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Money Market Accounts Could Drag Down Your Retirement Savings

After the stock market meltdown of 2007 and 2008, many Americans grew wary of investing and moved more of their savings into money market deposit accounts. These have less volatility than stocks and a higher return rate than traditional savings accounts.

In fact, the total amount in money market accounts has nearly doubled since the stock market crash, from around $2.7 trillion at the end of 2007 to more than $5.1 trillion as of this June, according to data from the Federal Deposit Insurance Corp.

Trading the volatility of stocks for the safety of a money market account might sound like a good idea, but many financial advisors believe that putting long-term savings, such as retirement savings, into money market accounts — and forgoing the better long-term returns of the stock market — would cost Americans plenty.

Money market accounts usually return 1% or less, which is lower than the rate of inflation. That means people are essentially losing money they’re hoping will ease them through their retirement years.

We asked Anna Sergunina of MainStreet Financial Planning to explain how money market accounts may be hurting consumers and what they should be doing instead. Anna is a member of NerdWallet’s Ask an Advisor network.

Are people costing themselves money by putting their retirement savings in money market accounts?

Yes. Money market accounts are good places to park your short-term money, but these accounts are paying very low returns, 1% per year if you are lucky. With inflation at 3% or more per year, you won’t be able to make your savings stretch very far. That’s where stock and bond market investing comes in handy. It helps you stay ahead of inflation.

Are there some cases where you should keep your money in money market accounts?

Yes, but only if you plan to be using the money in the next year or two. This way you can avoid any short-term market fluctuations and the potential loss of principal.

It’s best to think about your financial goals: Are you planning to buy a car in the next few months? Are you going to do a home remodel next year? Are you going to take a costly vacation soon? If the answer to these questions is yes, putting money in a money market account is a good idea, because you wouldn’t want to see that money shrink due to a bad month for the stock market.

You can also use a money market account as the place where you keep your emergency fund. This is the place where you want to keep at least three months of expenses to pay for any unforeseen costs that come up, like car repairs. Money markets are liquid, so you can easily withdraw this money when it’s needed.

» MORE: Here are the best money market accounts

What would you tell cautious investors who think the stock market is dangerous?

The stock market is not a dangerous place if you have the right strategy in place. The key thing to know about the stock market is that it needs time — time to work for you and time for your money to grow. Historically the stock market grows an average of around 7% per year. But that doesn’t mean it grows that much every year. For this reason, we recommend investing more money in the stock market when it is for long-term goals such as retirement savings, because then you’re giving it time to grow and you can ride out the ups and downs.

Are there any other investing tips people should keep in mind?

I like the idea of a “buckets of money” approach for investing. Think of your savings vehicles as short term (one to three years), medium term (three to seven years) and long term (seven years or more).

In your short-term bucket, you should only have “safe,” FDIC-insured investments such as savings accounts and money market accounts. Your medium-term bucket can include some stocks and bonds to generate more return, since three to seven years should be enough time to capture the upside of the stock market. For your long-term bucket you definitely need to have significant stock-market exposure. Your goal is to help your money grow so that it lasts longer and beats inflation.

Anna Sergunina is a financial advisor, the owner of MainStreet Financial Planning, and creator of the Money Library platform. MainStreet has offices in California, Maryland, New York and Washington, D.C.

New Tool Helps Prevent Credit Card Fraud

MoneyTips

IdentityMind, a digital security company, has introduced a new tool called Weave to help retailers and others verify a consumer’s identity by using information pulled from social networks, public sources, and a number of different sanctions lists. This information will help identify when someone is trying to purchase items for malicious use and to cut down on the number of improper credit card declines. Online retailers and even a number of brick and mortar stores see false declines on credit cards. This occurs when the card issuer declines a charge because it appears suspicious. There are a number of different types of charges that can trigger this security mechanism. If the consumer has bought unusual items that do not fit their spending patterns or has made a very large purchase, the purchase may be flagged. Another false decline can come from using the card in a locati...

How to Deal With Student Loans When You Owe More Than Your Annual Salary

You borrowed money to pay for school, but when it came time to start working you found that your loans add up to more than your first year’s salary. It’s not ideal, but it’s not an impossible situation, either.

Follow these tips to make your payments more manageable.

Assess your financial situation

The first step toward taking charge of your student loan debt is figuring out where you stand. For your student loans, find out how much you owe, what your interest rates are, how much of your monthly payments goes toward paying down the principal and how long you have to pay it off. Then do the same exercise for any other types of debt you have. Once you have all the information in front of you, it’ll be easier to see where your money should be going.

