Class For long-term savings, look for high resale value. A few top performers: FIVE-YEAR RETAINED VALUE Midsize truck

66%

Toyota Tacoma

Compact car

Compact crossover SUV

Subcompact car

Minivan

Midsize car

58.3%

54.9%

53.8%

48.5%

48.1%

45.7%

Subaru WRX

Honda CR-V

Honda Fit

Honda Odyssey

Toyota Camry

INDUSTRY AVERAGE

NOTE: Above vehicles are best in category, based on five-year average projections for 2016 models. SOURCE: Edmunds.com

24

m o n e y. c o m

DECEMBER 2016

baseline quote from your bank or credit union and compare it to automaker financing. The latter is likely to be the better deal.

“Because car manufacturers want to be a one-stop shop, they offer aggressive interest rates,” says WalletHub analyst Jill Gonzalez.

In September, for instance, the average rate on 36-month newcar loans from manufacturers was 1.45%, vs. 2.2% at credit unions and 4% at regional banks, WalletHub says. Gonzalez predicts automakers will trim rates even further by year-end, trying to lure buyers.

AIM FOR RESALE If you don’t plan to drive your new vehicle into the ground, look for a car with higher-than-average resale value. Start with the right model: Both Edmunds.com and Kelley Blue Book track those that hold their value (see chart at left).

For extra features, consider both price range and regional taste, says Ron Montoya, a consumeradvice editor at Edmunds. Buyers of used luxury cars will more likely splurge on extras than budget shoppers, for instance, and in snowy areas, all-wheel-drive sedans hold value better than front-wheel-drive models.

While you may have fewer options at year-end, seek features like sunroofs and leather seats, which hold up better than chrome wheels or custom paint, Montoya says.

And while you might enjoy pricey technology like a premium sound system or remote car starter, don’t consider it a long-term investment.

“A used-car buyer isn’t typically interested in the latest technology,” Montoya says. “Otherwise they’d be buying a new vehicle.”

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Plan

CAR BUYING | TAXES | SECOND ACT | COLLEGE

YEAR-END CHECKLIST

8 Money Moves Before the Ball Drops

RIGHT NOW …

GO EXTREME WITH 401(K) CASH. To make real cuts to your 2016 taxable income, you’ll need to divert a big chunk of the year’s last paychecks toward retirement savings. If your December cash flow can take the hit, go to your plan’s website to reset the share of income you set aside; most employer plans will let you make that kind of dramatic adjustment, says Rob Austin, research director at benefits firm Aon Hewitt.

$18,000 Maximum contribution. Or $24,000 if you’re 50 or over.

SWITCH TO A ROTH. If you’re in a lower tax bracket this year than you expect to be later on, change an IRA to a Roth. You’ll pay income tax on the converted amount for 2016, then never owe tax on that money again. Just make sure the amount is small enough to keep you in a low bracket, says Mark Wilson, a CFP in Newport Beach, Calif.

SIGN UP FOR A CLASS. The lifetime learning credit lets you cut up to $2,000 a year from your tax bill, depending on your income. To claim it for 2016, register and pay now for a skills-enhancing class from an accredited school—and start by March 31, 2017.

31

TAKE REQUIRED MINIMUM DISTRIBUTIONS. Once you hit 70½, you must withdraw a set amount each year from your employer retirement plans (if you’ve retired) and traditional IRAs. After the first year, the annual deadline is Dec. 31— but don’t leave it until New Year’s Eve, in case the move takes a few weeks.

BY MID-MONTH …

BEFORE YOU CELEBRATE the

26

m o n e y. c o m

of required withdrawal is the penalty for a missed deadline.

CLAIM NEXT YEAR’S DEDUCTIONS. If you’ll have unusually high income me in 2016, you can cut your tax bill by moving up some deductible expenses. Send in your January mortgage payment, prepay any property taxes, and get a jump on next year’s professional or union dues and subscriptions, says Scott O’Brien, a CFP in Austin.

SELL STOCK LOSERS. If you have taxable stock gains, you can offset the tax hit— and even cut ordinary income by up to $3,000—by selling poor performers at a loss, says the AICPA’s Labant. Look for candidates this year among biotech companies and European stocks, both of which have taken a beating.

BY MIDNIGHT ON DEC. 31 …

SPEND YOUR FSA. If you still have a balance and your employer won’t give you a grace period or let you roll over up to $500 for 2017, you need to use the cash fast or lose it.

Among the eligible items you can buy online up till midnight: contact lenses, sunscreen, even condoms. (See benefits provider WageWorks’ list at money.us/fsa.) Be sure to keep receipts.

MAKE CHARITABLE CONTRIBUTIONS. Before the holiday season ends, give a couple of final online donations to your favorite 501(c)(3) organizations. (See page 82 for more on maximizing the tax impact of your gifts.)

DECEMBER 2016

G E T T Y I M A G E S / I ST O C K

New Year, you should pause to reflect on what you’ve gained in the past one. You have just a few weeks left in which you can cut your 2016 tax bill.

“Depending on the strategies you implement, you could see thousands of dollars of tax savings,” says Melissa Labant, tax advocacy director for the American Institute of Certified Public Accountants.

Some year-end tasks require enough lead time to let changes take effect. Others can be done right up until the clock strikes midnight. Use the following checklist to cover all your bases. —KERRI ANNE RENZULLI

50%

CAR BUYING | TAXES | SECOND ACT | COLLEGE

Building His Audience

Plan

I want the name to be a brand that’s worth something on its own.”

AFTER ONLINE STRATEGIST JIM ROBINSON VEERED OFF THE CORPORATE FAST TRACK, HE WOUND UP GROWING BOTH WEB TRAFFIC AND HIS OWN BUSINESS. by Josh Hyatt

JIM ROBINSON, 45, FREDERICK, MD.

THEN

DIRECTOR, NASDAQ.COM

NOW

WEB MARKETING AGENCY OWNER

Photograph by

j e f f e lk i n s

JIM ROBINSON WAS ON THE VERGE of reaching a higher rung on the corporate ladder when he decided he didn’t like the view. Back in 2012, “I was looking down a path that I didn’t feel I could commit to,” says Robinson, now 45. “I knew I wasn’t cut out to be a management generalist in a corporate setting. But my bosses thought I’d be good at it.”

He’s referring to his higher-ups at Nasdaq.com, where he was the director of product development, upgrading the site’s search and social media performance. Tapped for the company’s elite “high potential” program,

DECEMBER 2016

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27

Plan

CAR BUYING | TAXES | SECOND ACT | COLLEGE

Robinson seemed desway to build a company.” tined to trade detail work He tried to staff up, for a VP spot—much but on a shoestring—and to his ambivalence. “It the first employee he would have taken me hired, a digital marketaway from the work I ing coordinator, was too love,” he says. junior to handle what He considered a Robinson really needed: competing offer from an “Somebody to take stuff outside firm. Yet what he off my plate.” really wanted, he realFeeling overwhelmed, ized, was to start his own Robinson set about putdigital marketing agency, ting standard processes helping clients with in place, paving the way search-engine optimizafor more effective hiring: FAMILY WAY Robinson expects his wife, Lia, to join ClickSeed next year. tion, content marketing, “I’ve got documentaand paid search ads. tion I can put in front of The timing wasn’t them so they can get up optimal for a big risk. He and his to speed pretty quickly.” In 2015, $4,000 in startup costs—buying a wife, Lia, had welcomed their first with revenues hitting $400,000, laptop, crowdsourcing a logo for child, Dylan, a few months earlier. he hired an SEO strategist, and about $750, and hiring a lawyer. His (A daughter, Layla, was born in this year he brought on a digital second client, referred by a former July 2014.) He had just $20,000 in marketing coordinator. His next coworker, was also a big one: Rollliquid savings and was leaving a hire will be an editorial direcing Stone publisher Wenner Media. mid-$100,000s salary that had entor—though his wife will also pitch More publishers signed on, abled the family to live on just one in next fall, after their son starts looking for help attracting audiincome. “Looking back on it now, it kindergarten and their daughter’s ences, and by 2014 ClickSeed’s revdoes seem a little nuts,” he admits. preschool hours increase. enue had reached $200,000. With The decision to launch ClickSeed Eventually, Robinson hopes, office rent at just $900 a month, was made easier when he struck a having his own firm will give him Robinson’s overhead was still low— deal with his Nasdaq bosses, who more time with his family. “As the but scaling up was proving tricky. were eager to keep him in the fold. kids get older, I want to have the “My clients wanted my personal He’d stay on as an employee until flexibility to help out with them,” attention, because they felt the the end of 2012, then get a monthly he says. “As it turns out, starting stakes were very high,” he says. consulting retainer. the company when I did made “This was like having a job as a

By January he had invested perfect sense.” freelancer. I realized it was not the

BY THE NUMBERS

SEVEN

CURRENT CLIENTS Although many early customers were publishers, Robinson now targets finance, health care, and technology firms. The shift occurred in the past year, after a tech-sector client was acquired and its staffers jumped ship to other businesses—taking their ClickSeed relationships with them.

IN THE EMERGENCY FUND The family moved in 2013, selling a smaller home and relocating to a more distant Washington, D.C., suburb. They got more room and took out $40,000 in equity, which Robinson added to their $20,000 savings.

$60K 28

m o n e y. c o m

DECEMBER 2016

12%

2016 REVENUE GROWTH Robinson expects ClickSeed to bring in $450,000 this year but has fixed his salary at $120,000 to build cash reserves. “I want to grow the value of the company,” he says, “so it will enable me to retire at the right time.”

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I Hate Annuities…and So Should You! The Soothing Sound of Guaranteed Income Annuities are sold as safe investments, offering dependable and predictable returns, no matter what the market does. And that sounds very appealing.

So what’s the problem with annuities?

What You Might Not Know about Annuities Could Haunt You The vast majority of annuities are really complicated insurance policies are very difficult to understand. And once you buy into an annuity, it can be very difficult and very costly to reverse. That’s why it is vital you have “your eyes wide open” before you purchase an annuity. And if you already own an annuity, this free report is just as valuable. It could help save you hundreds of thousands of dollars and untold financial heartache.

What You’ll Learn from this Free Report • The advantages and disadvantages of annuities • Why annuities can be complex to understand • What you need to ask an annuity salesman before you buy • The inflation risk, tax implications and annuity fees

If someone is trying to sell you an annuity, I urge you to call for your free report.

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CAR BUYING | TAXES | SECOND ACT | COLLEGE

Best State Schools for Out-of-Staters THEY AREN’T THE STEAL THEY ONCE WERE, BUT THERE ARE STILL BARGAINS TO BE FOUND. by Kim Clark MANY PARENTS TODAY, perhaps recalling their own college search, assume that public universities will be a lot cheaper than private ones. But that’s often not the case anymore, especially for students applying outside their home states.

At least 20 popular public colleges have list prices of more than $50,000 a year for out-of-staters, rivaling many top private schools.

Those scary sticker prices don’t tell the whole story, however.

Although many public colleges are exceedingly expensive for outof-staters, MONEY found others where a significant percentage of students pay less than full price.

While your own state’s schools are likely to be your most economical option, you can find worthy contenders by asking about:

DEALS WITH OTHER STATES A variety of public colleges offer discounts to students from nearby

10 Top State Colleges for Nonresidents All scored in the top half of MONEY’s overall value rankings and are competitively priced for out-of-state students.

ESTIMATED PRICE, 2016–17 WITHOUT AID WITH AVG. AID

SCHOOL (OVERALL MONEY RANK)

% WHO GET AID

IOWA STATE UNIVERSITY (132)

Ames, Iowa

$33,360

$25,855

83%

UNIVERSITY OF KANSAS (334)

Lawrence, Kans.

$39,951

$27,863

68%

NORTH DAKOTA STATE UNIV. (224) OHIO STATE UNIVERSITY (130) OKLAHOMA STATE UNIV. (261)

Fargo, N.D.

Columbus, Ohio Stillwater, Okla.

UNIV. OF SOUTH CAROLINA (316)

$32,000

$28,223

38%

$44,000

$28,885

65%

$38,330

$30,002

45%

$45,387

$30,387

66%

Iowa City, Iowa

$42,112

$32,936

50%

PENN. STATE UNIV. (220)

University Park, Pa.

$48,900

$34,478

26%

MIAMI UNIVERSITY (316)

Oxford, Ohio

$49,000

$34,500

62%

$59,784

$34,579

42%

UNIVERSITY OF IOWA (198)

UNIVERSITY OF MICHIGAN (2)

Columbia, S.C.

Ann Arbor, Mich.

Plan

states. At the University of Minnesota, for example, more than 43% of out-of-state students pay instate tuition because they come from states with reciprocity agreements, such as Wisconsin.

Students in the South can take advantage of the region’s Academic Common Market and pay in-state prices at an out-of-state school to study a major not available in their home state. The New England Regional Student Program offers similar tuition breaks.

AID FOR STRONG STUDENTS Many highly ranked public colleges try to lure top students from other states with merit scholarships. At the University of South Carolina, for example, two-thirds of out-ofstate freshmen receive scholarships starting at more than $9,100 a year. Top students, with high GPAs and SAT scores over 1500, may get full-tuition scholarships, says Scott Verzyl, USC’s associate vice president for enrollment management.

A handful of elite public colleges also offer need-based grants.

The University of Michigan says it covers the full demonstrated financial need for out-of-state students from families earning up to about $90,000 a year.

Of course, competition can be fierce. While there are some small scholarships for B students, outof-staters shouldn’t expect a lot of aid unless they are in the top 25% of the pool or have SAT scores over 1300, says Stuart Canzeri, a college counselor in Atlanta.

For more rankings and college advice, visit the MONEY College Planner at money.com/colleges.

NOTES: Listed in order of average price for out-of-state students who receive grants, scholarships, or discounts from the college. Aid percentage is also for out-of-staters. SOURCES: U.S. Dept. of Education, the colleges, and MONEY calculations

m o n e y. c o m

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G E T T Y I M A G E S ( H O U S E I C O N S ) ; L O C AT I O N C O U R T E S Y O F P S W R E A L E STAT E

A Home for Now and Later CONTINUING-CARE COMMUNITIES ATTRACT SENIORS WITH DELUXE AMENITIES AND ADDED HELP WHEN THEY NEED IT. by Carla Fried

Photograph by darren

brau n

AS YOU THINK about an ideal home for an older relative, or for yourself later in life, what seems most appealing? Nearly 90% of people 65 and older surveyed by AARP said they would like to “age in place.” And yet the hard truth is that a beloved house in a familiar community can become both physically impractical and socially isolating over time.

Another way you or your relative might get comfort, connections, and continuity is, surprisingly, by moving to a new spot: a so-called continuing-care retirement DECEMBER 2016

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Retire

CONTINUING-CARE COMMUNITIES | MASTERING THE JOURNEY

community (CCRC). These developments couple attractive condo-like living units with fancy communal dining rooms, add-ons like tricked-out gyms, and busy rosters of activities to keep residents engaged. They also deliver peace of mind by including facilities the prospects hope they won’t need: assisted-living and skilled-nursing units on the same campus.

CCRCs can mean fewer worries for adult children as well as residents by eliminating a scramble for care after an acute health problem, says Lisa McCracken, a senior vice president at Ziegler, an investment bank that specializes in not-for-profit senior housing. And for the fewest financial worries down the road—assuming, that is, you have the cash now—you can essentially prepay for whatever future care you end up needing.

“The CCRC concept is the most dependable way for people to provide for their own old age,” says Jack Cumming, the director of research for the National Continuing Care

Residents’ Association, an advocacy group for CCRC residents. But, warns Cumming, himself a resident of a California CCRC at age 80, “there are few standards or regulatory safeguards that a prospective resident can look to as assurance that a particular CCRC is all that the marketing staff presents it to be.”

That’s no small thing given the huge commitment that’s involved, both financially and in terms of leaving your current home. Here are key questions.

WHAT DO YOU GET AT A CCRC?

WHAT WILL IT COST YOU?

At the core of every CCRC is independent living in cottages or apartments.

Each community includes at least one level of care, such as assisted living, and many provide a full range of assisted-living, memory-care, and skilled-nursing services. Residents segue to more care when needed.

For couples, one spouse may move to a care unit while the other stays in independent living.

You’ll typically be charged an entry

As you might suspect, this all-in-one living doesn’t come cheap. Entry fees can range from the low- to mid-six figures, with monthly charges from $2,000 to more than $4,000. Costs vary widely among communities. And at any individual CCRC, you’ll pay more—sometimes a lot more—if you select a larger independent-living unit or opt to prepay for more care.

Want to shield your future finances and your family from the costs of assisted-living or nursing care you might need as you get older? Opt for a life-care, or Type A, contract that will cover care on the campus as needed. This is the “gold standard,” says Cumming, and so will require the largest entry fee. Type A can be especially smart for couples, who may sometimes have different needs.

To keep costs down, you can prepay for less care. A Type B, or modified fee-for-service, arrangement includes a set allotment—say, 30, 60, or 90 days—of covered or discounted care. If you have a long-term-care insurance policy, you could opt to pay even less for a Type C, or fee-forservice, contract. With that one, you are typically guaranteed access to future care but must pay the going rate at the time. (See the graphic at

Paying for Peace of Mind Here’s a representative array of what you might pay at a continuing-care retirement community. Some CCRCs charge considerably more.

