Tips for Preventing Identity Theft

Identity thieves steal your personal information to commit fraud. They can damage your credit status and cost you time and money restoring your good name. To reduce your risk of becoming a victim, follow the tips below:

• Don’t carry your Social Security card in your wallet or write it on your checks. Only give out your SSN when absolutely necessary.
• Protect your PIN. Never write a PIN on a credit/debit card or on a slip of paper kept in your wallet.
• Watch out for “shoulder surfers”. Use your free hand to shield the keypad when using pay phones and ATMs.
• Collect mail promptly. Ask the post office to put your mail on hold when you are away from home for more than a day or two.
• Pay attention to your billing cycles. If bills or financial statements are late, contact the sender.
• Keep your receipts. Ask for carbons and incorrect charge slips as well. Promptly compare receipts with account statements. Watch for unauthorized transactions.
• Tear up or shred unwanted receipts, credit offers, account statements, expired cards, etc., to prevent dumpster divers getting your personal information.
• Store personal information in a safe place at home and at work. Don’t leave it lying around.
• Don’t respond to unsolicited requests for personal information in the mail, over the phone or online.
• Install firewalls and virus-detection software on your home computer.
• Check your credit report once a year. Check it more frequently if you suspect someone has gotten access to your account information.

How to Report Identity Theft

Your wallet contains some of your most important personal items, from hard-earned money to credit cards and driver’s license. For an identity thief, your wallet offers a treasure trove of personal information. If you suspect or become a victim of identity theft, follow these steps:

• Report it to your financial institution. Call the phone number on your account statement or on the back of your credit or debit card.
• Report the fraud to your local police immediately. Keep a copy of the police report, which will make it easier to prove your case to creditors and retailers.
• Contact the credit-reporting bureaus and ask them to flag your account with a fraud alert, which asks merchants not to grant new credit without your approval.

If your identity has been stolen, you can use an ID Theft affidavit to report the theft to most of the parties involved. All three credit bureaus and many major creditors have agreed to accept the affidavit. You can download the ID theft affidavit or request a copy by calling toll-free 1-877-ID-THEFT (438-4338). You can also file a complaint with the Federal Trade Commission.

Use this helpful infographic (PDF) to help you remember the steps to take if your wallet or identity have been stolen.

Seniors and ID Theft

Seniors are vulnerable to identity theft. Here are some common schemes that ID thieves use to steal the identity of seniors.

• Telemarketing. An ID thief may call, making fraudulent offers for products, benefits or medical services. The caller will require you to provide personal information, such as your social security number, birthday, or Medicare ID number.
• Tax ID theft. Phony tax preparers steal your social security number and sell it to scammers. ID thieves may also read obituaries so that they can file a tax return in the deceased person’s name. This can be a problem for a surviving spouse, when he or she tries to file taxes later in the tax season. For more information contact the IRS’ Taxpayer Advocate Service at 1-877-275-8271.
• Medical ID theft. In general, seniors have more contact with medical service providers that can take advantage of access to their insurance information to get medical services in your name or to issue fraudulent billing to you and your health insurer.
• Nursing home and long-term care. Staff at these facilities have access to seniors’ personal information on file, as well as the potential misuse or theft of seniors’ finances (for example check books or bank statements in the senior’s room) . You can report this fraud to the long-term care ombudsman in your state at long-term care ombudsman.

Follow the steps listed in “Reporting Identity Theft” to report ID theft or report it to the U.S. Senate’s Special Committee on Aging’s Fraud Hotline at 1-855-303-9470.

H/T Source: USA.gov

Insurance Basics: How to Save on Insurance

All insurance works pretty much the same way: You pay a premium (a set amount of money) to the insurance company, usually on some sort of schedule (monthly or yearly, for instance. In return, the company issues an insurance policy to you, which is a contract that gives you certain coverage, or financial protection. When you suffer an insured loss, you file a claim and the company pays you a benefit.