But before you can solely focus on paying off your student loans, registered investment advisor Tom Martin advises considering another aspect of your finances: your emergency fund. It’s how you’ll be able to handle unexpected costs, like a flat tire or a fried hard drive. As a general rule of thumb, NerdWallet advises saving three to six months’ worth of living expenses.

For Martin’s millennial clients with student loan debt, he suggests starting off by working toward a $1,000 emergency fund.

Prioritize your high-interest debt

Anyone with a large amount of student loan debt knows the weight of that debt hanging over your head can be stressful. And it’s probably tempting to throw all of your extra cash at your student loan payments.

But you may be better off using that money elsewhere. Credit cards and personal loans, for example, tend to have higher interest rates than federal student loans — think 25% or higher versus 3.4%.

“Financial advisors typically talk about the benefits of compounding interest to millennials because of their long time horizon. Carrying high-interest debt causes just the opposite. With debt, compounding is now working against you,” says Matt Hylland, a registered investment advisor based in Virginia.

Take advantage of repayment plans and forgiveness options

If you have federal loans, switching to an income-driven repayment plan can lower your monthly payments to as low as $0 per month. Plus, after 20 to 25 years, any remaining balance will be forgiven.

There are a few financial drawbacks: The forgiven amount will be taxed and your total interest payments will be higher. You also have to reapply every year. But keeping your payments manageable will help you stay on track and out of default, which can negatively impact your credit score, lead to wage garnishment, and cause your entire student loan debt to become due at once.

Another forgiveness option for federal loans is public service loan forgiveness. It’s available to those who work for a nonprofit or the government for at least 10 years and make 120 on-time payments on their loans. If you plan to sign up for PSLF, you can cut costs even further by switching to an income-driven repayment plan to lower your monthly payments.

If you’re ever having trouble making your monthly payments, contact your loan servicer to go over your options. If you have loans from a private lender, you may be able to postpone your payments for a period of time.

Live like you’re still in college

Getting that first big paycheck is cause for celebration, but you should continue to be pragmatic with your spending. That doesn’t mean you have to wipe out fun purchases altogether: Financial planner Catie Hogan advises taking a creative approach to cutting monthly costs.

“Instead of going out for an expensive night of dinner and drinks, have a dinner party where everyone contributes to the meal,” Hogan says. “So many cities now offer free community fitness and yoga, festivals, and concerts. It’s all about how resourceful you can be.”

Whatever changes you can make to cut your cost of living, know that it’ll be easier to replicate the college lifestyle when you’re fresh out of school rather than when you’ve spent months living at or above your means. So the sooner you make those adjustments, the easier it’ll be.

Use deferment and forbearance as a last resort

If your student loan payments are too high and you’ve exhausted all other options, look into getting a deferment or forbearance on your loans while you get your finances in order.

Both deferment and forbearance will allow you to postpone your student loan payments, but only deferment on federal loans allows you to do so interest-free; the government pays the interest on subsidized federal direct loans and Perkins loans when they’re in deferment. If you don’t qualify for deferment, you may be able to put your loans into forbearance instead, but interest will continue to accrue. For private loans, contact your student loan servicer to see if deferment or forbearance is an option.

If your financial situation is more secure before you come out of deferment or forbearance, consider paying off any accrued interest before your regular payments begin. That way you’ll avoid having that interest capitalized, or added to your principal balance, and save money in the long run.

Devon Delfino is a staff writer at NerdWallet, a personal finance website. Email: ddelfino@nerdwallet.com. Twitter: @devondelfino.

'Mrs. Doubtfire' house hits the market for $4.5 million

Real estate shoppers who are willing to shell out $4.45 million can now purchase a piece of entertainment history. 

>> Read more trending stories  

The San Francisco home featured in "Mrs. Doubtfire" hit the market with a multi-million dollar price tag this week.

The home, featured in the 1993 film starring Robin Williams, is located at 2640 Steiner Street. It was the site of a memorial for the Bay Area-based actor after he committed suicide in Aug. 2014, and it remains an "unofficial memorial," according to KGO-TV.

The three-story Victorian house has four bedrooms, three-and-a-half bathrooms and sits overlooking the San Francisco Bay. It also features a marble bath tub and two-person shower, "garden/patio for al fresco enjoyment," an office/family room, foyer, a remodeled kitchen, space for a personal gym and a multi-car garage. According to E! News, "a piece of the garage actually lifts your car up into the air so you can park a second one under it."