STUDIO FOR ONE PERSON

CONTRACT TYPE

TWO-BEDROOM UNIT FOR TWO

ENTRY FEE

MONTHLY CHARGE

ENTRY FEE

MONTHLY CHARGE

LIFE CARE LIFE CARE Includ Inc ludes es ass assist isted ed liv living ing an and/ d/ or nur nursin singg care care as ne neede eded d

$159,700

$2,450

$289,450

$4,750

MODIFI MOD IFIED ED FEE FO FOR R SERV SERVICE ICE Provides Provid es som somee cove covered red or discou dis counte nted d care care

$94,950

$2,350

$215,500

$4,450

FEE FO FOR R SERV SERVICE ICE No pre prepay paymen mentt for for future fut ure ca care re

$90,100

$2,100

$203,600

$3,900

NOTE: Figures are for contracts that provide declining-balance refunds. SOURCE: MyLifeSite.net

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fee. And there are monthly charges that usually include most activities and some meals in the dining rooms.

There are nearly 2,000 CCRCs, up 7.5% over the past 10 years, with a total of about 600,000 living units, according to Ziegler. Another 92 CCRCs are in the pipeline to open by 2019. You can locate CCRCs at LeadingAge.org, the website of an advocacy group that represents more than 6,000 senior-care nonprofits, and MyLifeSite.net, developed by a financial planner.

left for a sampling of charges.)

In one common design, a declining portion of the entry fee is refunded if a resident leaves or dies within a few years of moving in. For a much higher fee, you may be able to lock in a permanent refund for the resident or heirs of, say, 50% or 90%.

Can you afford to consider a CCRC? Many people cover the entry fee with the proceeds of a home sale. You’ll need to compare the monthly charges with what you are paying now for housing and for whatever food and activity costs you might no longer face. Hiring a financial adviser for a one-time consultation might help. One resource is garrettplanningnetwork.com, whose members charge hourly fees; you might pay $200 an hour.

IS IT A GREAT FIT FOR YOU NOW? In evaluating a community, spend time on the campus; many CCRCs even offer overnight stays to prospective residents. Does the meal schedule work for you? Are you pleased with the food quality and selection? Peruse the list of activities and try out a few. What transportation is available if you’re ready to give up the car?

The median move-in age at CCRCs is 81, and nearly two-thirds of new residents are single, according to a study by Love & Company, a marketing firm that specializes in retirement communities. Are you comfortable with the age range and mix of residents? Can you envision wanting to build friendships with the people you meet?

To emphasize that CCRCs are not depressing old-folks’ homes, the industry has launched a push to rebrand as life-plan communities.

“These are more about the living

IS THE CCRC FINANCIALLY FIT?

THERE ARE FEW STANDARDS OR REGULATORY SAFEGUARDS.” –JACK CUMMING, A CCRC RESIDENT AND ADVOCACY OFFICIAL

side of things than the care side,” says Katie Sloan, president of CCRC association LeadingAge. Is the CCRC a good fit philosophically? Eight in 10 are nonprofits, and many are run by religious organizations. Are you comfortable with the group’s mission and inclusiveness? Check if the board of directors includes residents as voting members, a sign that management values resident input.

HOW WELL WILL IT TAKE CARE OF YOUR FUTURE SELF? Check out the assisted-living or nursing facilities or, at the very least, send your adult kids for a tour. Beyond the general feel of the facility, focus on the staff vibe: grumpy or engaged? Ask independent residents if they have spent time in the care units for an injury or illness or visited friends there.

If a CCRC has a skilled-nursing unit, look up its rating at Medicare .gov. Though not a perfect assessment, a five-star rating should boost your confidence. Brad Breeding, cofounder of MyLifeSite.net, also recommends asking the state long-term-care ombudsman if there are any complaints on file. (You can locate LTC ombudsmen at theconsumervoice.org/get_help.)

If a CCRC isn’t on solid footing, you’ll run the risk of big monthlyfee hikes, a reduction in the quality of services or care, and delayed refunds. A financial adviser, CPA, or actuary might be able to help you make sense of a community’s audited financial statements; you might ask an elder-care lawyer to recommend someone. Careful vetting is crucial because there is no federal oversight of CCRCs, and state regulation varies.

At MyLifeSite.net you can download a sample report that includes recommended levels of profitability, debt, and liquidity measures. CARF International, which runs an accreditation program for CCRCs, has free guides for consumers (carf.org/ resources/retirementliving).

Empty units are a drag on a CCRC’s finances, so look for an occupancy rate of at least 90%. As a benchmark, the current 92% average occupancy rate for nonprofits is nearly six percentage points above the rate at for-profit CCRCs, according to Ziegler. A waiting list to get in is a good sign too.

Ask if your upfront payment is being set aside as reserves for future care. “You don’t want to hear that entry fees are primarily being used to cover day-to-day operational costs,” says Breeding.

He says a CCRC’s transparency in answering your questions is an important signal. One red flag that should prompt further questions: any annual fee increases in the past five years that exceeded 3% or so.

Granted, this is all a lot of work.

But if you find a CCRC that’s the right fit, you may reap a valuable payoff: a vibrant life today and fewer worries for the future.

DECEMBER 2016

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Retire

CONTINUING-CARE COMMUNITIES | MASTERING THE JOURNEY

The Challenge: Agreeing on the Perfect Retirement Locale by Kerri Anne Renzulli MOLLY MOYNAHAN, 59, and TIMOTHY GOODRICH, 54 Chicago • Married 13 years OCCUPATIONS: She’s a writing consultant and academic coach. He’s an ironworker.

GOALS: They dream of a big move when Timothy leaves full-time work in eight years.

But they have different ideas about where.

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DECEMBER 2016

MOLLY MOYNAHAN’S VISION for the next stage of life involves living in a condo near the beach with an indoor swimming pool and little upkeep, all within driving distance of a large university or city so she can continue her work as a writing consultant and academic coach. Her husband, Timothy Goodrich, shares her desire to leave their landlocked $700,000 Chicago condo for a coastline residence—but that’s about all they agree on.

His ideal retirement spot, Delray Beach, Fla., lies more than 1,200 miles to the south of Molly’s pick on the New Jersey shore. The 54-year-old ironworker pictures them in a house with a workshop for welding and woodworking, plenty of room for the grandkids to visit, and maybe a dock and a boat. As for vibrant

P H OTO G R A P H C O U R T ESY O F SU B J ECTS

THE COUPLE

city life within reach, he could easily go without.

“This is our biggest challenge with retirement planning,” says Molly, 59. With only eight years till Timothy expects to leave full-time work, the couple are feeling pressure to create a plan and find a spot they can agree on and afford.

A FINANCIAL REALITY CHECK “Molly and Timothy are in pretty good shape for retirement,” says Rapid City, S.D., financial planner Rick Kahler. The couple currently have a combined $381,000 across IRAs, a taxable account, and an annuity. That’s on top of two pensions: $60,000 a year for Timothy and $20,000 for Molly.

Still, Kahler recommends the couple work part-time during the first decade of their retirement to add another $220,000 from pay to their reserves over that period.

While Molly already has a flexible work schedule and intends to never truly retire, that plan will require Timothy to make good on his idea of doing some welding work or turn a profit from his favorite hobby: photography.

“We’re not really interested in traditional retirement activities.

We’re not golf people,” says Timothy. “We like the excitement of still doing work and being connected.” The couple currently earn $125,000 and believe they could earn $60,000 a year (in today’s dollars) from their part-time labors.

Timothy is confident he’ll find short-term ironworking gigs.

They’ll get additional income from Molly’s Social Security benefit and, later, Timothy’s larger one.

“The optimal strategy is for Molly to file at full retirement age and

Where the Money Will Come From Molly Moynahan and Timothy Goodrich are planning on significant part-time earnings to augment their pensions.

$50,000 Earmarked to add to reserves, not for spending

EXPECTED INCOME, FIRST YEAR OF RETIREMENT: $198,000

$60,000

$20,000

$14,000

$76,000

$28,000

Timothy’s pension

Molly’s pension

Molly’s Social Security

Part-time earnings

Investment gains

NOTE: Estimates for 2024, shown in 2024 dollars. SOURCE: Kahler Financial Group

for Timothy to wait to file until age 70,” says Jill Guericke, a financial planning associate of Kahler’s.

That timing will generate the most income over their two lifetimes, based on conservative mortality assumptions.

After income taxes, the advisers figure the couple will have about $95,000 in current dollars to spend annually in Florida or $92,500 in New Jersey, which Timothy and Molly say will be comfortable.

NEXT STEPS TO TAKE How to decide where to live? “Visit in different times of the year so you can get a good sense of what it would be like to live there full-time,”

WE’RE NOT REALLY INTERESTED IN TRADITIONAL RETIREMENT ACTIVITIES.” —TIMOTHY GOODRICH, AGE 54

recommends Kahler. “If you can, take a year and spend a couple of months in each location.”

“This is a great plan,” says Molly. “We don’t want to leave Chicago too hastily. We want to be sure.” The pair think they could do such a long-term test, taking on some work in each place.

Kahler also points out another possibility: splitting time between two locales in retirement. That could be a factor in weighing a house vs. a condo.

“For investment reasons we recommend a house,” says Kahler.

Condos tend to suffer more than houses in a real estate downturn, he explains. And owners of a house have more flexibility to rent it out for income, if Timothy and Molly want to do that at some point.

With Kahler on Timothy’s side about a house, Molly’s hesitations may be abating. There were heavy charges for some work on their building in Chicago, and “renting was always an issue with the condo board,” she says. “Having more options would be nice, so it may be better to look for a home.”

Want help on your journey to retirement?

Email us at makeover@moneymail.com.

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ST Y L I N G B Y J E N N I F E R B I G H A M

de

How to Brace Yourself BOLSTER YOUR PORTFOLIO FOR RISING RISKS, BUT GIRD YOUR STOCKS AND BONDS THE RIGHT WAY. by Carolyn Bigda

Photograph by darren

brau n

CHANCES OF A RATE HIKE are rising. A new administration is heading to Washington, promising a few curveballs, no doubt. And not only is the second-longest bull market in history getting even older—only the 1990s rally lasted longer—but both U.S. stocks and bonds are expensive by historical standards, limiting the number of potential safe harbors. “If there’s anything to expect from here until the end of the year, it’s rising volatility,” says Omar Aguilar, chief investment officer of equities and multi-asset strategies at Schwab.

Still, the odds of a downturn are slim, according DECEMBER 2016

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Invest

HOW TO BRACE YOURSELF | STOCK X-RAY

to the Blue Chip Economic Indicators survey of leading forecasts. And a well-diversified portfolio can help you ride out bumps along the way.

But diversification means more than owning enough fixed income to weather a market storm.

You must also assemble the right variety of stocks and bonds to address specific types of volatility.

Sometimes that means thinking counterintuitively.

YOUR EQUITIES Conventional wisdom says to add a dose of income-producing shares to your core stock holdings because dividends serve as a cushion in rocky times. In 2008, when the S&P 500 lost 37%, an index of dividend growers fell just 22%.

But rising rates—not a recession or financial crisis—are the threat today. And when rates rise, dividend stocks lose their appeal.

Go small instead. This may sound risky, as shares of small and midsize firms are thought to be more volatile than blue chips. But in six of the eight down years for the S&P 500 since 1970, small-caps either lost less or made money.

Plus, smaller stocks tend to hold up well when recession fears are low—as is the case today—and rates are rising. In the 12 months after the last six periods of Federal Reserve rate hikes, these shares gained 15.6% on average, according to Perritt Capital Management.

Academic research shows that holding about 30% of your domestic equities in smaller and midsize stocks can outperform a 100% U.S. stock strategy—with less volatility.

If you need to boost your stake, go with a fund like Vanguard Small-Cap

46

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DECEMBER 2016

Value ETF (VBR), which has about a third of its assets in midsize stocks along with its smaller companies.

Go abroad. Foreign shares come with risks today, such as sluggish growth. But research shows that keeping 20% to 40% of your stocks abroad lowers volatility. “You get the benefit of different currencies and interest rate policies,” says David Chalupnik, head of equities at Nuveen Asset Management.

You also get cheaper stocks now.

The MSCI EAFE index of foreign developed-market shares sports a price/earnings ratio of 14.5, based on projected profits. Emergingmarket shares trade at a P/E of just 12.4, vs. 16.9 for the S&P 500.

Small Wonder Contrary to popular belief, small stocks don’t always lose more than blue chips …

AVG. LOSS IN DOWN MARKETS SINCE 1970

YOUR BONDS U.S. Treasuries are considered the safest haven when stocks sell off.

That was true at the start of the year, when the S&P 500 plunged 10.3% through early February while Treasuries rose 2.9%. But if stocks are set to fall because rates are climbing, Treasuries could lose ground, since bond prices move in the opposite direction of yields.

Embrace risk, don’t run away from it. Junk-bond funds and emerging-market debt may seem like a scary choice to diversify your high-quality government and corporate holdings. But these high-yielders actually benefit from a strengthening global economy that allows rates to rise.

Fidelity Total Bond (FTBFX), on our MONEY 50 recommended list, currently has about 15% of its assets in high-yield debt and 5% in emerging-market bonds to diversify its core holdings. If you’re just looking for a junk-bond fund, go with Fidelity High Income (SPHIX). For emerging-market debt, there’s Fidelity New Markets Income (FNMIX). Both are in the MONEY 50.

-7.6%

ALTERNATIVES -15.9% Large stocks

Small stocks

… And adding small stocks can boost gains with little extra risk.

ANNUAL TOTAL RETURNS SINCE 1970

10%

11%

100% large

70% large/ 30% small

SOURCES: Ibbotson, Morningstar

Conventional wisdom says that in the long run, nontraditional assets such as commodities can help you diversify. In the short term, however, they can experience big swings. Last year a broad basket of commodities fell 25%.

If you’re really worried, build up cash instead. Christine Benz of Morningstar suggests keeping short-term spending needs—say, the next couple of years of retirement expenses—in cash. “A cash cushion will keep you from selling at the wrong time,” she adds.

HOW TO BRACE YOURSELF | STOCK X-RAY

Invest

X-Ray: Wells Fargo CAN THIS BANK THRIVE WITHOUT AGGRESSIVE SALES TACTICS? by Ryan Derousseau Big banks have had their share of ignominy. But the backlash to Wells Fargo’s scandal, in which employees opened 2 million sham accounts without clients’ knowledge—and for which the bank was fined $185 million—has brought more than the usual public ire. The stock is down 8%, CEO John Stumpf resigned, and Wells was forced to scale back its strategy to “cross sell” more products to existing customers. It’s a dramatic fall for one of the few banks to emerge from the financial crisis unscathed. Can this once-admired lender recover its reputation and profits?

Upsell Down

Sea Change?

Beyond the Scandal

Wells’ move to temper its aggressive sales strategy is already being felt.

Can an insider remake the culture— and focus the bank on its real goals?

The fallout isn’t the only thing that jeopardizes Wells’ earnings.

SEPTEMBER DECLINES

TOTAL REVENUES

PRICE/EARNINGS RATIO

$90 billion

–20%

$80

11.2

13.6

Wells Fargo

Industry average

–25% New checking accounts

Credit card applications

In banking, cross-selling means coaxing a credit card customer to open a checking account or a mutual fund investor to buy a CD. “Wells has built its identity around it” to investors, says UBS analyst Brennan Hawken. The bank’s ability to upsell has helped it boost deposits by 22% since 2012. By comparison, Bank of America’s deposits grew just 8%.

But after the scandal, Wells pulled back on this aggressive tactic—and that’s already showing in the decline of new checking accounts and credit card applications. Shareholders shouldn’t panic yet. Long-term, the bank is not likely to ditch crossselling entirely, says Morningstar analyst Jim Sinegal. Plus, most customers will likely stay because of the hassle of switching banks.

NOTES: September data compared with September 2015. P/E ratios based on projected profits. SOURCES: Morningstar, Wells

$70 2009

2016

With Stumpf gone, COO Tim Sloan is charged with revamping a culture rife with unrealistic targets, which critics blame for the sales scandal.

But as Stumpf’s No. 2, Sloan had oversight of the retail-banking unit before the scandal broke. That’s why some shareholders still advocate for an outside CEO. This would have led to more dramatic changes because an outsider would “clear out” the C-suite, says FBR analyst Paul Miller.

But as an insider, Sloan is keenly aware of Wells’ real problem. Even with cross-selling, the bank struggled to grow revenues. After Sloan deals with scandal-related issues, the bank may turn to one of his initiatives— a greater push into investment banking, which is producing record revenues for rivals like J.P. Morgan.

Ultralow interest rates set by the Federal Reserve are weighing on profits—Wells’ lending margins have shrunk from 3.9% in 2011 to 2.8%.

Like other banks, Wells wants the Fed to begin lifting rates so that it can start charging more on its loans. But Wells generates 16% of noninterest income from its mortgage business, which would be hurt if rates rise too much too fast. So the bank needs a not-too-hot, not-too-cold rate policy, which is what the Fed is promising.

In the past this stock traded at a premium to its peers, in part due to its squeaky-clean image. Today Wells trades at a slight discount. And while a low price/earnings ratio is a sign that a stock has room to run, in this case it may reflect how much Wells has to go to regain its status.

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B y KIM CLARK, MEGAN LEONHARDT, SCOTT MEDINTZ,

FINANCIAL LIVES OF AMERICANS THIS YEAR? AFTER TWO MONTHS OF PORING

IAN SALISBURY, BRAD TUTTLE, and PENELOPE WANG

OVER SOME 75 NOMINATIONS FROM READERS, EXPERTS, AND STAFFERS, THE ANSWER WAS CLEAR. MEET MONEY’S PICK FOR 2016’S MOST INFLUENTIAL AND INFORMATIVE (AND, FUNNY!) FINANCIAL CRUSADER, ALONG WITH A DOZEN OTHER INNOVATIVE PEOPLE, PRODUCTS, AND IDEAS THAT CHANGED YOUR MONEY LIFE FOR THE BETTER, PERHAPS FOREVER.

