Is a Living Trust the Most Financially Savvy Way to Pass Inheritance to Your Family?
Move Over, FAANG: 1 Unstoppable “Magnificent 7” Stock to Buy Hand Over Fist
Planning to Pass On Wealth to Your Grandchildren? 4 Things to Do Now
7 Remarkable Stocks That Could Join Apple, Microsoft, Nvidia, Amazon, and Alphabet in the $1 Trillion Club
Despite everything, Americans’ finances are still sturdy. At least that’s the view of people’s wallets from some of the country’s biggest banks as corporate earnings season gets rolling with profit beats.
“We’re trying to be really clear here. The consumer is in good shape,” said JPMorgan Chase & Co.
JPM,
CEO Jamie Dimon, speaking on a Friday earnings call after a second quarter profit beat from the nation’s largest bank. “They’re spending down their excess cash. That’s all tailwinds.”
Dimon added, “even if we go to a recession, they’re going with rather good conditions, low borrowings and good house price values still. But the headwinds are substantial and somewhat unprecedented.”
Over at Wells Fargo
WFC,
CEO Charlie Scharf said “The U.S. economy continues to perform better than many had expected. Although there will likely be continued economic slowing and uncertainty remains, it is quite possible the range of scenarios will narrow over the next few quarters.”
“I’d say we’re seeing a more cautious consumer but not necessarily a recessionary one,” Citi
C,
CEO Jane Fraser said in a Friday earnings call.
There’s reasons to think many Americans would disagree with these upbeat — albeit guarded — assessments on their financial wellbeing.
Consumer debt is rising while the food and rent costs that were pushed higher by inflation in the past two years likely aren’t getting punctured. Many Americans still haven’t tucked away money for emergency savings. And don’t forget, student loan payments are returning in October to stretch the budgets of more than 40 million borrowers.
Both things are true, said Ida Rademacher, vice president at the Aspen Institute and co-executive director of the Aspen Financial Security Program.
“The economy is doing surprisingly well and many people in the economy are doing surprisingly well — and at the same time, many people in the economy are continuing to make trade-offs in their everyday lives to manage to stay afloat,” she said.
Over one-third, 35%, of people told Federal Reserve researchers they were worse off in 2022 compared to a year earlier, Rademacher noted. That’s the largest share since Fed researchers started asking the question nearly a decade ago.
The disconnect happens when trying to identify one single trend about Americans’ money when their financial lives can be so different now, Rademacher said.
“The idea that there’s an average consumer is a myth,” she said. In fact, “the ‘average’ is one the greatest last-standing American myths at the moment,” she later added.
There’s only so much that corporate earnings can show, she said. “The overall ways that we measure economic health and performance of the economy is now so separate than the ways that we measure the economic health and performance of a household.”
Here’s the measures that many people are watching when they decide if they are in a good position — or not.
Credit-card balances stuck at $968 billion during the first quarter, according to the Federal Reserve Bank of New York. The first quarter is usually when Americans pay off the credit-card debt that accumulates in the back end of the year, capped by holiday spending. But the collective balances didn’t decline from quarter to quarter for the first time in over two decades, researchers said.
While aggregate balances aren’t declining, the APRs for the balances are increasing due to rising interest rates. The average rate on a new credit-card offer was 24.06% in June, up from 23.98% in May, according to LendingTree.
Inflation rates are coming off their four-decade high. New data this week showed inflation rates dropping to 3% in June year over year. But one problem could be nudging those inflation rates even lower, economists say.
It’s unlikely prices will decrease for many grocery store items, food industry experts said. Rents will “almost definitely” not revert to pre-pandemic levels, one economist at Zillow
Z,
said.
“Consumers are slowly using up their cash buffers,” Dimon said in a statement with the second quarter earnings results.
For many people, the buffers haven’t been big enough to build emergency savings. Just under half (48%) of people polled on their emergency savings said they had enough to cover three months of costs, according to a Bankrate survey last month. That’s flat from a year earlier. Meanwhile, 57% said they were uncomfortable with the amount of money they did have for a rainy day.
Federal student loan payments are going to come back in October, and without large scale loan forgiveness. The Supreme Court said the Biden administration overstepped its power with the cancellation order.