"Because it's built on a wide corner lot, the public rooms are large-scale and the home has an open feel," said listing agent Steven Gothelf of Pacific Union Christie's International. 

The home, built in 1893, is approximately 3,300 square feet.

The current owner, Douglas Ousterhout, is a surgeon who has specialized in facial feminization surgery for transgender patients. He purchased the home in 1997 for $1.395 million, according to the San Francisco Gate. The Gate reported that Ousterhout is selling the home to retire in the wine country.

See more at 2640steiner.com.

Best Things to Buy in October

Most stores follow a similar pattern when it comes to marking down merchandise, so there is a best time of the year to buy some products. The best things to buy in October are the current year’s models of items stores are looking to sell to make way for next year’s models and seasonal items…

Your Capital One Credit Card Could Help You Score Jingle Ball Tickets

Getting tickets to the Jingle Ball tour each winter is no easy task, as each stop tends to sell out within minutes. But landing one of these coveted tickets just got a bit easier for Capital One cardholders. Consider it an early Christmas miracle.

According to an email from a Capital One spokesperson, any Capital One cardholder “is eligible to take advantage of the early ticket sales,” which will happen October 13 at 10 a.m. local market time for each of the 12 cities on the tour. This gives cardholders access to tickets three days earlier than when they go on sale to the general public. Cardholders can order up to eight tickets per transaction and must use their Capital One card to pay, according to the spokesperson.

Plus, one cardholder at each of the tour stops will win the opportunity to head up on stage and announce an artist at the performance. This is the second year Capital One has partnered with iHeart Radio to put on the Jingle Ball concert series.

If you’ve been hoping to catch an up-close glimpse of Charlie Puth or Fifth Harmony — two of the artists announced for the tour (full lineup is expected to be announced October 11) — this card benefit may give you your golden ticket. But, while exclusive entertainment access can be a great perk — and is offered by many different credit card issuers— it may not be in your best interest to buy concert tickets you can’t afford just because you can get them. It’s also not might not be in your best interest to apply for a new credit card just to score access.

Before you sign up for any new credit card, you should read the terms and conditions to be sure it’s right for you. It’s also good idea to review your credit, as having good credit can help you qualify for better terms and conditions. (You can see a free snapshot of your credit report, updated every 14 days, for free on Credit.com.) If you review your credit profiles and discover things aren’t quite where you want them to be, there are things you can do. Consider fixing any errors you discover, paying down debt and limiting any credit inquiries until your scores rebound.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

Related Articles

This article originally appeared on Credit.com.

Green Dot Launches Secured Credit Card: What You Need to Know

Green Dot Corp., a company best known for its prepaid debit card products (and celebrity endorser Steve Harvey), is now offering a secured credit card. Like most secured credit cards, the Green Dot Platinum Visa Secured Credit Card is “designed to help people with no prior credit history or those with poor credit scores build a positive credit history,” according to a press release.

That’s the standard pitch in the secured credit card world: Almost anyone can get one, so you can get in. For the most part, all you need to do is be able to pay a deposit and, sometimes, an annual fee, and then you can use the secured credit card just like any other credit card: Buy things with it, and when your bill comes each month, make sure you pay it on time. If you don’t pay your bill, the bank can take your deposit. (We rounded up some of the best secured cards in America and also have an expert guide to secured credit cards here.)

The Specs

Anyone in the market for a credit card should carefully review the terms of the cards they’re considering. Here’s what potential cardholders will want to know about the Green Dot Platinum Visa Secured Credit card.

Deposit: The minimum deposit is $200. So, if you make that $200 deposit, your credit limit would be $200. The maximum credit limit available is $1,000. Consumers can apply online, and once they receive their card, they can start using it as soon as they make their deposit. For a $4.95 fee, cardholders can make deposits at a Green Dot retailer (like CVS, Walgreens and Wal-Mart, among others). Some retailers can only accept a deposit of $500, so if you’re approved for a higher credit limit, you will need to mail the difference in deposit to Green Dot Bank. Wal-Mart can accept deposits up to $1,000. Cardholders also have the option of sending their deposit by mail, which takes 10 days to process, so you can’t use the card immediately upon receiving it. Green Dot Bank holds onto your deposit.