MON EY

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JOH HN OLIVER + BRAD KA ATSUYAMA CFPB PHYLLLIS BORZI CHARRLES ELLISS CHASE SAPPHIRE RESERRVE CARD VA ANGUARD PERSONAL ADVISOR SERVICES THE ABLE ACT MASS. STTAT ATE SEN. PA AT JEHLEN ELEANORR HOLMES NORTON EPIPEN PARENTS MITCH H DANIEELS INDDEX FUND WARS

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“If it was a one-off, it’d be a big deal,” says Robert Weissman, president of the nonpartisan consumer rights group Public Citizen, about Oliver’s coverage of obscure financial issues. “But he’s doing it in one area after another.

The heightened public awareness creates an environment in which it’s possible to win reform.”

That’s a big claim to make about a comedian.

But truth be told—and his own protests notwithstanding—Oliver is doing a lot more than telling jokes. The show’s format allows for 20-minute deep dives, complete with detailed explanations, investigative reporting, exhor-

tations for viewers to take action, and even practical advice of the kind MONEY routinely offers (albeit without expletives).

The jokes, meanwhile—which Oliver has said are dropped into scripts last, after weeks or months of research and factchecking—are added largely to leaven the wonky stuff and sustain viewer attention.

“They’re kind of the window dressing,” he told Vulture.com in February. “But you need to make sure that they’re hanging on something solid, because if that story falls apart, all the jokes fall apart.”

The resulting show has as much in common with the kind of populist TV journalism made famous by 60 Minutes as it does with the topical comedy style that Jon Stewart—Oliver’s former boss and mentor—invented on Comedy Central.

Take that June segment on retirement planning, for instance. The joke about fiduciaries (and soup) was followed by a capsule seminar, complete with graphs, on how compound interest can turn small

P R E V I O U S S P R E A D : J E S S E D I T T M A R / R E D U X ; T H I S S P R E A D : ( B OT H ) C O U R T E S Y O F H B O

WARNING: THE FOLLOWING JOKE is not safe for work and may offend longtime MONEY readers (and some financial advisers).

The context: a June 2016 episode of HBO’s Sunday-night mock news magazine, Last Week Tonight With John Oliver.

The setup: “It is currently legal for financial advisers to put their own interests ahead of yours, unless—and this is interesting—they are what is called a fiduciary.”

The punch line: “Which is weird—it’s kind of like finding out that only some waiters are forbidden from ejaculating in your soup.”

Whether or not you laughed at that— trust us, it’s funnier on YouTube—one thing is clear: Before Oliver, nobody ever tried (let alone won an Emmy for) making watercooler-worthy entertainment out of complicated subjects critical to Americans’ financial health. The wage gap, predatory lending, and paid family leave each got the Last Week Tonight treatment during the show’s first two seasons. But Oliver has doubled down on personal finance in 2016, devoting entire shows to credit reports (in April), debt collection and retirement planning (in June), and auto lending (August).

OLIVER CELEBRATES AFTER RETIRING NEARLY $15 MILLION OF CONSUMER MEDICAL DEBT.

+MONEY CHAMPIONS OF THE YEAR

OLIVER’S 4 BEST MONEY MOMENTS OF 2016 ON CREDIT REE P OR T S (A A P R ILL) 5.1 million YouTube views “Just one error on your credit report, and suddenly the world treats you like a mean girl treats the high school debate team: ‘You’re nothing, Amberly, you don’t even exist.’”

ON DEBT BUYEE R S (J U N E ) 7.8 million YouTube views “It is pretty clear by now that buying debt is a grimy business and badly needs more oversight. Because, as it stands, any idiot can get into it, and I can prove that to you because I’m an idiot and we started a debt-buying company.”

ON RETIREMEN NT PLANS (JUNE)

fees into big losses over time. (“Think of fees like termites: They’re tiny; they’re hardly visible; and they can eat away your f__king future.”) Then came a quick lesson on active vs. passive investing. Then a few minutes on Oliver’s months-long effort to secure a low-fee 401(k) plan for his show’s own staff. (He had to fire the company’s provider to do it.) Finally, more than 18 minutes in, viewers saw a pre-produced parody of a financial firm ad, ending with a five-point plan for successful retirement savings. “Try to keep your fees, like your milk, below 1%,” comedian Billy Eichner deadpans to the camera as the piece ends.

“Even one-tenth of 1% can really f__k you.”

Similarly, Oliver painstakingly picks apart the abuses of many debt collection businesses (partly by starting his own firm and buying $15 million worth of medical debt for pennies on the dollar); the high rate of credit reporting errors; and the systematic markups of the used-car industry.

Is there evidence that this approach

5.2 million YouTube views “Financial analyst, financial adviser, financial consultant, financial planner, investment consultants, and wealth manager are generic terms or job titles and may be used by investment professionals who may not hold any specific credential. So ‘financial analyst’ is just a fancy term that doesn’t actually mean anything, like the ‘John Oliver effect.’”

ON AUTO LEND DIN N G (A U G U S T ) 6.3 million YouTube views “There’s a surprising amount of competition to give car loans to people with poor credit, so much so that people who have recently declared bankruptcy are being actively targeted through the mail.”

actually changes minds, individual behavior, or public policy? The raw numbers suggest it resonates in a way that personal finance never has before. The retirement segment was seen by some 5 million viewers when it aired on HBO in June. More significantly, it went viral, garnering another 6 million views on YouTube and Facebook since then. That kind of multichannel success no doubt helped Oliver’s show capture its first Emmy for Outstanding Variety Talk Series in September.

But Oliver’s influence goes beyond ratings and cultural cachet. The so-called John Oliver effect—the idea that the comedian’s topical polemics translate into real change—has been a persistent Internet meme ever since the show’s first season.

Oliver himself (who declined to comment for this article) pointedly deflates the notion, but fans and policy wonks alike see his fingerprints on a range of progressive policy developments in a variety of areas, from for-profit colleges to civil forfeiture.

In most cases the evidence is circumstantial—New York City reformed its bail policy less than a month after Oliver covered the topic, for example. But in 2014, Oliver’s fans notoriously crashed the website of the Federal Communications Commission after he implored them to voice concerns about pending threats to so-called net neutrality. A few months later the FCC issued rules holding firm on net neutrality.

But Oliver’s impact is arguably even subtler—and more powerful. “He’s really building a case for more control over predatory financial institutions,” says Public Citizen’s Weissman. Powerhouse Massachusetts Sen. Elizabeth Warren agrees.

“John Oliver shines a light on some really big problems,” she told MONEY. “He makes us laugh and teaches us something, but he also calls on the audience to take action to influence public policy. He helps make change.”

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invented a fairer stock market

ability to know what other traders are about to do and to take advantage of it.

That may cost conventional investors only a fraction of a penny per trade. But fractions add up. As a group, high-speed traders have reaped about $6 billion in profits since 2011, according to research firm Tabb Group.

Katsuyama’s IEX battles back by slowing down trading by 350-millionths

THE BREAKOUT YEAR FOR THE CFPB The five-year-old Consumer Financial Protection Bureau hit its stride in 2016. Consider the actions taken this year: MAY: Proposed rules will limit mandatory arbitration clauses— contractual fine print that financial firms use to deprive disgruntled (and even defrauded) customers of their day in court.

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JUNE: Proposed rules will keep payday lenders—who make short-term loans at sky-high interest rates—from lending “without reasonably determining that the consumer has the ability to repay.”

JULY: Proposed rules will limit how often debt collectors can contact consumers and require them to get the details right and

DECEMBER 2016

of a second—a “speed bump” so small that humans don’t notice, but that eliminates high-frequency traders’ edge. “The idea is to cut out superfluous middlemen,” says Barnard College economist Rajiv Sethi.

To be sure, Katsuyama—who was one of the heroes of Flash Boys, Michael Lewis’s 2014 bestseller about high-speed traders— still has his work cut out for him. So far IEX handles only about 2% of U.S. trades.

But just providing competition may be a victory for investors. In June the New York Stock Exchange announced that it, too, would explore the idea of introducing “speed bumps” to protect investors.

offer an easy dispute process.

SEPTEMBER: The agency’s massive enforcement against Wells Fargo, which paid $100 million for opening some 2 million accounts without customer knowledge, was just one of 30 cases filed in the CFPB’s busy year. In total, it collected $150 million in fines and ordered $95 million in restitution to consumers.

OCTOBER: Many consumers assume prepaid cards and pay-

ment apps like Venmo offer the same fraud and theft protections as credit cards. Not so. The CFPB’s finalized rules change that and require these companies to be upfront about fees.

CFPB director Richard Cordray deserves much of the credit, says Paul Bland, executive director of advocacy group Public Justice: “In the face of an extraordinary amount of criticism and abuse, he was very courageous and farsighted.”

P H O TO G R A P H S B Y C H R I S G O O D N E Y/ B L O O M B E R G V I A G E T T Y I M A G E S

IF BRAD KATSUYAMA GETS HIS WAY , it will no longer be possible for a handful of professional investors to get an early peek at the trading of other market players. They won’t be able to jump in and fill orders at less-than-perfect prices. And they won’t be able to pocket the difference.

His brainchild is a new stock exchange called the Investors Exchange, or IEX, which formally opened its doors in August.

If it succeeds, IEX will be a less expensive way for large traders like mutual funds to buy and sell stocks on behalf of ordinary investors. “Cheaper trades boost investment returns,” explains Joe Brennan, head of the equity index group at fund giant Vanguard, which has been complaining about high-speed trading abuses for years.

At issue is so-called high-frequency trading, a strategy that uses powerful computers to rapidly buy and sell stocks, often looking to gain advantage over competitors by mere fractions of a second. A new technology gives high-speed firms the unfair

( B O R Z I ) J O N AT H A N E R N S T/ R E U T E R S ; ( B O O K ) P H OTO G R A P H B Y S H AY L A H U N T E R

got us the fiduciary rule After nearly a decade of trying, the U.S. Department of Labor finally got it done: a rule that will require financial advisers to act in their clients’ best interests when managing retirement assets—in other words, to act as fiduciaries.

That rule will go into effect next year in large part because of the heroic efforts of Phyllis Borzi, who jump-started the campaign

when she joined the department as assistant secretary of labor for employee benefits security in 2009.

The fiduciary standard is designed to address the fact that some financial pros push expensive or risky investments that pay them high commissions but aren’t necessarily the best choice for their clients. They are allowed to do this under a socalled suitability standard, which requires only that their investment recommendations be “roughly suitable.” According to a 2015 White House Council of Economic Advisers report, the conflicted advice that results costs savers, on average, 1% a year in returns, or $17 billion.

That far more financial advisers might soon be held to the higher standard looked far-fetched just five years ago, when the Labor Department was forced to withdraw its initial proposal in the face of fierce industry and congressional opposition. It was a devastating setback, but Borzi refused to give up.

“I knew that if we kept working, kept talking to everyone involved, and were willing to consider alternative ways to achieve the same goals, we would get there,” she says.

Going back to the drawing board, Borzi and her staff crafted an approach that would turn fiduciary principles into policy. More important, she went to work behind the scenes forming alliances with consumer groups, bringing industry executives to the table, and eventually convincing the White House to bring its bully pulpit to bear on the issue.

“Many people on that team played vitally important roles, but Phyllis Borzi was the linchpin,” says Barbara Roper, director of investor protection at the Consumer Federation of America. “It would not have happened without her.”

The new standard will begin rolling out in April.

So many people applied for a Sapphire Reserve card within days of its August launch that Chase literally ran out of the metallic card blanks and had to send temporary plastic ones instead. Why the stampede? The rewards are far better than any other card: three points per dollar spent on restaurants and travel, one point on everything else, and a 100,000-point sign-up bonus if users spend $4,000 within three months. Even the hefty $450 annual fee is mitigated by $300 worth of credits. But perks only partly explain the card’s blockbuster appeal: Customers flooded social media with “unboxing” videos of opening their cards for the first time. Hoping to inspire similar passion, Citi and AmEx boosted their sign-up bonuses and point structures. The Reward Wars rage on.

GAME CHANGERS

THE CHASE SAPPHIRE RESERVE CARD

convinced us to index FOR INVESTORS, 2016 was the year of the index fund. Some $175 billion was yanked from actively managed funds, while $326 billion was stashed in passive ones. This shift came about in large part because of the ideas of investment consultant and author Charles Ellis—whose new book, The Index Revolution, tidily sums up the case he’s been making for decades.

Back in 1 9 75, E l l i s wrote an artic l e a rg u i n g that investors would come out ahead by simply avoiding mistakes rather than seeking to beat the market. Forty years of data have proved him to be prophetic.

Ellis isn’t as famous as indexing champion and Vanguard founder Jack Bogle, of course, but he is a legend among investing pros. “Long before behavioral finance came along, Charley had the crucial insight that investors should try to control their own behavior,” says New York investment adviser Barry Ritholtz.

Central to Ellis’s case is the huge impact of investment costs. “It’s easy to ignore a 1% fee if you’re earning 15% returns,” says Ellis. “But today you’re lucky to get 7%, which means a 1% fee takes nearly 15% of your returns.” In today’s world of low returns, that’s a message that has never been more urgent.

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+MONEY CHAMPIONS OF THE YEAR

GAME CHANGERS

VANGUARD PERSONAL ADVISOR SERVICES

GAME CHANGERS

ABLE ACCOUNTS

THE GENDER WAGE GAP remains stubbornly persistent despite getting loads of media attention. But in 2016 two lawmakers made tangible progress in the slow-going battle to ensure equal pay for equal work.

The first is Massachusetts State Sen. Pat Jehlen, who pushed a comprehensive equal pay law through the commonwealth’s legislature this summer.

The provisions of the law, which Jehlen (along with former colleague Alice Wolf) first introduced in 1998, include incentives for businesses to tackle gender pay imbalances and clear standards for making sure workers get “comparable pay for comparable work,” as state law has long required.

But perhaps most important, the law bars Massachusetts employers from asking for an applicant’s salary history before extending a job offer. Advocates believe that prohibition will break the

New state-level tax-advantaged savings plans aim to fix a longstanding problem: that disabled Americans are more likely to live in poverty and less likely to save for retirement than others. The programs, new in 2016 but made possible by the 2014 ABLE Act, allow anyone diagnosed with a disability before age 26 to save up to $14,000 a year without losing out on Medicaid and Supplemental Security Income benefits. Michigan, Nebraska, Ohio, and Tennessee offer plans that are available nationally.

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JEHLEN AT THE SIGNING OF THE MASSACHUSETTS EQUAL PAY LAW.

cycle by which one discriminatory wage leads inevitably to the next.

“These are important steps to reverse wage discrimination,” Jehlen says. “But the bigger impact may come from the cultural change we are trying to effect.”

Indeed, there’s reason to think Jehlen’s victory will resonate outside Massachusetts. Several states are modelling their own bills on the law, and New York City implemented a similar rule for city agencies in November. And on a national level it inspired the legendary congresswoman and equal rights leader Eleanor Holmes Norton to introduce the federal Pay Equity for All Act in the U.S. Congress in September. If passed, it would bar employers from asking about previous salaries nationwide.

Norton has fought to secure equal pay for women throughout her storied career, of course, but 2016 may introduce her to a new generation of women. As a young civil rights attorney, she filed the landmark discrimination suit on behalf of the female researchers at Newsweek magazine. The 1969 case galvanized feminists nationwide and is the focal point of the new Amazon series Good Girls Revolt, in which Norton is portrayed by Joy Bryant.

Season one of the series dropped on Oct. 28.

P H O TO G R A P H S B Y ( H O L M E S N O R TO N ) PA U L S A N C YA /A P P H O TO ; ( J E H L E N ) J E S S I C A R I N A L D I / T H E B O STO N G L O B E V I A G E T T Y I M A G E S )

So-called robo-advisers—algorithms that pick investments based on your financial goals and risk tolerance—are all the rage, providing new competition for traditional (that is, human) financial planners.

Fund giant Vanguard has steered a middle path. Its Personal Advisor Services—open to investors with $50,000—pairs computer-driven investing with an adviser you talk to over the phone. It grew into a juggernaut in 2016, reaching $46 billion in assets under management.

It’s not hard to see why. At 0.3% of assets per year, fees are competitive with fully automated options.

“Now someone with less than $100,000 can get the advice someone with millions would have gotten in the past,” says financial blogger and money manager Wesley Gray.

battled the pay gap

( E P I P E N ) J O E R A E D L E /G E T T Y I M A G E S ; ( D A N I E L S ) M I C H A E L H I C K E Y/G E T T Y I M A G E S

beat back big pharma Never underestimate the power of parents who feel their children’s lives are endangered because of corporate greed.

Outraged parents unleashed their fury on pharmaceutical maker Mylan for “unconscionable price gouging” on a product that their children literally could die without—leading to a congressional hearing, $500 million in penalties, and annual savings in the thousands for families.

Mylan owns the EpiPen, a device that wards off lifethreatening anaphylactic shock during allergic reactions. Roughly two children in every U.S. classroom have allergies that warrant an EpiPen prescription.

Families tend to restock EpiPens, which expire annually, during back-toschool season. It was then that many realized that their high-deductible insurance plans left them on the hook

EPIPEN for the full retail price—over $600 per pack, up from less than $100 when Mylan acquired the product in 2007.

Families need multiple packs (one each for school, home, and to carry around), so bills hit the thousands.

Parents reacted by flooding Mylan’s Facebook page with comments assailing the price increases.