The administration argued there would a rise in defaults and delinquencies without cancellation, and it’s applying a one-year grace period to shield borrowers from collections and credit score dings.
It’s been more than three years since people had to pay their federal student loans.
Sides can argue on the merits of loan forgiveness, but there’s “little doubt” cancellation could have boosted the ability of many borrowers to build their wealth, said Adam Kamins, a regional economist for Moody’s Analytics. “These are uncertain times for those who borrowed from the government to fund their post-secondary educations,” he said in a Friday note.
See: Is now a good time to refinance your student loans? You could save money, but tread carefully.
To be clear, bankers aren’t playing Pollyanna. Bracing for foreseen and unforeseen financial risks are a core part of the banking business. The pending risks and unknowns include the continuing effects of Russia’s invasion of Ukraine and the consequences of together monetary policy, Dimon said Friday.
So when bankers voice a vote of confidence for the consumer, that’s no small thing. And they also remember consumers’ financial conditions before the pandemic.
For example, JPMorgan saw a double-digit percentage gain in outstanding credit-card balances. But the activity was “normalization, not deterioration,” Jeremy Barnum, JPMorgan’s chief financial officer said on the Friday earnings call.
There’s also the bullish view beyond bank balance sheets.
The jobless rate fell to 3.6% in June and the economy added 209,000 new jobs, the Bureau of Labor Statistics said last week. While just a little under the consensus forecast for 240,000 new jobs, many economists cheered the report.
The numbers could be interpreted as a sign the economy was cooling down without crashing and didn’t need too many more Federal Reserve interest rate increases, they said.
“Labor market performance is great, but it doesn’t completely transfer into how people’s financial security is,” said Rademacher.
There’s also the indications that people are still spending. During the two-day Amazon
AMZN,
Prime Day e-shopping bonanza, people spent a record $12.7 billion, according to Adobe
ADBE,
But more people purchased the wide array of goods with ‘buy-now-pay-later’ methods compared to a year ago.
There’s money, and then there’s mood.
The same day of the mega bank earnings, a recurring gauge on consumer sentiment exceeded economist expectations and reached the highest level since September 2021.
The improving outlook is aided by a strong job market and gas that’s cheaper than a year ago. But consumer confidence is “restrained,” one analyst said.
Besides, the preliminary July read of 72.6 is still well below the cheery mode Americans were in just before the pandemic. In February 2020, the same index was at 101.
“Part of the disconnect is who we know and are in community with,” Rademacher said. People with good jobs and benefits may not know too many people struggling with debt or money worries, she noted.
“The squeeze that’s happening on the American cash flow is pretty hard to navigate for many, many households.”
JPMorgan CEO Jamie Dimon is no fan of remote work. He’s previously claimed it suppresses “spontaneous idea generation.” Now he’s talking again about his distaste for working from home—and taking aim at remote managers in particular.
“I don’t know how you can be a leader and not be completely accessible to your people. I do not believe you can be a leader and not be accessible to your people,” Dimon told The Economist editor-in-chief Zanny Minton Beddoes during a wide-ranging interview on Tuesday, in which he also discussed the economy, U.S.-China relations, and his own legacy at the financial services firm.
Dimon did note that certain roles are suited for remote work, and that JPMorgan has always had a small percentage of employees work from home. But calling himself a work-from-home “skeptic,” he emphasized that he doesn’t believe remote work is good for creativity, younger employees doing apprenticeships, or for management teams.
“To the extent it works, I’m okay with it. If it doesn’t work, I don’t mind getting rid of it either,” he said. “We’re not going to make that decision because we’re pandering to employees. That is not the way to build a great company.”
JPMorgan started calling its traders back to the office as early as September 2020—though soon after some workers were sent home after an employee tested positive for COVID. Attempts to return to in-person work over the past few years have been met with employee pushback. In April 2023, the bank ordered its senior leaders back to the office five days a week, with the threat of “corrective action” if they refused.