Insurance is meant to protect you against catastrophes, not day-to-day annoyances. You use insurance to guard against things that aren’t likely to happen, but which would cause financial hardship if they did occur.

Your goal should be to have just the right amount of insurance. If you have too much, you’re wasting money. For example, if you have a $50 deductible on your car insurance, you’ll probably end up paying the insurance company far more in premiums than they’ll ever pay you in benefits! Or, if you’re young, unmarried, and have tons of credit-card debt, life insurance usually isn’t a good place to put your cash.

On the other hand, if you’re a 40-year-old small-business owner and father of five, term life insurance could be an excellent way to hedge against the risk that you’ll die tomorrow. Or, if you’re a millionaire who likes to drive fast, increasing the limits on your automobile liability coverage could save your fortune if you get sued for the damage you cause when you plow into the back of a school bus.

How to Save on Insurance

The number one thing you can do to save money on insurance is to self-insure as much as possible. That is, set aside your own money to cover minor and moderate catastrophes, if possible. Try raising the deductibles on your auto and home insurance policies. Then take the difference between your old premiums and your new premiums and put it into a “self-insurance” online savings accountevery month. It won’t take long for you to have more than enough to cover the deductible.

You can also save by reviewing your coverage from time to time, and following these suggestions:

• Read your policy. As with all legal contracts, it’s important that you read your policy so you know what’s covered and what isn’t. Pay attention to policy changes that come in the mail. If you have questions, ask. And make it a habit to review your policies every so often to be sure you understand them (and check whether anything has changed).
• Don’t duplicate coverage. Know which policies provide which benefits. If you have a AAA membership, for example, you don’t need towing coverage on your car insurance. And if your credit card doubles the warranties on the things you buy, don’t pay for extended warranties. I try to go over my policies once a year to remind myself of my coverage. (I’m a forgetful guy!) I recommend you do the same.
• Consolidate. Get all of your insurance from one provider. Insurance companies often give a discount if you have multiple policies with them. Plus, this saves you the hassle of having to pay more than one company.
• File fewer claims. Don’t nickel-and-dime your insurance company. If you file claims for every little thing, they’ll raise your rates. Insurance is meant to cover unexpected large losses, not every ding your car gets from shopping carts.

Tip: To increase the odds of a satisfactory settlement when you file a claim, be sure to document your losses well. And it’s perfectly acceptable — good even! — to negotiate if you think the insurance company’s settlement offer isn’t fair (and their first offer almost never is). Be persistent.

• Shop around. To find better rates, harness the power of the web. Visit theNational Association of Insurance Commissioners and click the “states and jurisdictions” link to find your state’s insurance department. From there, you can find info about your state’s insurance laws and, in some cases, get quotes. You can also get quotes from multiple insurance carriers at sites likeinsweb.com, insurance.com,insure.com, and even our insurance page at Get Rich Slowly.
• Buy only what you need. Insurance agents are happy to sell you more coverage than your situation calls for. Do some research before you buy. Figure out how much and what kind of insurance you need, and don’t let the agent talk you into more.
• Raise your deductible. The deductible is the amount you pay on a loss before the insurance company kicks in money. For example, if your car takes $400 in damage because you drive over a curb and you have a $250 deductible, you pay the first $250 and your insurance company pays the rest. It’s up to you where to set the deductible, but the lower your insurance deductible, the higher your premiums. Ask yourself how much you can afford to pay if something goes wrong; more specifically, how much is toomuch? Set your deductible just below “too much”.
• Take care of the things you insure. One of the best forms of insurance is routine maintenance. A well-maintained car is less likely to have an accident due to mechanical failure. If you take care of your house, it’ll weather the ravages of time. And if you exercise and eat right, you’ll get cheaper life and health insurance.

These tips help you save on most types of insurance. Still, not all insurance advice can be generalized; each type of insurance has its quirks. Next week, we’ll look at specific ways to save on the most common type of insurance: auto insurance.