They wrote to politicians demanding action, leading to a congressional hearing and public condemnations of Mylan from the likes of Hillary Clinton, Elizabeth Warren, and the actress

Sarah Jessica Parker, who resigned as a company spokesperson. Hundreds of thousands signed online petitions pleading for sensible pricing, and allergy advocacy blogs were filled with heartbreaking personal stories.

“Parents were saying, ‘What am I supposed to do, not pay the mortgage? Not pay for groceries?’ ” says AllergyKids.com founder Robyn O’Brien. “I heard from school nurses, doctors, pharmacists, members of Congress—everyone was enraged.”

Months of this bad publicity prodded Mylan into releasing coupons for bigger EpiPen discounts and launching a cheaper generic version. The uproar also led to federal investigations, revealing Mylan has overcharged the Pentagon and Medicare for EpiPens to the tune of $500 million.

Perhaps most important, the EpiPen saga brought to light one of the most dysfunctional parts of our health care system. “Hopefully, this kicks off a much bigger conversation about how we price medicine,” says O’Brien.

is tackling college debt STARTING THIS FALL, the Purdue Research Foundation is paying tuition for more than 100 students—who, in return, agree to pay a portion of their future earnings. It’s the biggest program of its kind in the country.

Purdue president Mitch Daniels, a two-term Republican governor of Indiana who joined the school in 2013, based his Back-a-Boiler program on an idea for income-share agreements (ISAs) proposed by economist Milton Friedman in 1955. But he’s been careful to avoid some pitfalls that sank previous ISAs; for example, he limits the term to nine years, so students aren’t doomed to a lifetime of payments.

The experiment is winning bipartisan praise from education experts. But ISAs are just part of Daniels’ strategy at Purdue. He also cut the price of room and board and froze tuition for in-state residents for the past three years. —K.C.

Here’s one fund company’s marketing ploy we can get behind: In October, ETF giant BlackRock slashed fees on 15 of its most popular funds, including iShares Core S&P 500, from 0.07% to 0.04%. Less than a week later Schwab responded by slashing fees on five of its own ETFs, including one of its core bond options. Fidelity and Vanguard have also attracted attention with their own cuts, announced in June and December 2015. The fee cuts won’t save investors a ton of money; and of course, fund companies love the free publicity they’re getting for it. But investors are coming out winners in the long run, says Tom Roseen, head of research services at fund analyst Lipper: “It puts pressure on the whole industry to keep costs in check.”

GAME CHANGERS

THE INDEX FUND WARS

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HEREâ&#x20AC;&#x2122;S HOW TO PLAY THE AGING BULL MARKET, LAND A NEW JOB, PICK THE RIGH

By PAUL J. LIM, KRISTEN BAHLER, KERRY CLOSE, and

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20 BEST

MOVES FOR

017

T CREDIT CARD, PROFIT FROM THE SHARING ECONOMY, AND FIND YOUR NEXT HOME.

MEGAN LEONHARDT. Illustrations by RYAN HUDDLE

DECEMBER 2016

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or ordinary Americans, 2017 is likely to feel like the best year economically since the Great Recession.

The recovery is finally expected to trickle down to you in the form of an improved job market, higher wages, and growing spending power. “These are things we’ve been talking about since 2012 or 2013,” says Tim Hopper, chief economist for TIAA Global Asset Management. “And now it’s finally here.”

And, despite the advanced age of this bull, your improving fortunes just may keep U.S. stocks chugging along too, as consumers represent 70% of the U.S. economy, says Nariman Behravesh, chief economist for IHS Markit.

Still, with economic growth expected to remain sluggish at 2.2%—and with all the unknowns surrounding the new Donald Trump presidency—you’ll need smart strategies to turn a decent year into a great one financially. On the pages that follow, we identify the big trends that will affect your wallet in 2017 and offer 20 pointers on how to tweak your investments, advance your career, and be savvy in both everyday spending and your big-ticket housing decisions.

economy && investing economy investing THE BIG TREND

THE BULL MARKET LIVES ON INTO 2017 Trump’s win raises uncertainties and risks, economists say, especially over trade policies. Still, tailwinds that are forming at the intersection of Wall Street and Main Street “should help stocks make some decent progress,” says Jeffrey Kleintop, chief global investment strategist at Charles Schwab. Expect another year like 2016, with mid-single-digit gains.

Earnings for S&P 500 companies are expected to surge 12% in 2017, after being flat this year.

Helping drive that: consumers with more dollars in their pockets.

Household spending has been meh, to use a technical term. But that should perk up along with pay. Average hourly wages could grow 3% to 3.5% in 2017, says Hopper. That could jump to 3.5% to 4% should Trump’s promised infrastructure spending produce jobs. “The more you push job growth, the more you push wage growth,” Hopper says.

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Pick sailboats over motorboats … Investors in recent years

favored shares of companies that don’t require a strong economy to excel. Burt White, chief investment officer at LPL Financial, refers to these stocks as “motorboats,” since they generate their own motion. Now he says it’s time to look at “sailboats” that are powered by economic strength.

They include technology shares that benefit from consumer spending, as well as retailers such as Home Depot and Lowe’s.

An added advantage: These stocks are relatively cheap. Tech shares in the S&P 500, for instance, are trading at an 8% discount to their historical average price/earnings ratio, while the broad market is trading at a 10% premium. In our MONEY 50 recommended list, T. Rowe Price Blue Chip Growth (TRBCX) holds half its assets in economically sensitive tech and consumer discretionary stocks. … But don’t go overboard.

Though equities are expected to rise for a ninth straight year, strategists and portfolio managers warn investors not to get overly optimistic. After all, the bull market is already more than twice as old as the typical rally.

Rather than boosting your exposure to equities, you might add a small dose of high-yielding junk bonds, says Terri Spath, chief investment officer at Sierra Investment Management.

Junk bonds are highly correlated with equities but offer some cushion. In 2008 junk bonds suffered only 70% of the losses of the broad equity market. Yet over the past 15 years, junk bonds have generated an average annual gain of 7%, which is nearly identical to the return for the U.S. stock market. A solid junk bond fund is Fidelity High Income (SPHIX), which is on our MONEY 50 list.

a percentage point since July, utility stocks have already lost 6% of their value.

You don’t have to give up on dividends. Just shift into funds that balance decent yields with dividend growth. Christine Benz, director of personal finance at Morningstar, has recommended Schwab U.S. Dividend Equity ETF (SCHD). The fund currently yields about 3% and has the lowest expenses among dividend-oriented ETFs, according to Morningstar.

THE BIG TREND

THE FED STICKS TO “LOW AND SLOW” ON RATES The economy isn’t the only thing picking up steam. Inflation is expected to rise too, with consumer prices forecast to grow 2.3%, nearly double this year’s pace, according to the Blue Chip Economic Indicators survey.

With higher inflation typically come higher interest rates.

But don’t worry about big jumps that could pump up your borrowing costs or clobber your bonds. Before the election, most economists expected two quarterpoint rate hikes by the Federal Reserve in 2017. While Trump’s election could speed up or slow the pace, that is still a reasonable expectation. That means the Fed’s short-term rate target should stay close to 1%, four points below the historical average.

As yields inch up, households won’t have to sock away quite as much money to meet their goals.

That means people will feel more comfortable spending.

RIDE THE TAILWIND Economically sensitive technology and consumer discretionary stocks have been outpacing defensive utilities lately …

TOTAL RETURNS SINCE JANUARY 2015

0.8% 13.4%

7.8%

Technology

Consumer discretionary

Utilities

…But they’re still cheaper than historically…

Forward P/E

Historical average forward P/E

16.7 18.2

Technology

YOUR BEST MOVES Favor income stocks that can also grow. Some income investors frustrated by low bond yields have shifted into dividendpaying equities. But when rates do rise, people are likely to turn back to bonds, which means classic high-dividend payers such as utility stocks are a risk.

“You want to stay away from interest-rate-sensitive stocks,” says LPL’s White. Indeed, as yields on 10-year Treasuries have jumped more than half

17.4 19.5

Consumer discretionary

17.0

Utilities

14.3

… And have stronger growth prospects.

Sales growth 2017

11.1% 6.8%

Earnings growth 2017

10.0% 5.1% 3.0%

Technology

Consumer discretionary

1.4%

Utilities

Favor muni bonds. While bond prices move in the opposite direction of market interest rates, some forms of debt are less rate-sensitive than others.

One such choice: tax-advantaged municipal bonds.

An uptick in economic activity and wages translates to higher tax receipts for the cities, counties, and states that issue muni bonds. Moreover, these bonds are starting off with higher yields than Treasuries, which allows them to weather rising rates better.

Ten-year A-rated municipal bonds are yielding 2.2% on average, slightly higher than the 2.1% you’re getting on 10-year Treasuries. When you tack on the fact that muni-bond income is free of federal—and in some cases state—taxes, that 2.2% yield is actually the equivalent of 2.9% if you’re in the 25% federal income tax bracket, and 3.3% if you’re in the 33% bracket.

There’s one more reason to go with munis in 2017. With President-elect Trump promising major infrastructure spending during the campaign—he alluded to more than $500 billion—and his party controlling both houses of Congress, the likelihood that Washington embarks on a new round of stimulus spending is rising. Spath of Sierra Investment Management notes that any push for national infrastructure spending is likely to create “huge increases in demand” for munis, which fund such projects.

One of the cheapest and most effective ways to get broadbased exposure is through Vanguard Intermediate-Term Tax Exempt Fund (VWITX), which charges expenses of just 0.2%.

SOURCES: Morningstar, FactSet, S&P

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THE BIG TREND

EMERGING MARKETS STAY STRONG Stocks in developing economies are likely to have another good year in 2017, after rising more than 17% so far in 2016. Investors certainly have waited long enough: The shares returned a mere 2.5% a year on average over the past decade, even including this year’s advance. The turnaround has come as economic growth in the developing world finally picks up after a long cold spell. (You’re showing your age if you remember when emerging markets were the engine of global growth in the early 2000s.)

The recovery isn’t uniform, however. China, the biggest economy in the emerging markets, continues to slow down, with GDP growth expected to fall to 6.2% next year, from 6.6% in 2016 and 7.3% in 2014. Economies that are reaccelerating can be found in Eastern Europe, Mexico, Indonesia, and the Philippines.

You can thank the bounce in commodity prices, as many emerging economies are still tied to the mining and production of raw materials such as crude oil. Since the end of January, oil prices have jumped from around $26 a barrel to about $45. Prices aren’t expected to rise as aggressively in 2017, but they are forecast to be stable. “The big downward pressure on commodity prices is over,” says Thomas Clarke, comanager of the William Blair Macro Allocation Fund.

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YOUR BEST MOVES Replenish your emergingmarkets stake … If you haven’t rebalanced your equities in a while, do it now. A 10% weighting in emerging-markets stocks five years ago is down closer to 5% now. Be careful, though. Because economists don’t expect a new bull market in commodities to take off, you may want to avoid funds with big bets on commodity-reliant companies.

T. Rowe Price Emerging Markets Stock (PRMSX), which is on the MONEY 50 list, holds less than 7% of its portfolio in energy, basic materials, and industrial stocks, with the majority of its assets in consumer-driven areas including tech.

HOW OUR 2016 FORECAST SHAPED UP WHAT WE GOT RIGHT Stocks: Last year MONEY said investors would get at least one more bite at the bull-market apple but warned that there would be increased rockiness as the rally ages. Sure enough, the broad market has gained 7% this year, despite major bouts of volatility in January and the summer. We also advised you to take a chance on emerging-markets equities because they were among the cheapest stocks in the

world. Shares of companies in the developing markets have returned around 17%.

Bonds: Don’t panic over the potential for interest rate hikes, MONEY said. The Fed would take things slowly, we pointed out—so slowly, it turns out, that December could see the first and only move of 2016.

Careers: We warned that while the labor market was expected to keep improving in 2016, salaried workers would

… But go light on China.

For years China drove economic growth in the developing world.

But the country is now an emerging market in name only, mired by an aging population and a shrinking workforce.

Favor funds that limit exposure to China. The Harding Loevner Frontier Emerging Markets Fund (HLMOX) focuses on relatively small and fast-growing economies such as the Philippines, Colombia, and Kenya.

Among index funds, Columbia Beyond BRICs ETF (BBRC) avoids the largest emerging economies (Brazil, Russia, India, and China) while focusing on consumerdriven markets such as Mexico, Malaysia, and Indonesia.

have to fight to earn raises above 3%. The typical pay hike this year was a modest 2.8%, according to Aon Hewitt.

WHAT WE GOT NEARLY RIGHT Housing: The real estate rebound was expected to cool down, since prices were far outpacing the rate of income growth.

The housing market didn’t exactly set the world on fire this year, but it didn’t slow either. Median prices on singlefamily homes sold in 2016 rose 4.5%, nearly the same rate of growth as in 2015.

WHAT WE GOT WRONG Growth: Forecasters were expecting 2.7% GDP growth and an 8% rise in corporate profits this year.

Those numbers were far too optimistic. The domestic economy is on track to grow by barely half that, at a mere 1.5%. And S&P 500 earnings actually fell by nearly 1%.

The dollar: The greenback was supposed to keep strengthening this year. But with no rate boost from the Fed through November, the dollar buys 0.9 euros—close to what it did at the start of 2016.

NI

CE SAVE

No

11 How would you spend $1,327 on your sonâ&#x20AC;&#x2122;s skateboarding career?

$1,327

$200

Sprained Ankle

Skateboard Lessons

$96

Helmet, Elbow and Knee Pads

$350

New Skateboard

vs $230

New Wheels and Trucks for Skateboard

$152

Skate Shoes

$175

Skateboard Repair Kit

$124

Sprained Ankle

Emergency Room

Did you know that many injuries can be treated at urgent care for less than one-tenth the cost of the emergency room?

Compare quick care options and costs at uhc.com/QuickCare Costs are 2015 UnitedHealthcare national averages reflective of commercial claim data. Costs are not tied to a specific condition or treatment. Out-of-pocket costs will vary based on your medical plan design.

Emergency room cost estimate includes facility charge and initial physician consultation. Š2016 UnitedHealth Group, Inc. All Rights Reserved.

Urgent Care

YO U R 2 0 B E S T M O N E Y M OV E S F O R 2 0 1 7

job market job market THE BIG TREND

AN EMPLOYMENT BOOM SETS YOU UP FOR A BIG RAISE It’s a job seeker’s market. Openings hit an all-time high in 2016, according to the Bureau of Labor Statistics—and the 2017 outlook is particularly rosy for mid- to senior-level workers. “We expect robust demand for experienced workers,” says Steven Lindner, executive partner of recruiting firm the WorkPlace Group. Meanwhile, the wage premium for switching jobs is near its highest point in years (see graphic, below). “People are leaving because there are better alternatives,” says Andrew Chamberlain, chief economist at Glassdoor.

“And generally, when people leave a job for a pay raise, it can be significant—10% to 20%.”

YOUR BEST MOVES Test-drive new tools. Try new apps like Jobscan, which lets you tailor your résumé to postings by identifying key words, or Switch, which works like swipe-right dating app Tinder to pair you with

hiring managers. And use LinkedIn’s new Open Candidates setting (see Fast Takes, page 14) to tell everyone but your employer that you’re on the market.

Flaunt your skills. Even if you’re not in IT, know which tech skills you’ll need to get a new job in 2017, says Katie Bardaro, lead economist at job site PayScale.

Update your résumé to highlight tools you already use—Workday software in HR, for instance.

And if the ads in your field seek a skill you don’t have, find classes nearby or online, via sites like Lynda.com and Coursera.

Use your leverage if you stay put. Don’t want to leave your gig?

Pay is forecast to rise only 3% next year for workers who don’t change jobs—though high performers can expect a 4.9% bump, Mercer finds. Talk to your manager, says career coach Roy Cohen— and don’t be afraid to brag. “You’ll advance by highlighting areas of particular distinction,” he says.

THE BIG TREND

NEW EQUAL-PAY EFFORTS RESET THE MONEY TALK A crescendo of recent changes aimed at closing the gender wage gap has reshaped the compensation landscape for 2017. Massachusetts just made it illegal for in-state employers to ask about salary history—a question that tends to disadvantage anyone who has been historically underpaid—and the lawmaker who launched the bill says she’s heard from peers in other states looking to replicate her effort (see “The MONEY Champions,” page 52).

New York City has already

WHY IT PAYS TO SWITCH The pay premium for changing jobs is near an eight-year high.

YEARLY PAY INCREASES

4%

Job switcher

Job stayer

3

2

1 2008

2009

2010

2011

2012

2013

NOTE: Chart shows median year-over-year wage growth. SOURCE: Atlanta Fed’s Wage Growth Tracker

2014

2015

2016

consumer habits consumer habits THE BIG TREND

A CREDIT CARD WAR AMPS UP REWARDS Credit card perks are at record highs and are likely to keep rising in 2017, says analyst Matt Schulz, of CreditCards.com. Among premium cards, the new $450 Chase Sapphire Reserve—with up to a $1,500 bonus—is expected to draw copycats. “It wouldn’t surprise me much if we saw somebody try to match what the Chase Sapphire Reserve is offering—or even top it,” Schulz says. (More about the card on page 57.) And the sweet lures aren’t just for big spenders: Cashback cards now offer an average of $100 to new cardholders, triple what they paid in 2010. followed suit for municipal jobs, and a federal version of the rule is now in front of Congress. And at least 50 employers—including Apple, Hilton, and Visa—have signed the White House’s Equal Pay Pledge, promising to analyze company pay levels and review hiring processes to reduce bias.