The chiefs of other banks have also had some harsh words about remote work. Morgan Stanley CEO James Gorman previously said that remote work is “not an employee choice.” And Goldman Sachs CEO David Solomon called it an “aberration.” Dimon himself said he was “about to cancel all my Zoom meetings,” in 2021, adding “I’m done with it.”
All of JPMorgan’s managing directors are now fully in-office, and 60% of employees work in-person full-time, Dimon told Minton Beddoes. Around 10% of employees—primarily those in certain sales or service roles—work entirely from home, and the remaining 30% commute to the office three days per week, he added.
In his interview with Minton Beddoes, Dimon acknowledged that his preference for in-person work isn’t for everyone—but said those who disagree can look for work elsewhere.
“I completely understand why someone doesn’t want to commute an hour and a half every day. Totally get it,” he said. “Doesn’t mean they have to have a job here either.”
This story was originally featured on Fortune.com
More from Fortune:
5 side hustles where you may earn over $20,000 per year—all while working from home
Looking to make extra cash? This CD has a 5.15% APY right now
Buying a house? Here’s how much to save
This is how much money you need to earn annually to comfortably buy a $600,000 home
A Bitcoin-themed van promoting adoption around Europe has seen its fair share of drama, including a midnight stop and search by law enforcement agencies.
U.S. Attorney General Merrick Garland speaking on June 22, 2023 in Washington, DC.
Chip Somodevilla | Getty Images
The Department of Justice announced Wednesday that it has recently charged 78 people with $2.5 billion in separate health-care fraud and opioid abuse schemes.
The defendants allegedly defrauded programs used to take care of elderly and disabled people, and in some cases used the ill-gotten money to buy exotic cars, jewelry and yachts, the DOJ said.
Among those charged are 11 defendants accused of submitting $2 billion in fraudulent claims through telemedicine, as well as 10 defendants charged in connection with fraudulent prescription drug claims.
In all, prosecutors filed charges against people in 16 states in cases that were lodged or unsealed in the past two weeks as part of the coordinated crackdown.
The defendants include “physicians and other licensed medical professionals who lined their own pockets, including doctors who allegedly put their patients at risk by illegally providing them with opioids they did not need,” the DOJ said in a press release.
Attorney General Merrick Garland in a statement said, “These enforcement actions, including against one of the largest health care fraud schemes ever prosecuted by the Justice Department, represent our intensified efforts to combat fraud and prosecute the individuals who profit from it.”
In the scheme cited by Garland, executives of supposed software and services companies submitted $1.9 billion in fraudulent claims to Medicare for items that were not eligible for reimbursement, according to the DOJ.
The defendants in that case are Brett Blackman and Gregory Schreck of Johnson County, Kansas, and Gary Cox of Maricopa County, Arizona, who allegedly used mass telemarketing operations to sell the elderly and disabled expensive and unnecessary medical equipment and prescriptions, according to an indictment in U.S. District Court for the Southern District of Florida.
The trio allegedly operated a software platform called DMERx that generated fake and fraudulent doctors’ orders in exchange for illegal kickbacks and bribes.
Cox was CEO of the company that originally operated the software behind the fraud scheme. He subsequently sold the platform to a company where Black was CEO and Schreck was vice president of business development.
The defendants allegedly received payments for referring fraudulent doctors’ orders and prescriptions to pharmacies, suppliers and telemarketers, according to the indictment. The orders and prescriptions claimed the doctors had actually examined or treated the patients when in reality the physicians were paid to sign the documents by supposed telemedicine companies, the indictment alleges.
In many instances, the doctors had just a brief phone call with the patients or no interaction at all, according to the indictment. In an effort to conceal the scheme, the defendants allegedly removed references to telemedicine in the orders.
In a separate case, the DOJ also indicted Steven Diamantstein, owner of Scripts Wholesale Inc., for a $150 million fraud scheme involving HIV medication.
Diamantstein, who lives in Brooklyn, New York, allegedly purchased HIV drugs at a steep discount from people who illegally obtained the pills by paying patients cash and repackaging them for sale.
Diamentstein then falsely claimed his company had obtained the drugs through legal channels, according to an indictment in U.S. District Court in New Jersey.
The DOJ also charged 24 doctors and medical professionals in cases related to $150 million in false billings involving the illegal distribution of opioids and lab testing fraud.