H/T Source: GetRichSlowly

Save for Retirement and Still Pay Your Kids’ College Costs

BY IVORY JOHNSON, CNBC

 

 

 

You can borrow money for a college education but not for your retirement. It’s what we, as financial experts, truly believe. But a constant tug-of-war between 401(k) plans and Section 529 college savings plans has ensued in investors’ hearts and minds—and neither side appears to be winning. Identifying priorities is no easy task. Just ask an average parent if his or her retirement is more important than paying for a child’s education.

Most parents are aware that over the course of an adult’s working life, high school graduates can expect, on average, to earn $1 million less than those with a bachelor’s degree and are 50 percent more likely to be unemployed. So it isn’t hard to see why parents might be tempted to make paying for their kids’ college education a priority over saving for their own retirement.

At the same time, college costs have, according to published reports, increased 1,225 percent since 1978 (that is not a typo)—more than housing, food or health-care expenses. Penn State cost my parents $7,500 a year, but I will be on the hook for almost $40,000 a year if my son goes to the same school. (It hurts me just to write that sentence.)

As a consequence, parents who are willing to provide a more lucrative future for their children do so at the expense of their own. It should be no surprise, therefore, that 57 percent of U.S. workers have less than $25,000 in savings. Meanwhile, student debt has reached $1.2 trillion, growing seven times faster than this country’s mortgage debt in just the past 10 years.

So what to do? A flexible game plan might be the best option.

Sure, the 529 plan allows parents to save money in a tax-deferred account with no taxes on distributions if used for qualified education expenses, but why not manufacture a similar outcome with a retirement vehicle? In other words, here is a chance to kill two birds with one stone.

For example, a Roth individual retirement account offers tax-deferred growth and tax-free distributions, a winning combination for anyone trying to save for retirement. Should the account holder choose to use that money for a child’s education, they might be in luck. Contributions made to a Roth IRA can be withdrawn tax-free if used for a qualified education expense.

Moreover, the Roth IRA will treat those distributions on a “return of contributions first and earnings second” basis. In other words, a $5,000-a-year contribution for 10 years would allow a parent to withdraw $50,000 for college tax-free and leave the earnings in the same account to be used during retirement.

Most households depend on a 401(k) plan to save for retirement on the grounds that they receive a tax deduction today and pay ordinary income taxes when they take distributions later, presumably when they are in a lower tax bracket. I suspect, however, that if somebody offered to lend me money without disclosing the interest rate or any of the terms, I would decline the invitation.

That is exactly what a 401(k) plan is, a tax-deferred contribution today in exchange for the expectation that tax rates will be lower when 70 million baby boomers are receiving their entitlement benefits. Furthermore, a hardship distribution from a 401(k) to pay for education is still subject to the 10 percent early withdrawal penalty for those younger than 59½, and that is on top of ordinary income taxes.

Another option to consider is cash-value life insurance to plan for both objectives. Should the policy offer attractive guaranteed rates of return, over time the cash value will grow to a reasonable level without being subject to market volatility or capital gains taxes. When it is time for either college or retirement, the policy holder can borrow money from the cash value and pay it back with the death benefit when they die.

Please note that when you borrow money from a life insurance policy, it doesn’t show up as income and has no impact on financial aid or the tax rate on Social Security benefits. These policies are known to have high expenses but may offer steady returns, tax-deferred growth and no exposure to income taxes in the future.

There are several strategies that can address the same goal, so find one that lets you sleep at night. If you are comfortable working longer in exchange for your child’s education, then own it. List it as a priority, write it down, and don’t second-guess the decision later. The only reason anyone ever gets upset is because their expectations aren’t met. Our life is the sum total of the choices we make, so it is about what is important and what we can live without.

When it comes to retirement vs. education, choose wisely, make a plan, stick to it, and avoid that tug-of-war.

H/T Source: The Fiscal Times