YOUR BEST MOVES Ask for a revision. Suspect you’re paid less than peers? Meet with your manager, says Marissa Peretz, of Silicon Beach Talent— and bring a list of accomplishments, in case your suspicions are true and you need to show you’re not underperforming.

Peretz suggests starting with something like: “I overheard someone talking about their salary, and it sounds like I’m not being paid commensurate with my peers. Can we talk about why

that is?” Tell your boss you appreciate the mentorship he or she offers and want to continue working together.

Then come up with a solution. Maybe you’ll set up periodic goals and evaluations, with an agreed-upon salary bump for every benchmark that you hit.

Reset your negotiations.

Looking for a new gig? It’s still legal for most employers to ask about your pay history (even in Massachusetts, where the law won’t take effect until 2018). Yet the attention given to the legal changes may give you more cover to duck the question.

You don’t need to mention the new laws explicitly, says Alison Green, a workplace consultant.

Instead, say something like, “I’ve always kept that confidential, but I’m seeking a range of X to Y,” she advises.

YOUR BEST MOVES Don’t ignore free money.

If you pay your bill monthly and don’t have a rewards card, you’ll miss out. Several new cards offer 1.5% cash back on all spending, though none match the no-fee Citi Double Cash, one of MONEY’s 2016 Best Credit Cards, which pays out a flat 2%.

Pick the right perks. If you spend a typical $2,000 monthly, with $500 on travel and restaurants, you’ll do best long term with a cash back card like the Double Cash, instead of a travel card. And if you’ll need a vacation splurge to earn a sign-up bonus, apply for a card a few weeks before you leave (or book a trip, if paying big costs in advance).

DECEMBER 2016

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YO U R 2 0 B E S T M O N E Y M OV E S F O R 2 0 1 7

WHERE THE SWEET SPOTS ARE THE BIG TREND

THE SHARING ECONOMY CREATES NEW SAVINGS

Families looking to trade up and move to the suburbs are poised to find better deals than downsizers, first-time buyers, and urbanites.

HOME PRICE GROWTH, 2011–16

You probably already hail rides with Uber or Lyft instead of taxis, book vacation stays through Airbnb, or even hire help via TaskRabbit to assemble your Ikea bed. More than two-thirds of Americans used a shared service at least once in the past year. But eMarketer estimates the number of regular users will rise 14% in 2017, to more than 31 million, as consumers get more comfortable with such services. “People think that because Airbnb and Uber have gotten so big, we must be hitting a ceiling,” says Rachel Botsman, a visiting lecturer at the University of Oxford. “But the space is still in its infancy.”

YOUR BEST MOVES Rethink spending habits.

Sharing services can save you real money. Start with big-ticket items. A MONEY analysis found that a family could save about $18,000 over five years by selling its second car and using more public transit and car sharing.

Even smaller expenditures deserve a second look now, especially for short-term needs.

For a winter getaway, for example, rent a snowboard through Spinlister. You could pay as little as $15 a day rather than shell out at least $59 daily at a resort like Vail. Other sites to try: Peerby, for tools and home goods; EatWith, which pairs home chefs with guest diners; and Rent the Runway, for designer dresses.

Just remember: Booking a room on HomeAway or Airbnb

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isn’t like reserving at a Wyndham.

Be sure to read ratings and reviews before you commit.

Weigh payoffs against the fine print. Looking to pick up extra cash? The sharing economy isn’t just for millennials. People over 60 were the fastest-growing set of Airbnb hosts last year, AARP says, and one in four Uber drivers was over 50. But know the drawbacks before jumping in. Uber, for instance, takes 20% to 30% of every fare you accept. Airbnb charges just 3% on each reservation—but you could run afoul of city regulations or your homeowners association, so call town hall (or your local board) before listing your place. Also, rental income is subject to income tax if you have paying guests for 15 or more days a year. Keep meticulous records.

real estate real estate THE BIG TREND

SPLIT HOUSING TRENDS POSE NEW CHALLENGES Forget a tale of two cities: Extreme housing market fragmentation is creating different experiences for buyers and sellers in a wide range of locations and segments. Nationally, home prices are expected to keep rising, albeit more slowly— 3.5% in 2017, vs. 4.5% in 2016, per

DECEMBER 2016

Twobedroom

59%

Fourbedroom

41%

Urban core

76%

Larger metro area

52%

HOMES ON THE MARKET, 2015–16

7.9%

–8.4% $100,000– $250,000

$500,000– $750,000

NOTES: Home-size data based on third-quarter numbers. Urban core defined as five kilometers (3.1 miles) from city center. SOURCES: Attom Data Solutions, Redfin, National Association of Realtors

Moody’s Analytics projections.

But even more than in recent years, your position now hinges on what and where you’re buying or selling.

Hoping to escape a downtown condo for the suburbs? Your equity should go far: Small homes have seen much sharper price growth than larger ones, urban areas have appreciated faster than metro outskirts— and both trends are expected to continue in 2017. If you’re in the reverse position, though, brace yourself: Inventory has tumbled among less expensive homes, and your money may not buy as much as you expect.

Youâ&#x20AC;&#x2122;ve earned your money, but are you owning it?

In life, you question everything. The same should be true when it comes to managing your wealth. Do you know what your investment recommendations are based on?

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Brokerage Products: Not FDIC Insured â&#x20AC;˘ No Bank Guarantee â&#x20AC;˘ May Lose Value To see how Schwab stands by our word, visit www.schwab.com/accountability &KDUOHV 6FKZDE UHFHLYHG WKH KLJKHVW QXPHULFDO VFRUH LQ WKH - ' 3RZHU )XOO 6HUYLFH ,QYHVWRU 6DWLVIDFWLRQ 6WXG\ EDVHG RQ UHVSRQVHV IURP á UPV PHDVXULQJ RSLQLRQV RI LQYHVWRUV who used full-service investment institutions and were surveyed in January 2016. Your experiences may vary. Visit jdpower.com.

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Wealth management refers to products and services available through the operating subsidiaries of the Charles Schwab Corporation of which there are important differences including, but not limited to, the type of advice and assistance provided, fees charged, and the rights and obligations of the parties. It is important to understand the differences when determining which products and/or services to select.

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YO U R 2 0 B E S T M O N E Y M OV E S F O R 2 0 1 7

YOUR BEST MOVES Growing families, make your move. If you’re looking to trade up to a larger home, you’re in the housing market’s sweet spot, and the first part of 2017 should be a particularly good time to strike.

Over the five years between 2011 and 2016, the average price on a two-bedroom house climbed 59% nationwide, while four-bedroom houses rose a more modest 41%, according to an analysis by Attom Data Solutions. Inventory has also risen at the higher end of the market, climbing almost 8% for homes in the $500,000 to $750,000 range.

Because you’re well positioned as a seller, and you want to walk away with as much money as possible for your next down payment, choose a higher offer over a speedier close, suggests Lawrence Yun, chief economist at the National Association of Realtors.

Aiming small? Be flexible.

If you’re hoping to cash out and scale back—or if you’re a firsttimer looking for a starter home—you face a tight market with low supply and greater competition from rival buyers.

Yet the more flexible you are, the more choices you’ll have.

Willing to move farther from the city center, for instance? The average price per square foot in overall metro areas has risen 52% over the past five years, according to Redfin, but it has jumped 76% in the urban cores.

And while no one wants to tackle a major overhaul, buyers who are willing to make at least some upgrades can get a better deal, notes Svenja Gudell, Zillow’s chief economist. You won’t be alone: More than half of home-

70

m o n e y. c o m

owners who bought in the past year got a place that needed at least some updates, according to a recent Zillow survey.

Meanwhile, retirees looking to move to sunnier climes can profit from what are now bigger variations between U.S. metro areas than have existed at any time in the past two decades, Yun says.

He singled out Greensboro, N.C., where home prices have slipped 0.3% over the past year, as a possible retirement destination.

Lock in a lower loan rate.

If you’re ready to buy, now is a good time to pull the trigger on financing, since the recordlow mortgage rates seen in 2016 aren’t expected to last. Average rates could rise as much as half a percent in the next year, according to Dan Smith, president of Atlanta-based PrivatePlus Mortgage. That would mean an $864 increase in annual payments on a $250,000 mortgage if rates jump to 4.2% from the 3.7% average on 30-year fixed loans in November.

THE BIG TREND

HOMEOWNERS FACE A REMODELING BOOM Remodeling spending is surging: It’s expected to jump by 8.3% in the second quarter of 2017, up from 5.7% growth in the same period in 2016, according to an October survey from the Joint Center for Housing Studies at Harvard University. That’s partly because of buyers purchasing houses that need a little work, but also because of a projected increase in discretionary income, says Abbe Will, an economist at Harvard.

YOUR BEST MOVES

PROJECTS THAT PAY OFF See which home improvements carry a high return on investment.

SHARE OF COST RECOVERED AT RESALE Garage door replacement

92%

Entry door replacement

91%

Minor kitchen remodel Siding replacement Deck addition

83% 77% 75%

SOURCE: Remodeling magazine’s “2016 Cost vs. Value Report”

Plan ahead. When remodeling surges, contractors get harder to find. Even if you’re just mulling over a project, start talking to pros in your area early to understand prospective costs and timelines. Will also recommends planning projects for the winter months—December, January, and February—when demand ebbs slightly. That means you should make a move ASAP. Pick your projects. Prioritize work that gives the best payoff, Will suggests. A minor kitchen remodel, for instance, would earn back an estimated 83% of what you spend at resale, according to a Remodeling magazine analysis (see chart, left), compared with just 65% for a major reno.

To get the most bang for your buck, Will says, seek projects that boost curb appeal. Garage and entry door replacements, for example, were near the top of Remodeling’s list.

HOW DO YOU EXPECT YOUR FINANCES TO CHANGE IN 2017? Tell us at letters@moneymail.com.

THE

High Cost Coping OF

ANXIETY. DEPRESSION. EATING DISORDERS. PHOBIAS. EVERY YEAR TENS OF MILLIONS OF AMERICANS FACE A MENTAL-HEALTH CHALLENGE— OFTEN AT GREAT EXPENSE. HERE’S HOW TO EASE THE FINANCIAL STRAIN.

By ELIZABETH O’BRIEN a n d T AY L O R T E P P E R P hot og rap hs by C E L E S T E S LO M A N

m o n e y.c o m

72

DECEMBER 2016

C rist Ch stin inee Byyrd (left)) spen sp ennt ev everythi ever thing she haad to help her daug ugghter, Pepper Snnidder, rec Snid reecoverr from fr om m ano nore ore rexi xia ia.

or five years, christine byrd

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DECEMBER 2016

But if you’re facing this formidable challenge, you need help now. The story that follows offers advice on meeting every financial hurdle thrown your way, along with lessons from families who have been down this tough path.

CHALLENGE NO. 1

Finding in-network care can be tough Six in 10 adults with a psychological disorder have not received care in the previous 12 months, according to the Substance Abuse and Mental Health Services Administration, and cost is often to blame. A recent Kaiser Family Foundation survey found that the top reason for forgoing needed mental-health care was affordability (13% of respondents), followed by insurance not covering it (12%).

A key problem: Not enough practitioners take insurance.

A survey published in JAMA Psychiatry in 2013 found that only 55% of psychiatrists accepted private insurance, while 89% of other medical specialists did so. The problem is more acute in some regions: Only 49% of psychiatrists in the

WA R D R O B E B Y S A M A N T H A S WA D E ; H A I R A N D M A K E U P B Y N ATA L I E C A R D O N A

figured her teenage daughter was going through a phase when she became withdrawn from friends and family and brushed off meals at home. It was only when Pepper Snider turned 17 that she was diagnosed with anorexia, triggering five years of intensive treatment, including thriceweekly therapy, residential care, and hospital stays. The total of $55,000 she spent out of pocket has left Byrd, 56 and widowed, with no retirement savings and five-figure credit card debt that she’s slowly paying off. “It was a long journey,” says Byrd of her now-28-year-old daughter’s recovery. “But it was worth it to see her get back on track.”

Every year, nearly one in five American adults experiences anxiety, depression, or another mental, emotional, or behavioral disorder. Others struggle with substance abuse. For many, the problem can be a manageable condition, a backdrop to a job and family time. For a smaller group, a mental illness can have a profound effect on day-to-day life, making it hard to stay in school or go to work. But no matter where someone falls on that spectrum, a mental-health challenge can strike deeply at a family’s financial well-being.

Treating a condition like depression or anxiety can prove costly in a myriad of ways. Almost half of psychiatrists don’t take private insurance, raising the odds that you’ll have to go out of network for care and shoulder higher out-of-pocket expenses as a result. Prescription-drug bills can be an ongoing drag on your budget. Insurance claims seem to be denied at higher rates than those for medical care are.

Overall, patients bear 16% of the total costs of mentalhealth treatments, according to the Agency for Healthcare Research and Quality, the highest portion of any common illness studied, including high blood pressure and diabetes.

“This is an area where people have been bankrupted,” says Colleen L. Barry, professor at the Johns Hopkins Bloomberg School of Public Health. “The expenses associated with treatment can be very high, even catastrophic.”

It wasn’t supposed to be this way. Eight years ago Congress passed a law intended to put insurance coverage for mental health on par with medical coverage. Two years later the Affordable Care Act made mental-health and substance abuse coverage an essential benefit that every qualified plan must offer. Both initiatives have helped soften the financial blow. Still, true parity remains an unfinished promise, so much so that this year President Obama established a task force that has floated ways to improve the system.

THE HIGH COST OF COPING

“I want to create a space that helps women deal with loss.”

Ford’s hoped-for next act is a wellness business for women.

PATCHING TOGETHER A F FO R D A B L E C A R E

TAMEEKA FORD, 43 Brooklyn, N.Y.

Tameeka Ford can trace her bouts with anxiety back to her childhood.

Over time she learned to breath deeply, ask herself why she was mad or angry, and remain still when she felt an attack coming on.

She coped with her anxiety without professional help while she earned a master’s degree from the Columbia University School of Social Work. She did the same after she became the director of youth and community programs at a New York City nonprofit, overseeing 150 employees and a $4 million budget. “I grind hard,” Ford says.

anemia, that fund was quickly depleted. The thought of filing an outof-network claim while experiencing depression was overwhelming. To supplement the little therapy she could afford out of pocket, she relied on meditation, yoga, and faith and prayer.

Four months after going on leave, Ford felt the pressure to go back was too intense and resigned. She is now starting a wellness business for women, where she can share her story via events, workshops, and coaching. She held her first yoga and meditation class in October. “I’m optimistic,” she says.

Then last June, Ford found herself sitting at her desk unable to stop crying.

Ford and her husband had been trying to have children, and she had suffered a second miscarriage.“I am a pretty resilient woman,” says Ford.

“But I couldn’t function.”

Ford took a break from her job using the Family and Medical Leave Act, relying on short-term disability to cover some of her bills. But she couldn’t find a therapist who accepted her insurance and struggled to afford the $250-a-session payments.

She tapped a pretax health care reimbursement account, but after she was diagnosed with pernicious

Northeast take private insurance; in the South, it’s 43%. doctor, you must pay the bill, then submit it to your carrier.

The trend is similar, though less pronounced, with psycholoBut not only will the reimbursement rate probably be lower— gists. In a 2015 survey by the American Psychological Associasay, 60%, vs. 80% for in-network care—but the insurer will tion, a quarter said they bypassed insurance companies. base that on what it deems a “usual, customary, and reason“Many mental-health providers don’t want to work able” (UCR) price, not what your doctor charges. with insurance because of the paperwork demands With a typical plan, the UCR might be the 80th and low reimbursement rates and difficulties dealing percentile of fees in your market, according to with a large bureaucracy,” says Mary Gresham, an FairHealthConsumer.org. If the UCR is $175, but Atlanta psychologist who has opted out. She charges you live in an area where each visit is $250 and your $175 an hour, far above the $70 to $116 that she says plan covers 60%, you might get just $105 back.

The number of hours depressed workers she’d get back from major carriers.

This is what Tameeka Ford encountered when lose in productivity Of course, all doctors face paperwork headaches. her lifelong struggle with anxiety became unmanper week.

Why don’t more cardiologists, say, go insurance-free ageable after a miscarriage. When the 43-year-old SOURCE: “Cost of Lost too? Blame history. Although coverage for medical nonprofit administrator found a doctor, the practice Productive Work Time Among U.S. Workers With Depression,” conditions became a routine part of employer insurdid not accept insurance, leaving Ford to pay a $250 JAMA, June 2003 ance following World War II, behavioral health was fee per session. She might have been entitled to outoften excluded. “Mental-health care is the stepchild of-network coverage, but the process of applying was of our health care system,” says Katy Votava, president of too much to handle. “I just couldn’t cope with completing GoodCare.com, an insurance consultancy. Therapists who have lengthy forms, answering personal questions, sending and regrown used to filling their schedules with patients willing to sending documents,” she says. Over the past four months she pay full price upfront have little incentive to change now. has paid for therapy four times, to a tune of $1,000. But she That shifts the burden to you. With an out-of-network has also skipped another eight sessions because of the cost.

5.6

YOUR BEST MOVES Give in-network a shot. Start by asking for a referral from your primary-care physician, says Carolyn McClanahan, a Jacksonville financial planner and medical doctor: “A family doctor has developed good networks and will help you find a therapist who’s covered by your health insurance.” You can also search via online tools. The therapist directories at GoodTherapy.org and PsychologyToday.com include insurance acceptance, as well as credentials and fees.