When Eric Schauer was laid off last July at age 55, he wasn’t too worried about landing a new position.
A senior manager in Albany, N.Y., Schauer figured the generous severance package he got from his company in the chemicals industry would tide him over until he found a new job in the tight labor market. Nearly a year later, he’s been a finalist for a handful of positions but hasn’t been hired yet. Schauer suspects his age may be to blame.
“Once they get me in person,” he says, “that’s where it ends.”
His experience is hardly unique. Only about half of Americans work continuously throughout their 50s, according to an analysis of Health and Retirement Study data by researchers Beth Truesdale, Lisa Berkman, and Alexandra Mitukiewicz in the recent book, Overtime: America’s Aging Workforce and the Future of Working Longer. Among the top reasons are being laid off or pushed out of work, health concerns, and caregiving responsibilities, according to the authors. While lower-income workers are most likely to be affected, the issue spans demographics.
The financial fallout is serious. Common advice assumes you can increase your retirement savings in your 50s, when, presumably, you can afford to make the extra contributions that the Internal Revenue Service allows for workers ages 50 and over. But for those out of work, not only can be it become impossible to save, but some are forced to do the opposite—raiding retirement accounts to pay for living expenses.
If you’re not steadily employed in your 50s, you’re less likely to work beyond that. Eighty percent of those who worked continuously in their 50s continued to work into their next decade of life, versus just 35% of those who were intermittently employed, according to Overtime.
In the popular imagination, you work up until you decide to retire. But for many, the reality is less linear.
It’s not up to individuals to fix the structural problems that can prevent older workers from staying employed, like ageism and the dearth of paid family leave. But there are some steps that you can take to prepare for a decade that could be bumpier than expected. Here’s what to do:
Workers age 50 and over are allowed to make what the IRS calls “catch-up contributions” to their retirement accounts. For 2023, the amounts are an extra $7,500 for 401(k) and similar plans, and an extra $1,000 for individual retirement accounts. Only about 16% of eligible workers made these contributions in 2022, according to Vanguard’s How America Saves 2023 report.
Ideally, workers will have been contributing to their retirement accounts all along, so they won’t have to catch up in their 50s. “I think of catch-up contributions as panic contributions,” says Teresa Ghilarducci, professor of economics at the New School. “That’s what Congress should have called them.”
The importance of starting retirement contributions early is typically framed in terms of compound interest. If you begin contributing $475 a month to a retirement account at age 22, you’ll have $2.4 million by age 67, versus just $1.1 million if you wait until 32, and only $450,040 if you wait an additional 10 years until 42, assuming annualized 8% returns, according to an illustration by MassMutual.
As important as compound interest is, it’s also worth thinking about contributing early as risk management. You may not be in a position to catch up in your 50s, so don’t wait. Save what you can now, even if it’s just enough to get your company match. And think of catch-up contributions as an opportunity to turbocharge your savings after decades of steady contributions.
While Schauer’s unemployment hasn’t been financially ruinous, his retirement progress has stalled. He and his wife have no children, and his wife’s job in project management has helped keep them afloat. But he is no longer contributing to his 401(k), and she is contributing only a minimum amount. “We’re kind of stagnating on retirement,” he says.
Rand Spero, president of Street Smart Financial in Lexington, Mass., talks to clients frequently about their job security and how they would pay their bills if they lost their work. “I get a range of responses, from ‘I could get 10 jobs tomorrow’ to ‘That’s pretty scary,’” he says.
He advises clients to keep at least six months’ worth of expenses in a liquid emergency fund. Those who anticipate a harder time landing a job if they become unemployed might want to save even more. If that’s a stretch, homeowners who qualify for a home-equity line of credit might want to open one while they’re still employed, so it can function like an emergency fund if they lose their jobs, Spero says.
In addition to padding an emergency fund, older workers who feel their jobs are precarious might want to dial back their spending. “In your 50s, you have a certain lifestyle,” Spero says. “The question is, what is fixed and what is discretionary?” Taking a more modest vacation—or deciding not to splurge on a new car—can help you build a buffer to withstand future financial shocks.
