Should Stay-at-Home Spouses Get Their Own Credit Cards?

Should Stay-at-Home Spouses Get Their Own Credit Cards?

By AnnaMaria Andriotis

An effort to loosen credit-card standards for stay-at-home spouses would seem to benefit millions of consumers, but critics say the change could actually push some families deeper into debt and derail their finances.

Last week, the Consumer Financial Protection Bureau proposed loosening regulations to make it easier for the nation’s more than 16 million stay-at-home spouses to qualify for credit cards, largely undoing more stringent requirements put into place in October 2011. Prior to then, consumers could sign up for a credit card by stating their household income, even if all of that income came from their spouse. But the Credit Card Accountability Responsibility and Disclosure Act required & #116;he Federal Reserve to amend several lending provisions for credit card issuers, including a new rule that issuers had to ask for individual income on a credit card application, and could no longer rely on household income.

If enacted, the CFPB’s proposal would allow credit card issuers to ask card applicants 21 and over for income to which they have a “reasonable expectation of access,” which could include a spouse’s salary. The bureau says it’s aware of several issuers that have denied card applications from otherwise creditworthy individuals based on the applicant’s stated income.

While this change could help stay-at-home spouses who pay their bills using their working spouse’s income and are financially sound, it could also cause a problem for indebted families. Odysseas Papadimitriou, chief executive at credit-card comparison site CardHub.com, points to the following example: If a working spouse with $ 100,000 in income and $ 100,000 of debt in his or her name applies &# 102;or a credit card, that individual would be denied by the card issuer. (Card issuers check applicants’ credit reports for outstanding debt before deciding whether to approve them for a card.)

But if the current rule is undone, that person’s stay-at-home spouse could be approved for a credit card: that person could claim $ 100,000 in income, but when the card issuer checks the applicant’s credit report it would find zero dollars of debt. “It’s half the story and it’s completely deceiving,” Papadimitriou says.

Not everyone agrees that this problem would outweigh the benefits. Some say the old rules were more fair for consumers. “Stay-at-home parents shouldn’t be penalized because they don’t personally bring in income,” says Scott Bilker, founder of DebtSmart.com.

Wealthy Home Buyers Return to Risky ARMs

Wealthy Home Buyers Return to Risky ARMs

You have requested an invalid page from Smartmoney.com.

It's possible you typed the address incorrectly, or that the page no longer exists.

You will be redirected back to the Smartmoney.com homepage or, you may go to the site map to locate the page you had requested.

Goldman Sachs bails on BRIC funds

Goldman Sachs bails on BRIC funds

By Ian Salisbury

Goldman Sachs is known for its emerging-markets acumen. But that doesn’t seem to have helped its effort to peddle mutual funds targeting these stocks.

On Thursday, the company which coined the term “BRIC” as an acronym for “Brazil, Russia, India and China,” filed with the Securities and Exchange Commission detailing plans to shutter mutual funds focused on stocks in two of those countries: Brazil and India. Goldman also plans to close another fund targeting South Korean stocks, according the filing, first highlighted by Morningstar.

Goldman launched all three funds, along with a fourth China fund that doesn’t appear to be affected, last year. (The company didn’t respond to a call for comment Friday afternoon.)

As a group, emerging-markets funds have remained popular, with investors pouring more than $ 18 billion into such funds this year, according to Morningstar. None of the four Goldman funds have managed to grab more than $ 10 million, however. Goldman’s more broadly focused emerging-markets funds, including one that targets the BRIC companies as a group, have proven more popular. That fund, the Goldman Sachs BRIC Fund (GBRIX) holds about $ 400 million, and is up 11% this year.

What gives? One possible explanation is cost. The Goldman Sachs India fund (GNAIX), for instance, charges annual fees of $ 150 per $ 10,000 invested for the cheapest share class. By contrast, one popular competitor, the $ 1.1 billion WisdomTree India Earnings ETF (EPI) levies just $ 83.

Investors that do own shares of the three Goldman funds will get their money handed back at the end of November, the filing indicates.

401(k) Plan Perks Grow, but Savings Still Lag

401(k) Plan Perks Grow, but Savings Still Lag

By Jonnelle Marte

Workers are getting a little more help from their employers when it comes to retirement saving, but many are still falling short in building their nest eggs.

After suspending or slashing their matches of employees’ 401(k) contributions  during the recession, most companies have restored them. In 2011, the percent of companies making those matches increased to 95.5%, up from 91% in 2010, according to survey results released this month by the Plan Sponsor Council of America, a nonprofit association that services plan sponsors.

But while more companies are contributing to retirement accounts, they aren’t as generous as they were before the financial crisis. The average company contributed 4.1% of pay in 2011, up from 3.7% in 2010, but still below the peak of 4.7% seen in 2006.

Instead, experts say some employers are throwing in another perk that often doesn’t cost them anything: 401(k) advice. Many retirement plans administered by Charles Schwab, for example, let employees chat with Schwab representatives to discuss their needs and get help comparing mutual funds available to them, says Steve Anderson, head of Schwab Retirement Plan Services.  Those workers who take advantage of the advice tend to save more and be more diversified than those who don’t use &# 116;he service, says Anderson.  (Schwab’s administrative costs for running the 401(k), which are often evenly divided among a plan’s participants, stay the same whether a company decides to offer advice or not, he says.)

Despite the return of matching contributions, financial advisers and other experts say workers still aren’t saving enough.  For instance, about two-thirds of investors surveyed by T. Rowe Price said they contributed 10% or less of their salaries into their 401(k) plans, according to results released this week. And nearly a third said they were not sure how much they were saving. Christine Fahlund, senior financial planner at T.Rowe Price, recommends workers save closer to 15% to 20% o&# 102; their incomeâ€"or more if they don’t start saving until their 40s or 50s. (To gauge whether you’re on pace to afford retirement, check our online planner: http://www.smartmoney.com/retirement/planner/).

Those lower savings rates mean many workers will have to delay retirement, take on part-time work, or spend significantly less during retirement, says Fahlund.  Indeed, while the economy has bounced back, workers’ confidence hasn’t: Just 14% of Americans are confident they will have enough money to live comfortably in retirement, only up slightly from the low of 13% reached in 2009, according to a 2012 survey by the Employee Benefit Research Institute.  And 37% of workers expect they will hav&# 101; to work past age 65, compared to 11% in 1991.

Some advisers say the company match may be â€" at least partly â€" to blame, pointing out that some workers see little reason to contribute beyond what their employer matches. For instance, many workers will contribute no more 6% of their pay if their employer only matches up to 6% of their salary, says Steve Vernon, a financial adviser and author of “Money for Life:  Turn Your IRA and 401k Into A Lifetime Retirement Paycheck.” “Don’t take the design of t
04;e plan as a signal as to how much you should save,” he says.

Some companies are trying to change that by matching up to a higher portion of a worker’s salary, but lowering the amount matched per dollar, he says. For instance, a company could go from matching up to 5% of pay dollar for dollar, to matching up to 10% of pay, but only contributing 50 cents for each dollar the employee puts in. That would increase the total contribution to 15% of pay from 10% for workers who max out their company contribution, says Vernon, but the total amount contributed by the company would stay the same.

Other companies are trying to boost savings by making the process automatic. The percentage of plans with an automatic enrollment feature increased to 45.9% in 2011, up from 23.6% in 2006, according to the Plan Sponsor Council of America. And 55.2% of plans had a component for automatically increasing the amount contributed, up from 31.2% in 2006.Savers can use these step-up programs, which typically increase the percent allocated by one or two percentage points each year, as a way to work up
16;o the target 15% or 20% savings rate, says Fahlund.