Be free to roam. No in-network option? To avoid shouldering the entire bill, make sure your insurance plan will let you go out of network. In 2016 a third of workers with employer insurance had a choice of health maintenance organizations, which restrict doctor networks, according to the Kaiser Family Foundation. A full 60% of all plans sold at HealthCare.gov for 2016 offered no standard out-of-network coverage, according to HealthPocket, a site that compares and ranks plans.

Preview your price. To get a sense of what you might pay out of network, go to FairHealthConsumer.org, where you’ll find an index of charges for a therapy session near you (use code 90834 to search), plus an estimated charge based on a lower UCR and your plan’s reimbursement rate.

Pinpoint the right care. Zeroing in on a therapeutic regime that matches your needs can save you in the long term, since doctor hopping and medication swaps can prolong your care.

Plus, you may not need the costliest specialists. For prescrip-

tion drugs, you must see a psychiatrist. But for psychotherapy, a licensed clinical social worker with a master’s degree can handle counseling sessions for less. If a clinical psychologist is out of reach, try a psychiatric or mental-health nurse, says Purvi Bhatt, senior manager at ECG Management Consultants, a firm that advises medical providers.

The national average for a psychologist is $163 a session, vs. $136 for a clinical social worker, according to FAIR Health, a nonprofit health care information site. You can research treatment options for your particular mental-health condition at nami.org (click on “Learn More”).

Negotiate upfront. Many doctors offer a sliding scale based on your income, so ask about that at the outset. Atlanta clinical social worker Rikki Clark McCoy charges $100 for a regular office visit but gives discounts tied to earnings—25% off, for example, if you earn between $50,000 to $55,000.

CHALLENGE NO. 2

Insurers still put up roadblocks The goal of the 2008 parity law was to prevent group health plans from treating mental-health claims differently than purely medical claims. And it has largely worked in leveling the playing field, according to a report this fall by the White House’s Mental Health and Substance Use Disorder Parity Task Force. For the most part, you won’t face higher deduct-

Mental Health in America A SNAPSHOT Nearly one in five American adults has a diagnosable mental, emotional, or behavioral problem.

For most, though, the condition is not disabling.

U.S. ADULTS WITH A MENTAL ILLNESS PER YEAR

9.8 million

33.7 million

With serious mental illness

With other mental disorders

43.6 million total

Some conditions are far more common than others.

Certain disorders hit young people even harder.

% OF U.S. ADULT POPULATION WHO EXPERIENCE THE FOLLOWING IN A GIVEN YEAR

% OF COLLEGE STUDENTS WITH ...

14.1% Men

U.S. ADULTS WITH ANY MENTAL DISORDER

21.8% Women

15.8% 13.1%

6.6%

Major depression

7.4% Post-traumatic stress Generalized anxiety disorder

And women are more likely to be affected.

6.8%

Social phobia

Panic disorder Bipolar disorder

3.5% 3.1%

2.7% 2.6%

Anxiety Depression

Panic attacks

NOTES: Serious mental illness is a disorder with serious functional impairment interfering with major life activities; students diagnosed or treated for the condition in past 12 months. SOURCES: Substance Abuse and Mental Health Services Administration, 2014 National Survey on Drug Use and Health; 2015 National College Health Assessment survey

THE HIGH COST OF COPING

from your plan’s benefit description, suggests the Kennedy Forum, a nonprofit working on mentalhealth parity. (Find it on your plan’s online members portal.) If you Portion of insured spoke to your insurer’s customer workers and family service in advance or during your members with mental appeal, include a record of any illnesses who spend over $1,000 a year on conversations that bolster your prescription drugs case, says Amir Mostafaie, direcvs. 2.8% overall. tor of quality and training at online SOURCE: Kaiser Family Foundation insurance broker eHealth.

It helps if a doctor weighs in on your behalf, Mostafaie says, and you could include medical studies supporting the effectiveness of the treatment you seek, if you’ve done that kind of research. You can find a sample appeal letter on page 30 of the National Council of Behavioral Health online toolkit at money.us/appeals.

Bring in an advocate … You don’t have to go it alone. You can hire a pro to challenge claims on your behalf. Medical Billing Advocates of America, a national firm, charges $125 an hour or 25% of the savings recouped. It accepts only cases in which the patient responsibility is greater than $2,500.

YOUR BEST MOVES Try, try again. Your first step when an insurer denies your … or be your own. When her insurer cut her off midway claim is to file an appeal. Most health plans allow for at least through intensive outpatient treatment for anorexia, 28-yearone. Read your claims denial for instructions—often you have old New York City communications professional Joanna Merto act within a certain window, such as two to six months. curi tweeted at her insurer. While she got a standard “I’m Spell out the treatment you want covered using language sorry to hear that” response via Twitter, she knew the company had seen them, since reps referenced the tweets when she called to follow up.

Mercuri didn’t stop there: She found the name of her insurer’s medical director on a news release on the carrier’s website, THE FINANCIAL CHALLENGES correctly figured out his email address, and emailed him directly, copying the New York attorney general’s office. Her stratFinding Other medical Psychiatrists taking private in-network care doctors egy worked, and her insurer paid for her who take it insurance is tougher. to finish her treatment. “You have a lot more power than you realize,” she says.

“Be the gadfly.”

Escalate your complaint. Government Patients bear a higher portion And insurers are more likely agencies can also help with your appeal. of the expenses. to push back.

Reach out to your state insurance departPATIENTS REPORTING CLAIMS DENIED % OF TREATMENT COSTS PAID BY PATIENT ment and the U.S. Department of Labor BASED ON MEDICAL NECESSITY (see the “Ask EBSA” tab on dol.gov/ebsa Mental health 15.9% for frequently asked questions or call 866Hypertension 15.5% 29% 14% 444-3272 to speak to a benefits adviser).

Diabetes Another resource is a new website from 13.8% the U.S. Department of Health and Human Mental-health care Medical care 11.4% Asthma and COPD Services that helps patients who need ibles for mental-health services or lower treatment limits.

Yet enforcement problems persist that are harder to measure, the report found. For example, there are signs that insurers are more likely to demand prior authorization for mental health and substance abuse. The task force raised concerns that plans require more step therapy for mental-health services—meaning you may have to “fail first” at a lower-cost treatment before seeking a more comprehensive and costly alternative—even if the cheaper path is less effective for some.

And there’s evidence that insurers apply so-called utilization reviews more rigorously—that is, assessing whether the treatment is medically necessary before okaying coverage.

In a 2015 survey by the National Alliance on Mental Illness, 29% of respondents reported a mental-health claim being rejected based on medical necessity vs. only 14% who were turned down for a medical claim on those grounds. Last year New York’s attorney general fined insurer Beacon Health Options (formerly ValueOptions) $900,000 for violating the parity law by issuing denials twice as often for behavioral health claims as it did for other medical or surgical claims, and four times as often for addiction recovery.

55%

5.4%

Heart conditions

6.2 %

89%

SOURCES: JAMA Psychiatry, 2013; Agency for Healthcare

Research and Quality; “The Long Road Ahead,” National Alliance on Mental Illness, 2015

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assistance with mental-health or addiction coverage: Find it at money.us/hhshelp.

CHALLENGE NO. 3

Drugs are an ongoing high expense With depression, anorexia, bipolar disorder, and many other psychological conditions, your treatment is increasingly likely to include prescription drugs. The percentage of Americans taking antidepressants, for example, jumped from 6.8% in 1999 to 13% in 2012, according to a study published in JAMA last year, in part because of new drugs that have come onto the market.

Overall, Americans with large-employer health insurance are spending less out of pocket on prescription drugs than in previous years, a study from Kaiser finds. But the number of workers and family members who spend more than $1,000 a year on meds is growing fast—from 1% of all enrollees in 2004 to 3% a decade later. Of that group, 39% have been diagnosed with a mental illness. “Mental health is one of the diseases that can lead to exceptionally high drug costs,” says Kaiser associate director Cynthia Cox.

YOUR BEST MOVES

Inspired by Snider’s illness, mother and daughter are now preparing together for careers in counseling.

30

T H I S PA G E A N D F I R ST S P R E A D : WA R D R O B E A N D G R O O M I N G B Y G LY N N E D AV I E S

Study up on your meds. Your drug plan is more complicated than ever. More than 80% divide the medications they cover—called a formulary—into three or more tiers, each with a tice leader, pharmacy, at Willis Towers Watson. different co-pay or coinsurance rate. Talk to your Keep in mind that antidepressants generally doctor about where your prescriptions fall in take weeks or months to become effective, and your formulary. you and your doctor may have to experiment to In the first tier, where co-pays average $11, find the right dosage. But if you’re not seeing any MILLION you’ll mainly find generics. Higher up the ladder, results after six to eight weeks or the side effects Americans who your costs rise too. The typical co-pay for a are intolerable, ask your doctor to step you up will have an tier three drug is $57, twice what you would have faster, says Rosier. Once you’re on a brand-name eating disorder in their lifetime. paid 15 years ago, according to Kaiser. Coinsurdrug, you can save up to a third on co-pays by SOURCE: National Eating ance rates tell a similar story: 17% for tier one and ordering via the mail.

Disorders Association 37% for tier three. Given that, it’s worth trying a Shavonne Carpenter, 31, has navigated the tier-one generic before a brand name. According steps in her quest for the right medication for her to the drug-comparison site GoodRx.com, you’ll pay no more schizoaffective disorder. The head life-coach trainer at than $8 a month for a prescription of the antidepressant Mental Health America, an Alexandria, Va., advocacy orParoxetine, compared with $216 for Viibryd. ganization, Carpenter ended up in the hospital when a geSpeed up your step-up. Sometimes you’ll need the more neric she was on wasn’t working. “You have to fail first expensive brand-name drug, but typically your insurer may before you get the help you need,” she says. She now pays require you to take a generic for months before okaying an about $200 a month for brand-name medications but feels upgrade. Step therapy for prescriptions has become more she has little choice if she wants to feel her best.

Stick with your regimen. Only 31% of those on anticommon, says Nadina Rosier, health and group benefits prac-

THE HIGH COST OF COPING

MOVING FORWARD—WITH FINANCIAL BATTLE SCARS

When Pepper Snider stopped hanging out with friends and spent her time brooding in her room, Christine Byrd thought her daughter’s moodiness was normal for a teen.

The reality was much more complicated—and costly: Snider was diagnosed with anorexia in 2006 at age 17, five years after her symptoms began.

“They’re very good at hiding it,” says Byrd.

Byrd’s health insurance through her job as an

“Never give up the fight,” says Byrd.

“Recovery is possible.”

accountant covered 12 therapy visits a year.

Snider needed 12 sessions a month. The first year’s out-of-pocket tab came to about $27,000.

“We spent all of her college money,” Byrd says. And Snider still wasn’t well.

In a cruel twist of fate, during this time Byrd’s husband was diagnosed with colon cancer, an illness that ultimately proved fatal. Watching her father struggle, Snider says she realized, “I had a choice to get better.”

After years of cycling in and out of treatment programs and college courses, Snider finally began to recover. One financial break: By joining a research study through

CHRISTINE BYRD, 56, AND PEPPER SNIDER, 28 Kirkland, Wash.

Columbia University, she got six weeks of free care.

Byrd is still paying off the roughly $50,000 in credit card debt she incurred for treatment and college costs. Unable to save for years, she has no retirement nest egg.

But the return on her investment is immeasurable: Her daughter survived a disease with one of the highest mortality rates of any psychiatric disorder.

Now fully recovered, Snider works as a patient assistant at the residential center where she once stayed. And Byrd has found a new passion, studying alongside her daughter as each pursues a master’s degree in counseling.

depressants fully adhere to their treatment, according to a 2009 study in the Journal of Affective Disorders. Half took their drugs on and off; the rest skipped them altogether. Not following doctors’ orders can be more common with behavioral health disorders than with other chronic illnesses, says Rosier. Why? The side effects can be difficult to bear: Nearly two in three people who take antidepressants experience at least one, from dry mouth to weight gain. But taking your pills decreases your odds of experiencing a relapse, a 2014 study published in the Journal of Clinical Psychology found, which means more care, and more costs, down the line.

CHALLENGE NO. 4

Intensive care can be the real budget buster As with your physical health, early intervention for a mentalhealth disorder is crucial, both clinically and financially.

Caught early, there’s a greater chance a condition can be man-

aged with peer support, counseling, and medications, says Paul Gionfriddo, president and CEO of Mental Health America.

“Don’t let it become a crisis,” he says.

Yet with any mental-health condition, sometimes low-intervention approaches aren’t enough. With an acute mentalhealth episode or serious addiction, treatment typically involves an inpatient hospital stay to stabilize the patient, followed by residential treatment, partial hospitalization (daily stays but not overnight), or intensive outpatient therapy.

Prices for residential facilities differ widely, but a typical range is $20,000 to $40,000 a month, says Katalin Goencz, an insurance consultant and patientbilling advocate in Stamford, Conn. The most generous insurance policies don’t place limits on treatment, but many impose some sort of cap, says Goencz. The standard that insurers generally use to determine if inpatient care is required is whether the person is a danger to himself or others, says Denise R. Black, a former medical necessity reviewer, and a licensed clinical social worker and Ph.D. student at the University of Tennessee.

YOUR BEST MOVES

Know what you’re in for. Some plans will pay only for the therapeutic portion of a residential stay, leaving you responsible for room and board. Say a facility charges $30,000 a month; roughly $8,000 of that might be attributed to therapy, Goencz says. If the facility is in network, that $8,000 might be reimbursed at 80% or 90% after the deductible and any other restrictions; if it’s out of network, it might be reimbursed at 60% or 70%, with a higher out-of-network deductible and further limits. By knowing the ins and outs of your policy, you can at least take a stab at budgeting in advance.

Really try to stay in network. Most health plans put a ceiling on your annual outlays. Under Obamacare, the out-ofpocket limit is $7,150 for individual coverage in 2017 and $14,300 for family coverage. A big caveat: These ceilings apply to covered in-network services. If you go out of network or use an uncovered service, your liability might be unlimited.

Go to school. As an adult, you’ll typically rely on insurance and savings to fund your treatment. But for children ages 3 to 21 with a serious condition such as ADHD or bipolar disor-

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der, there’s another potential source: your public school district. The Individuals With Disabilities Education Act entitles every child up to age 21 with a qualifying disability to a free, appropriate public education tailored to his or her needs.

If you feel your local district isn’t providing your child with such an education, you can petition for private school funding.

While the process varies by district, authorities will weigh the following considerations, says Tracey Spencer Walsh, a special-education attorney in Manhattan: whether the public school’s plan is inappropriate for the child; whether the private school is appropriate and the least restrictive option available; and whether the family has done everything it can to cooperate with the evaluation process.

It’s not an easy test to pass. With most members of the National Association of Therapeutic Schools and Programs, 10% or fewer students are funded through their school districts, a spokeswoman says. And while parents always want the best for their children, under courts’ interpretation of the law, Walsh says, children are not entitled to a free “Cadillac education”; they are entitled to a “serviceable Chevrolet.”

Sapphira Murphy didn’t find that serviceable ride at her school. Diagnosed with bipolar disorder at age 4, Sapphira, of Easton, Mass., trashed her principal’s office in second grade and, afraid of hurting others, then hid in a closet, says her mom, Linette. The school district now pays the $500-a-day tuition at a residential treatment program 30 minutes from home. To make her case, Linette hired an education advocate, at $100 per meeting. You can search for professional help at the Council of Parent Attorneys and Advocates site, copaa.org, where you’ll also find advice from families in the trenches.

“There are not enough hours in the day for me to do everything I want to do.”

CHALLENGE NO. 5

The high costs can derail your finances Christine Byrd was stunned when she got a quote of $75,000 a month for a residential facility to treat her daughter’s anorexia. An administrator told her that most families took out a second mortgage. Treatment from a free research study sparked her daughter’s recovery—but cross-country airfare still added up. Transportation costs mount quickly for eating disorder patients since few facilities are dedicated to the disease. “Cost and geography are the two big barriers,” says Claire Mysko, CEO of the National Eating Disorders Association.

Even with a less acute disorder, out-of-pocket bills can be a severe setback to your financial plans. What’s more, the cost of mental illness doesn’t stop at the doctor’s office. Research has linked depression and other psychological conditions to lower lifetime earnings and a drop in productivity.

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YOUR BEST MOVES For big sums, borrow smart. Advisers generally frown on parents raiding retirement accounts to cover college tuition.

Yet using a 401(k) to pay for a child’s addiction treatment may be a different story. “When it’s life and death, the rules of thumb need to be reconsidered,” says Rand Spero, president of Street Smart Financial, a financial planning firm in Lexington, Mass. A home-equity line of credit is another option. Typically you can borrow up to 85% of the appraised value of your home minus the amount you owe on your first mortgage.

Protect your income. Under the Family and Medical Leave Act, employees at companies with 50 or more workers are entitled to up to 12 weeks of unpaid leave to tend to themselves or a family member. If you only need to change your routine, you also have the law on your side. The Americans With Disabilities Act requires companies with 15 or more employees to provide “reasonable accommodation” to help you do your job—say, adaptable start times or a quieter desk.

THE HIGH COST OF COPING

GRATEFUL FOR GENEROUS SUPPORT

After a major bout with depression, Brodsky is relishing his retirement in rural New Mexico.

Tap the tax code. Draw from pretax medical spending accounts to pay for care. You can put as much as $2,600 in a flexible spending account for 2017, or, with a high-deductible health plan, open a health savings account (2017 max: $3,400 for individuals and $6,750 for families). Those low caps will only get you so far, but any help is worth it.