Hugh Taylor saw the writing on the wall in 2009, when he got laid off from
IBM
at age 44 in a mass layoff that affected thousands of employees. He didn’t want to find himself in that position again, so he resolved to become his own boss. After spending a couple of years as the head of marketing for a start-up, he’s been working steadily as a freelance content writer for the past 12 years.
Now 58, Taylor has watched some of his peers struggle. A 1992 graduate of the Harvard Business School, he has seen former classmates get sidelined by health concerns or a failure to adapt to changing circumstances.
Photograph by Peter Larson
People who get laid off in their 50s often seek to replicate their prior positions and salaries in their new positions. However understandable, this impulse often holds them back. “The idea that you’re just going to go from one Fortune 500 company to another in the same role—it happens, but it’s not easy,” Taylor says.
David Wiczer, associate advisor at the Federal Reserve Bank of Atlanta and a research fellow at the IZA Institute of Labor Economics, says it’s normal after a period of unemployment for people in their 50s to get offered a lower salary than the one they left. In fact, his research has found workers 56 and older earn about a quarter less on average in their new job after they’ve remained unemployed for at least a month.
His advice? Take the lesser offer. Once you’re in the job, you can try to maneuver your way into something better. “The best way to get back to where you were is to be employed,” Wiczer says.
For his part, Schauer has come to realize that his salary expectations might be putting prospective employers off. “Maybe I can’t be too choosy,” he says.
He reads widely and has kept himself current on developments in his field. In interviews, he tries to leverage his emotional intelligence as an asset. While his job search has grown demoralizing, he’s not giving up.
“I still feel like I have something to contribute,” Schauer says.
Write to Elizabeth O’Brien at elizabeth.obrien@barrons.com
Uber
UBER,
is launching a new feature that will give people an opportunity to make money by loaning their vehicle when they are not using it.
The new peer-to-peer service is called Carshare, and will soon launch in North America, beginning in Toronto and Boston, the company said during its Go-Get product event this week.
“For years, Uber has made it effortless to tap a button and get a ride on demand,” Camiel Irving, head of Uber’s rides business in the U.S. and Canada, said in a statement. “Now, we’re taking the same approach with car-sharing by making it simple, affordable, and sustainable for you to borrow and list cars in your neighborhood.”
Here’s how Uber Carshare will work.
See also: Mark Zuckerberg says Meta could be ‘primary beneficiary’ of Apple Vision Pro release
People in cities where Carshare is available can use Uber’s app to search for and reserve vehicles, which can be loaned for the entire day or by the hour. Carshare users will have to drop off the vehicle at the same location it was picked up.
For people lending out their cars, Uber will suggest pricing for them, but vehicle owners can dictate their own price — fuel and charging costs will be included in the total amount.
“By turning any car into a shared car, you’re increasing efficiency and contributing to more livable neighborhoods,” the company said in a news release.
The ride-sharing giant announced the new feature in conjunction with several sustainability efforts including a push to prioritize electric vehicles, eco-friendly routes and attempts to reduce packaging waste on Uber Eats orders.
Uber didn’t specify exactly how the car sharing would work, however, and the company didn’t say when the Carshare feature will debut. MarketWatch reached out to Uber for comment for this story, but hasn’t heard back.
Uber first got into the car sharing business when it acquired the Australian company Car Next Door in 2022, although the company has operated independently from Uber. This new feature would be separate from Uber Rentals, which funnels Uber drivers to traditional car rental companies including Hertz
HTZ,
and Avis to then execute rides.
Sharing vehicles is not a new idea, and there are already several other competitors in this space.
The Avis Budget Group-owned
CAR,
Zipcar, which specializes in vehicle sharing, has been operating since 2000, and Turo, formerly known as RelayRides, is in over 7,500 cities in the U.S., U.K. and Canada. Turo filed for an Initial Public Offering in 2022 under the symbol TURO, but has not made its debut on the New York Stock Exchange yet.
The announcement comes as New York City legislators are considering a new bill that would protect Uber and Lyft
LYFT,
drivers from getting kicked off the ride-sharing apps without 14 days of notice, and give drivers the ability to appeal the deactivation decision.