Pick up where you left off. If you stopped 401(k) contributions during treatment, start them up again as soon as you can. If you racked up credit card debt, a nonprofit credit counseling company can help you get it under control. For a small fee, these companies work with your lenders to get the interest rates on your debt reduced. Find one through the National Foundation for Credit Counseling at nfcc.org.

With no savings, Byrd knows retirement is far off. Her father is still working at age 88. If she inherits his career longevity, she says, “I’ve got at least 25 years, and I want to make a difference.” Her hope: Open a small treatment facility with Snider. They’d call it Pepper’s Place. “That’s our dream.”

Fifteen years ago, Stan Brodsky was the information technology manager for Saint-Gobain Coated Abrasives, a manufacturer where he had worked for 21 years. On what was looking like an otherwise normal workday, Brodsky was getting into the shower when he stopped in his tracks.“I just couldn’t do it,” he recalls.“I had to get back in bed.”

Brodsky stayed on the couch for weeks, watching reruns of The Andy Griffith Show. “It was a time of life that was just terrible,” he says. But while his condition was dire, the support that followed was what anyone in his place would hope for.

After his doctor referred him to a psychiatrist and a counselor (only cost: a $20 co-pay), Brodsky was diagnosed with major depressive disorder and went on disability. Seven months later, he returned to work, met with stares and an awkward “You’re back.” But he picked up

STAN BRODSKY, 71 Hillsboro, N.M.

where he left off, enjoying “happiness in the job,” he recalls, until retirement five years later.

Brodsky’s experience was by no means easy.

He spent years in therapy and still takes a trio of medications for depression, anxiety, and obsessive-compulsive disorder, all covered by his private retiree drug plan. But having the good fortune of a model employer, ample insurance, and a supportive family let Brodsky recover without taking a financial hit.

Today, Brodsky walks dogs at an animal shelter, pitches in at the library, enjoys the remoteness of his New Mexican 40 acres, and sips brandy on his porch at night with his wife of 36 years, who saw him through the worst of his ailment. “Depression was like any other physical ailment, except it affected my mind and emotions,” says Brodsky.

“There is nothing to be ashamed of.”

MORE ONLINE Meet additional families coping with high treatment costs, watch video profiles, learn about the pros and cons of telemedicine for therapy, get tips on keeping your career on track, see a list of helpful resources, and more at money.com/mental health.

HOW HAVE YOU MANAGED THE COST OF MENTAL HEALTH? Tell us at letters @moneymail.com.

AT YEAR’S END, A SLEW OF CHARITIES DEVOTED TO WORTHY CAUSES REACH OUT FOR YOUR DONATION. FOLLOW THESE STEPS TO MAXIMIZE THE POSITIVE IMPACT OF THE MONEY YOU HAND OUT—AND MINIMIZE YOUR TAX BILL ALONG THE WAY.

KERRI ANNE RENZULLI I l l u s t ra t i o n b y O T T O G R A P H I C S By

This holiday season, you’re likely to open your wallet or purse not only for your loved ones but also for charities and causes you’re passionate about. December is Americans’ peak month for funding nonprofits and their activities: education, the arts, social welfare, disaster relief, and more. And we’ve never been more generous. Individuals’ contributions hit a record $265 billion in 2015, according to the annual Giving USA report. This year Americans are expected to donate even more, as has happened every year since 2009.

You want your generosity to pay off, of course. “It is one of the best feelings—to know with confidence that your giving will make a difference,” says Katherina Rosqueta, executive director of the University of Pennsylvania’s Center for High Impact Philanthropy. To help you gain that confidence, MONEY has asked experts how to make your giving practices more effective in three key areas: choosing charities, making gifts, and reaping the tax benefits you deserve. Turn the page to read their wise advice. m o n e y. c o m

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DECEMBER 2016

Choose Right the first challenge in maximizing the impact of your charitable donation? Finding an organization that not only operates in the area you’re passionate about but also will use your money well. “People don’t always distinguish between a great cause and a great nonprofit,” says Rosqueta. Follow these steps to make sure you do.

Look Beyond the Name Donors often pick a charity based on its name alone, says Sandra Miniutti of the nonprofit information site Charity Navigator. The organization’s mission, however, might not be what you think it is. If you’re concerned about the treatment of farm animals, for example, you might decide to give to Animal Friends or the Animal Welfare Institute.

But only the Animal Welfare Institute, based in Washington, D.C., is concerned with farm animals’ living conditions; Pittsburgh’s Animal Friends focuses on house pets with programs that include spaying and neutering.

THE BETTER WAY

Visit the organization’s website and check its mission statement, along with any reports about its programs.

Another great way to learn about a charity’s activities is to volunteer.

You’ll witness firsthand how the group approaches the cause you care about.

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Judge by Results How do you decide if a charity carries out its mission effectively? People often judge by a number or two, says Rosqueta, like CEO pay or money spent on fundraising. Financial data, along with other information about how a charity is run—say, does it have an independent board?—can hint at whether it would be a good steward of your money. But information about actual impact is where you should start.

THE BETTER WAY

You have three major paths for getting clues to a nonprofit’s effectiveness, based on what you can learn online about that particular charity.

Listen to deep divers. Certain groups study nonprofits in depth to find ones achieving the best results.

Your easiest option is to give to nonprofits that get their seal of approval.

“People don’t always distinguish between a great cause and a great nonprofit.”

—KATHERINA ROSQUETA, CENTER FOR HIGH IMPACT PHILANTHROPY

GiveWell.org, for instance, puts out an annual list of charities it judges both effective and in need of funding.

Its top pick now is the Against Malaria Foundation, which distributes bed nets to thwart disease-carrying mosquitoes. GivingWhatWeCan.org and TheLifeYouCanSave.org each spotlight charities trying to eliminate poverty in the developing world.

In addition, the Center for High Impact Philanthropy (impact.upenn.edu) publishes an annual guide to causes it

believes will do the most social good, complete with examples of individual nonprofits in those areas that employ donations effectively. Among organizations fighting urban blight, for example, the guide spotlights the Pennsylvania Horticultural Society, which beautifies vacant lots in Philadelphia.

These lists have their limitations: Because of the effort required to evaluate charities in detail, they end up recommending only a handful. (GiveWell .org, for one, has just four top picks, all of which operate either primarily or wholly in sub-Saharan Africa.)

Check directories. If those resources don’t cover causes you hold dear, you can consult two major online directories of nonprofits, Charity Navigator and CharityWatch. Each rates charities based on measures of their financial health, transparency, and accountability. While not directly measuring effectiveness, these ratings are designed to indicate how professionally an organization operates. And presumably a well-run organization has a better chance of having an impact than one that’s a mess.

Charity Navigator assesses nearly 8,000 nonprofits, each at least seven years old and with more than $1 million in annual revenue. Ratings on the site (charitynavigator.org) range from zero to four stars.

The Children’s Aid Society, for example, has received fourstar ratings for 16 straight years, but the similar-sounding Children’s Charity Fund Inc. has gotten zero.

CharityWatch (charitywatch.org), which rates 600 charities, costs $50 for an annual membership. But you can see its list of over 100 top-rated charities for free.

You be the judge. If a charity isn’t rated by these other sites—very likely if it’s small or locally focused—you can do a little investigative work yourself via the GuideStar website

Following the Money

GIVE YOUR BEST WHERE CHARITABLE DONATIONS GO

Americans spread their wealth around to multiple charities and causes.

HOW MANY CHARITIES PEOPLE SUPPORT IN A YEAR

15%

12%

Education

Human services

32%

11%

Religion

Foundations

60% 1 to 3 charities

28%

10%

2%

4 to 9 charities

10 or more

No charities

(guidestar.org). On the free site, which lists 1.8 million U.S. nonprofits and their financial records, you can look up a specific charity. You can also search for potential recipients by keyword— say, “animal”—narrowing your query using factors such as location and size.

Once you’ve reached the individual listing of a charity that looks promising, you can learn more about it from its annual IRS return, which you can reach by clicking on the green “Forms 990” button on the right-hand side of the screen. Don’t worry: You don’t have to be an accountant to read it.

First, look at how much the nonprofit spends on administrative costs (including fundraising) vs. the programs and services it provides. Line 4e on page two of the 990 details its annual program spending; divide that by the number on line 18 on page one—the nonprofit’s total expenses for the year.

The result is the share of spending that goes to services. Be wary of charities devoting less than 75% of funds to programs, says Miniutti—and also of ones claiming to spend 100%. If a charity you’ve chosen fails this benchmark, look up past years’ reports, says Rick Cohen of the National Council of Nonprofits, since an occasional expenditure such as a renovation might have skewed its ratio in a particular year.

10%

5%

Other

Arts and culture

8%

7%

Health

Public-society benefit

NOTES: Individuals have incomes of $50,000 or more. Cause

figures include gifts from people, foundations, companies, and estates. SOURCES: RBC Wealth Management-U.S., Giving USA 2016

And charities may have high overhead expenses for legitimate reasons, such as the cost of starting up, says Timothy Seiler, a professor of philanthropic studies at the Indiana University Lilly Family School of Philanthropy.

As for CEO compensation—also listed in the 990—compare it to that of heads of similar charities. Also, look for a board of directors with at least five independent voting members, neither related or reporting to the CEO. Line 4 on page one of the 990 will give you a count.

Hang Up Early and Often Your phone rings with a fundraising pitch for a noble cause, perhaps in response to a disaster like Hurricane Matthew or the mass shooting in Orlando. So you give. But that unsolicited phone call—or email or message on social media—could be from a scam artist. Even if the fundraiser is legitimate, only a fraction of what you give might reach people in need.

THE BETTER WAY

Feel the urge to give? Do it directly through that organization’s website or mailing address. Avoid giving through a third party or via links sent in emails; even if the charity is real, the

fundraiser may not actually represent it. And even legitimate fundraising costs can be too high. Daniel Borochoff, who founded CharityWatch in 1992, says the data he has seen indicates that, on average, telemarketers’ fees eat up two-thirds of the money they raise.

There’s an even better strategy, says Miniutti. “Don’t wait to be approached,” she says. “If you want to donate, pick a couple charities you care about and make a commitment to give to those groups this year. This way you avoid giving in that knee-jerkreaction way.”

Give Right once you’ve figured out the cause or causes important to you, the next challenge is making your donations in a way that maximizes their impact. So do you give to individuals or to an organization? Do you spread out your gifts or bestow them all on one lucky recipient? Strange as it may sound, says Seiler, “it is hard to give money away prudently.”

Keep Your Head in the Crowd One in five Americans have contributed to personal appeals on websites like GoFundMe and CrowdRise, according to a 2016 Pew Research Center study; GoFundMe says it has raised more than $3 billion since 2010.

Nonprofits can raise money through these sites, and so can individuals in need—for example, some-

m o n e y. c o m

85

one who is struggling with medical bills. Twenty-eight percent of crowdfunders have given to someone they didn’t know, Pew found. Such unfamiliarity poses a risk, says Miniutti. “That person has no legal obligation to use the funds raised for the stated purpose,” she says. When 430 fundraisers on GoFundMe raised money for Orlando victims—more than four for each of the 49 killed and 53 wounded— knowing whom to trust wasn’t easy.

THE BETTER WAY

Donate only to campaigns run by people you know personally, advises Miniutti.

And because crowdfunding sites typically charge a 5% fee on each donation, avoid giving to a person crowdfunding for a charity, no matter how much you trust the person or how good the cause.

Instead, dodge the crowdfunding fee by giving to the nonprofit directly.

How to Raise Charitable Children Follow these three steps to help your kids understand that the holiday season is about more than the presents they receive.

GIVE OUT LOUD “We often give silently by mailing a check or clicking a button online, so children don’t know our values and the causes we are supporting,” says Carol Weisman, author of the

book Raising Charitable Children. Make your actions obvious each time you make a gift by telling your kids about the nonprofits you contribute to and the impact those funds will have. A study by the Indiana University Lilly

such as donations for disaster relief.

The exception? When you’re just starting to support a cause. Giving smaller amounts to several organiza-

Play Favorites In the hopes of spreading love, people give small amounts to lots of charities. Small gifts, though, have relatively high administrative costs. The $3 it might cost a charity to handle a donation, for example, is only 3% of a $100 donation— but 30% of a $10 gift.

“Concentrate your giving, rather than diversifying like with the stock market.”

Family School of Philanthropy found that young children whose parents talk with them about donating are 20% more likely to give to charity than kids who do not have such conversations with their parents.

DELEGATE GENEROSITY Set aside a portion of your charitable dollars for the kids to give. Allow them to suggest a cause or pick the

town—can hamstring a nonprofit, says Rosqueta. “A charity then has to spend more time and resources handling your donation and ensuring specifications are met,” she says, “diluting your gift’s potential.”

Donating goods can also make problems. After the 2004 Indian Ocean tsunami, says Rosqueta, donations of unneeded clothing—winter coats, for example—clogged ports, hampering delivery of urgently needed supplies.

—SANDRA MINIUTTI, CHARITY NAVIGATOR THE BETTER WAY

THE BETTER WAY

“Concentrate your giving, rather than diversifying like with the stock market,” says Miniutti. Bolder Giving, a nonprofit aiming to encourage people to make larger charitable donations, recommends a 50/30/20 rule: Focus half your giving on one charity or a select few that are most meaningful to you. Mark 30% for gifts to local nonprofits, such as your house of worship or the school PTA. Use the remaining 20% for “impulse” gifts,

86

m o n e y. c o m

tions focused on that issue is a smart way to learn about them and see which you prefer, says Rosqueta.

Don’t Be a Burden People often make donations based on their mistaken beliefs about what charities need, Rosqueta says. Gifts that aren’t on an organization’s wish list or that come with restrictions can hurt as much as help, she says.

Directives with donations—for example, that they be spent in a certain

Avoid adding caveats to your cash. But if you really want to, work with the organization to find a way that allows the nonprofit to still achieve its goals, says Cohen. Be realistic: This approach makes sense only if your gift would have a major impact on the charity’s budget.

Before you give goods, check on an organization’s website to see what it actually needs. For example, Dress for Success, an organization dedicated to women’s economic empowerment, accepts pantsuits and scarves, among other clothing donations, but not jeans or used panty hose.

charities they wish to support. To help younger kids figure out how to allocate funds among their chosen charities, give them an equivalent amount in Monopoly money as a stand-in, recommends Weisman. Up the ante by encouraging them to give their own money with a matching program. “For every dollar—or quarter— your little one socks away for the local soup kitchen or disaster relief organization, you

kick in one of your own,” suggests Beth Kobliner, author of Make Your Kid a Money Genius. “It’s amazing what an incentive this is.”

GET THEIR HANDS DIRTY To get your children hooked on giving their time as well as money, find volunteer opportunities or charitable projects that play to your children’s interests and talents, says Weisman. The

Get Taxes Right you can give to others and still get a tax benefit. But to fully enjoy Uncle Sam’s generosity, you’ll have to follow his rules. The IRS doesn’t reward all donations to nonprofits, for example, and a noncash gift may be your best bet for a sizable deduction.

Go Cashless People tend to give money via cash, check, or credit card. But sharing your wealth differently can pay off.

THE BETTER WAY

Score a bigger break by donating appreciated assets or by redirecting to

more you let them direct the process, the more they’ll appreciate the experience. For instance, if your child loves to bike, have him or her help maintain bike trails by planning a trash pickup day.

Because volunteer opportunities for smaller children can be scarce, says Weisman, consider signing your kid up for a serviceoriented group like the Boy Scouts, Girl Scouts, or Boys & Girls Clubs of America.

charity your annual required minimum distributions (RMDs) from an IRA. Give stock. The market has more than tripled in value since its 2009 lows. Avoid capital gains taxes on appreciated assets by passing ownership directly from your brokerage account to a charity, advises CPA Henry Grzes of the American Institute of Certified Public Accountants. You’ll benefit even more if you itemize, since you’ll be able to deduct the stock’s value. If, on the other hand, you sell the assets first and then donate the proceeds, you’ll instead owe taxes on the gains.

Tap your IRA. Over age 70½? Have your IRA administrator give your annual RMD to a charity. That will reduce your adjusted gross income, possibly lowering your tax bracket, says Grzes. This move is clearly a winner if you don’t itemize; if you do, the math is murkier.

In each case, check with the charity before donating to ensure your gift is handled correctly.

Mind Your 3s and 4s People treat all nonprofits equally, but the IRS doesn’t. For your donation to

GIVE YOUR BEST

be recognized, it must be made to what’s known as a 501(c)(3) nonprofit.

A nonprofit known as a 501(c)(4), which can devote itself to lobbying on behalf of its mission, doesn’t count; nor do charities outside the U.S. THE BETTER WAY

See whether a nonprofit is a qualified charity by using the IRS database at money.us/irs-charity. For foreign donations, Grzes suggests looking for nonprofits titled “friends of,” which are typically qualified charities set up to allow U.S. donors full tax benefits. One such charity: Friends of Women’s World Banking, which collects money for a financial empowerment charity based in the Netherlands.

Give, Don’t Receive It’s fun to get those thank-you gifts charities give in return for donations, but there’s a hidden cost. The amount of your donation that you can claim on your taxes is reduced by the fair market value of any gift you receive in return, says Grzes.

THE BETTER WAY

Ask yourself: Do I really need that tote bag? Forgo any such gifts or increase your contribution to cover their cost.

You then can take the deduction you want, and the charity will receive the amount you originally intended to hand over. If you give cash or property totaling $250 or more, you must have a bank record or a written acknowledgment from the recipient showing the amount contributed and whether the organization provided any goods or services in return.

more online

Read more stories about charitable giving at money.us/charity.

HOW DO YOU MAX OUT YOUR CHARITABLE GIVING? Tell us at kerri.renzulli@moneymail.com.

THE NUMBERS

STOCKS & FUNDS BIGGEST MUTUAL FUNDS BY CATEGORY CATEGORY

TOTAL RETURN ONE YEAR

THREE YEARS1

EXPENSES (AS % OF ASSETS)

LARGE-CAP STOCKS

Stocks Look Past Decent Earnings DESPITE THE BEST quarter for corporate profit growth since the end of 2014, the broad market was still down in the four weeks ended Oct. 26, as investors worried about external risks. Those include concerns over oil prices and the uncertainty surrounding the U.S. presidential elections.

S&P 500 RATIOS P/E

2.4%

22.0 2.3

21.7 ONEYEAR RANGE

20.0

2.2

2.16

2.1

TOTAL RETURN ONE MONTH

INDEX

S&P 500 Nasdaq2 Russell 2000 Morgan Stanley EAFE Dow Jones industrial average Barclays U.S .aggregate bond index

ONE YEAR

–0 –0.2% ––0.1 – 8 –2.8 –1 5 –1.5 0 0.7 – –0.6

5.6% 4.3 5.5 –3.3 6.1 4.1

9.0% 10.0 3.9 –1.3 8.0 3.5

4.0 3.9 3 9 1.9 9 0.2 0 – 3 –0.3 –0.6 –0 – 8 –0.8 ––4.4 .

– –4.6 –8 5 –8.5

7.9 3.8 11.2 0.0 6.8 6.7 6.8 13.4 0.7 9.7

–3.9 7.5 15.9 9.4 10.7 7.8 3.9 11.4 11.0 4.5

NOTES AND SOURCES: Stock index data as of Oct. 26 from Lipper, New York; 877-955-4773.

Sector returns from Bloomberg. Bond index data from Barclays. Monthly S&P 500 ratios are from Standard & Poor’s. P/E ratios are based on previous four quarters of operating earnings.

Biggest funds ranked by total net assets. 1Annualized. 2Price change only.

88

m o n e y. c o m

0.08 0.79 0.09 0.07 0.21

5.6 7.2 4.6 8.6 3.5

5.2 7.0 3.4 3.8 3.0

0.08 0.08 0.35 0.92 0.08

5.3 4.2 4.0 4.1 5.1

6.8 6.5 6.7 5.1 6.4

0.58 0.56 0.56 0.34 0.08

Vanguard Total International Stock Index (VGTSX) Harbor International (HAINX) American Funds EuroPacific Growth (AEPGX) Vanguard International Growth Fund (VWILX) T. Rowe Price International Stock Fund (PRITX)

0.2 –3.2 –0.5 3.8 1.2

–1.0 –2.8 1.0 1.0 1.2

0.19 0.76 0.83 0.34 0.83

5.2 7.9 12.3 6.9 6.9

–0.5 –0.8 1.5 0.1 –2.0

1.04 0.15 1.24 1.05 0.31

2.8 1.9 2.4 1.8 2.9

2.8 2.5 2.2 1.7 2.7

0.45 0.65 0.88 0.80 0.75

4.2 4.0 5.6 3.0 4.2

3.5 3.4 3.9 2.3 3.4

0.06 0.09 0.43 0.10 0.59

8.0 8.9 6.2 5.8 9.1

5.2 2.5 5.6 3.4 3.8

0.13 0.67 0.75 0.81 0.73

3.8 1.4 0.2 0.1 0.7

4.3 1.6 0.1 0.0 0.7

0.12 0.12 0.15 0.40 0.12

U.S. GOVERNMENT BONDS THREE YEARS1

SECTOR

Energy Financials Information technology Consumer discretionary Consumer staples Industrials Basic materials Utilities Health care Telecom services

7.4 4.8 4.9 4.9 7.6

SMALL-CAP Vanguard Small-Cap Index (VSMAX) Vanguard Small-Cap Value Index Fund (VSIAX) Vanguard Explorer (VEXRX) T. Rowe Price Small-Cap Value (PRSVX) Vanguard Small-Cap Growth Index (VSGAX)

American Funds New World (NEWFX) Vanguard Emerging Markets Stock Index (VEMAX) T. Rowe Price Emerging Markets Stock (PRMSX) Fidelity Emerging Markets (FEMKX) Northern Emerging Markets Equity Index Fund (NOEMX)

2.0

BENCHMARKS

3.8 1.0 4.5 4.4 2.3

EMERGING MARKETS

18.0 17.0

0.71 0.65 0.58 0.52 0.58

INTERNATIONAL ONEYEAR RANGE

CURRENT

19.0

8.0% 8.6 8.6 7.4 7.5

MIDCAP Vanguard Mid-Cap Index (VIMAX) Fidelity Low-Priced Stock (FLPSX) Vanguard Extended Market Index (VEXAX) Fidelity Spartan Extended Market Index (FSEVX) Vanguard Strategic Equity Fund (VSEQX)

American Funds American Balanced (ABALX) Fidelity Balanced (FBALX) Fidelity Puritan Fund (FPURX) Vanguard Star Fund (VGSTX) Vanguard Balanced Index Fund (VBIAX)

CURRENT

21.0

2.3% 6.1 7.1 6.7 5.5

BALANCED

DIVIDEND YIELD

23.0

Fidelity Contrafund (FCNTX) American Funds Growth Fund of America (AGTHX) American Funds Investment Co. of America (AIVSX) Dodge & Cox Stock (DODGX) American Funds Wash. Mutual Investors (AWSHX)

DECEMBER 2016

Fidelity Government Income (FGOVX) American Funds U.S. Government Securities (AMUSX) MFS Government Securities (MFGSX) Sit U.S. Government Securities (SNGVX) JPMorgan Government Bond (OGGAX)

INVESTMENT-GRADE Vanguard Total Bond Market Index (VBTLX) Vanguard Total Bond Market II Index (VTBIX) Dodge & Cox Income (DODIX) Vanguard Short-Term Investment-Grade (VFSUX) T. Rowe Price New Income (PRCIX)

HIGH YIELD Vanguard High-Yield Corporate (VWEAX) American Funds American High-Income Trust (AHITX) Fidelity Capital & Income (FAGIX) Northern High Yield Fixed Income (NHFIX) Fidelity High Income (SPHIX)

TAX-EXEMPT Vanguard Intermediate-Term Tax-Exempt (VWIUX) Vanguard Limited-Term Tax-Exempt (VMLUX) Vanguard Tax-Exempt Money Market (VMSXX) Fidelity Municipal Money Market (FTEXX) Vanguard Short-Term Tax-Exempt Fund (VWSUX)

THE NUMBERS

MONEY 50

TOTAL RETURN

Market Readies for a Rate Hike AS INVESTORS EXPECT THE FED TO MAKE A MOVE, SOME MONEY 50 FUNDS TAKE A HIT.

HOW TO USE OUR RECOMMENDED LIST Building-block funds: For broad exposure to core asset classes Custom funds: Specialized investments that can tilt your strategy One-decision funds: If you want stocks and bonds in one portfolio

TOTAL RETURN

FUND (TICKER)

ONE YEAR

THREE YEARS 1

EXPENSES (AS % OF ASSETS)

PHONE NUMBER (800)

BUILDING-BLOCK FUNDS Large-Cap Schwab S&P 500 Index (SWPPX) Schwab Total Stock Market Index (SWTSX) Midcap/Small-Cap iShares Core S&P Mid-Cap (IJH) iShares Core S&P Small Cap (IJR) Foreign Fidelity Spartan International (FSIIX) Vanguard Total Intl. Stock (VGTSX) Vanguard FTSE A/W ex-U.S. Small(VFSVX) Vanguard Emerging Markets (VEIEX) Specialty Vanguard REIT Index Investor (VGSIX)

––0.2% % ––0.6 6

5.5% 5.3

8.9% 8.1

0.09 0.09

435-4000 435-4000

–1.7 17 ––2.9 9

7.1 7.3

6.9 5.9

0.07 0.07

474-2737 474-2737

2

0.16 0.16 0.20 0.08 0.17

662-7447 662-7447 662-7447 662-7447 662-7447

7.4 7.4 7.0 10.2 9.0 9.1

0.52 0.39 0.93 0.29 0.64 0.71

621-3979 843-2639 551-1980 983-0903 729-2307 638-5660

2.5 10.8 2.4

4.6 9.6 6.9

1.12 0.38 0.87

292-7435 909-9473 2 638-5660

–1.2 –1.3 –2.5 –2.1

7.5 7.2 11.8 6.5

1.0 7.0 6.3 3.3

1.17 0.08 0.38 1.22

221-4268 662-7447 909-94732 551-1700

0.5 –2.6 –6.6 –5.1 2.3

–4.2 11.8 4.9 –3.2 9.3

–3.5 9.5 9.9 0.2 –6.2

0.58 0.35 0.96 0.59 0.48

983-0903 787-22572 437-9912 787-22572 474-2737

1.8 –2.1 –0.2

–1.9 3.7 12.3

–1.9 0.8 1.5

0.95 0.47 1.24

625-6275 662-7447 638-5660

0.0 –0.2 –0.1 –0.9 0.0 1.4 –0.8 –0.2 6.3 0.5

5.6 6.1 2.9 7.1 5.0 9.1 3.7 1.3 1.7 14.5

3.9 4.0 2.2 5.3 2.0 3.8 4.2 1.5 0.2 6.3

0.43 0.45 0.20 0.15 0.89 0.73 0.20 0.20 0.89 0.86

621-3979 544-8544 662-7447 474-2737 633-3330 544-8544 662-7447 662-7447 632-2301 544-8544

6.5 1.5 6.6

0.56 1.02 0.26

544-8544 544-8544 662-7447

3.9 4.6

0.60 0.66

638-5660 638-5660

4.9 5.0

0.15 0.15

662-7447 662-7447

–0.7 –0.3% –0.2 0.1 –1.0

4.1 1.5% 5.6 2.4 5.7

1.7 0.3 1.1 –0.6 –2.9 0.9

6.7 6.3 6.1 7.6 5.2 1.8

–0.4 –2.0 –2.5

THREE YEARS 1

3.4 1.4% 1.9 0.3 5.1

–1.5 15 ––0.8 –1.6 6 1.8 8

–3.5 0.2 3.4 7.7

-1.5 -1.0 0.5 -1.0

0.19 0.19 0.31 0.33

544-8544 662-7447 662-7447 662-7447

––7.11

6.3

9.2

0.26

662-7447

Large-Cap Dodge & Cox Stock (DODGX) PowerShares FTSE RAFI U.S. 1000 (PRF) Sound Shore (SSHFX) PowerShares S&P High Qual. Port. (SPHQ) Primecap Odyssey Growth (POGRX) T. Rowe Price Blue Chip Growth (TRBCX) Midcap Ariel Appreciation (CAAPX) WisdomTree MidCap Dividend (DON) T. Rowe Price Div. Mid Cap Gro. (PRDMX) Small-Cap Royce Opportunity (RYPNX) Vanguard Small-Cap Value (VBR) WisdomTree SmallCap Dividend (DES) Wasatch Small Cap Growth (WAAEX) Specialty PowerShares Intl. Div. Achievers (PID) SPDR S&P Dividend (SDY) Cohen & Steers Realty Shares (CSRSX) SPDR Dow Jones Intl. Real Estate (RWX) iShares N. American Nat. Resources (IGE) Foreign Oakmark International (OAKIX) Vanguard International Growth (VWIGX) T. Rowe Price Emerging Markets (PRMSX) Bond Dodge & Cox Income (DODIX) Fidelity Total Bond (FTBFX) Vanguard Short-Term Inv. Grade (VFSTX) iShares iBoxx $ Inv. Grade Corp. Bond (LQD) Loomis Sayles Bond (LSBRX) Fidelity High Income (SPHIX) Vanguard Intm.-Term Tax-Ex. (VWITX) Vanguard Limited-Term Tax-Ex. (VMLTX) Templeton Global Bond (TPINX)3 Fidelity New Markets Income (FNMIX)

ONE-DECISION FUNDS

NOTES: As of Oct. 26, 2016. N.A.: Not available. Load funds are included for those 1

Bond Vanguard Total Bond Market (VBMFX) Vanguard Short-Term Bond (VBISX) Vanguard Inflation-Protected (VIPSX) Vanguard Short-Term Infl.-Prot. (VTIP) Vanguard Total Intl. Bond Index (VTIBX)

PHONE NUMBER (800)

ONE YEAR

CUSTOM FUNDS

CONVENTIONAL WISDOM on Wall Street is that the Federal Reserve will lift rates this month, as there’s been a steady stream of generally positive economic news lately. Plus, policymakers have long expressed a desire to bring rates closer to normal levels at this stage of a recovery. By one measure, there’s an 81% chance rates will rise at year-end.

As a result, most portfolios on our recommended list of mutual and exchange-traded funds lost ground in the four weeks ended Oct. 26. No area of the market struggled as mightily as real estate stocks. Investors had recently turned to real estate investment trusts to supplement their low bond yields. But if rates rise, that strategy won’t be as necessary. Vanguard REIT declined 7.1%, while Cohen & Steers Realty dropped 6.6%. —TAYLOR TEPPER

O ONEE MONTH H

FUND (TICKER)

EXPENSES (AS % OF ASSETS)

ONEE O MO MONTH H

3

who prefer to use a broker. Annualized. Phone numbers are 866. 4.25% sales load.

SOURCES: Lipper, New York, 877-955-4773; the fund companies

Balanced Fidelity Balanced (FBALX) –0.5 4.2 Fidelity Global Balanced (FGBLX) –2.3 3.1 Vanguard Wellington (VWELX) –0.1 5.1 Target Date T. Row Rowee Pric Pricee Reti Retirem rement ent se serie riess (STO (STOCK/ CK/BON BONDD ALLO ALLOCAT CATION ION)) Example: 2005 Fund (45%/55%) (TRRFX) –0.7 4.8 Example: 2020 Fund (68%/32%) (TRRBX) –0.7 4.4 Vanguard Target Retirement series Example: 2025 Fund (70%/30%) (VTTVX) –0.8 3.9 Example: 2035 Fund (84%/16%) (VTTHX) –0.7 3.6

DECEMBER 2016

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89

MONEY WELL SPENT

Do you have a purchase you consider Money Well Spent? Email us about it and what it means to you at wellspent@moneymail.com.

At Peace in the Sun

by Jean Tomlinson

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m o n e y. c o m

DECEMBER 2016

I cried, and often we both cried.

Slowly, over the next few years, Gina went from wheelchair to walker, and ultimately to walking on her own. Therapists helped her practice swallowing; licking Popsicles gave way to actually eating.

Finally, she could speak again.

I realized that although we still had doctor visits, therapies, and the occasional surgery, we were careening less frequently from crisis to crisis. We were having conversations like other families: “What’s for supper?” “Where’s your homework?” “Do you have clean clothes for tomorrow?”

We needed a marker to indicate that our life had changed, that we were no longer living moment to moment, that we had a future. And so we did what millions of Americans take for granted every year—we went on vacation. We drove from our Atlanta home to Hilton Head, staying three nights at a Holiday Inn. The long weekend cost me all of $500, I estimate.

Gina’s health today is good. The cancer hasn’t returned. Although she has a benign tumor on her brain— probably a result of the radiation—it doesn’t appear to be spreading. Life hasn’t always been picture-postcardperfect for us. But we have survived, buttressed by memories of eating crab legs and lobster, lying in the sun, and dancing on the beach for those four days in South Carolina when we celebrated turning the corner.

Tomlinson, a former editor at IBM and other companies, retired last year to spend more time at the beach with her daughter.

Illustration by

m a rt i n t o g n o l a

L I S A T H O R N B E R G /G E T T Y ( B A L L )

HILTON HEAD ISL AND, S.C., 1989: The skies were blue, the water warm. It was the best vacation ever. We spread out beach towels, slathered ourselves in suntan lotion, and basked in the sun. We ran into the ocean, holding hands and screaming, “Jump, jump!” when waves approached. We raided souvenir shops, danced on the beach, and applauded a street magician.

And we ate. Oh, how we ate!

Gina, my then-9-year-old daughter, decided on that trip that crab legs were the most wonderful food ever. She could have saved me a lot of money if, like most kids, she had preferred fish sticks.

But Gina was not like most kids. Five years before, in one horrific week, her life had changed forever. Her dad—my husband, Jim—died on a Tuesday. The following Tuesday, Gina—who for weeks had been suffering headaches and nausea that had mystified doctors—was diagnosed with a malignant brain tumor. She had an operation that same day, and surgery for a blood clot two days afterward. Then came the radiation treatments.

Gina, with her shoulder-length blond hair, had been the first child to stand up in the day-care swings, the loudest to sing, the last to go to sleep at nap time—always the boldest and most adventurous. Now my child was bald, nearly paralyzed, and unable to speak. Our new world consisted of physical therapy, speech therapy, occupational therapy, and respiratory therapy. Nurses at home and doctors in offices. More surgeries, tests, IVs, injections, and tube feedings. Some days she cried, some days

OF A i g escues A H

O 7

i

i yt g

h l y ll

d .

Mazda3 Grand Touring interior with Premium Package shown.

THE NEW MAZDA3 The 2017 Mazda3 is designed to make driving better. Before you go anywhere. Its newly refined interior is crafted with driver-centric details that help you enjoy every drive. Even more. Like an available leather-wrapped, heated steering wheel that fi ts the optimal position of your hands.

An advanced Active Driving Display that lets you keep your eyes on the road. And a new electronic parking brake, placed within easy reach. Why do we obsess over making every detail feel just right?

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