Bank Account: You do not need a bank account in order to get the card (some secured cards require cardholders to have a bank account to make their deposit and regular payments).

Credit Reporting: Green Dot reports secured credit card activity to the three major credit reporting agencies: Equifax, Experian and TransUnion.

Fees: There’s a $39 annual fee, which comes out of your deposit. “If you are assigned the minimum credit limit of $200, your initial credit will be only about $161,” the card disclosure says. You must pay a $4.95 service fee to make the deposit at a retail location. Paying your monthly bill at a retail location carries a $4.95 fee. Late payments and returned payments each result in a fee up to $27. Cash advance fees are the greater of either $10 or 3% of the advance. Foreign transactions assess a 3% fee on each transaction in U.S. dollars.

Interest Rate: The Green Dot Platinum Visa Secured Credit Card carries a 19.99% APR.

Payment: You can pay your bill online, at a participating retailer or by mail. Paying your bill online requires having “an account with Green Dot, or with any other bank,” according to a Green Dot spokesperson. There are no fees for using online bill pay or paying by mail, but paying at a participating retailer costs $4.95.

Moving Up: At the moment, there is no option for “graduating” from the Green Dot secured card to a standard, unsecured credit card, but the spokesperson said there are plans to do that in the future. Cardholders can request a credit limit increase, which requires adding to their security deposit.

Who Is Green Dot?

Plastic is nothing new for Green Dot, but this is the company’s first credit card. Green Dot offers an array of prepaid debit cards, including the Wal-Mart MoneyCard, which was in the news earlier this year when hundreds of cardholders were unexpectedly locked out of their accounts. The secured card may appeal to many of the same people who gravitate to prepaid debit cards: People without bank accounts and/or who are unable to get credit cards because of a poor or nonexistent credit history. Green Dot touts its network of retail partners as a plus for customers who live in underbanked areas.

Building Credit With a Secured Card

The best thing you can do when using a secured credit card is make all your payments on time, as payment history has the largest bearing on your credit scores. The second most important thing is using as little of your available credit as possible: Credit scoring companies generally recommend you use less than 30% of your available credit, so if you’re only approved for a $200 limit on a secured card, that means you’d want to keep your balance below $60. (Paying your balance in full each month is a good way to keep that balance from creeping up.) It’s a good idea to keep an eye on how your credit-building efforts progress, which you can do by getting a free credit report summary on Credit.com, updated every 14 days. Keep in mind it generally takes six months of activity to establish a scoreable credit history.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

Related Articles

This article originally appeared on Credit.com.

Student Loan Default Rates Continue To Drop

MoneyTips

On Wednesday, the Department of Education released its 2016 annual report, detailing the state of the country's student loans. The report looked specifically at those who left school in September 2013. According to this information, just over 11% of these borrowers are now in default. Although this number is still quite high, it has decreased slightly from the previous year. There are 5.2 million individuals who left college between September 2013 and September 2016. Some of these individuals graduated, but others left school for other reasons. Those who are now in default have not made a loan payment during the past 360 days. The first payment on their federal loans would have been due in March 2014, after their six-month grace period expired. The 2013 default rate stands ...

Housing Costs Are Rising Faster Than Incomes, Study Finds

Homes are unaffordable in more American cities than any time since the recession began, and housing costs are rising far faster than incomes, according to a study released Thursday by ATTOM Data Solutions.

During the third quarter of 2016, 24% of U.S. counties were less affordable than historic averages, up from 19% one year ago, the firm said; that’s the highest rate since the third quarter of 2009.

Ironically, affordability increased in the nations’s most-expensive areas, such as Northern Virginia and Brooklyn, N.Y. — probably because years of high price growth have finally started to level off, the report found.

The study uses an affordability index to measure whether homes for sale are more or less affordable relative to incomes. The index is based on the percentage of average wages needed to make monthly mortgage payments on a median-priced house with a 30-year fixed rate and a 3% down payment, including property taxes and insurance.

The report found that 101 of the 414 counties analyzed had an affordability index below 100. That means a median-priced home in that county was less affordable than the historic average for that county, as determined by ATTOM, the report said.

“The improving affordability trend we noted in our second quarter report reversed course in the third quarter as home price appreciation accelerated in the majority of markets and wage growth slowed in the majority of markets as well as nationwide, where average weekly wages declined in the first quarter of this year following 13 consecutive quarters with year-over-year increases,” Daren Blomquist, senior vice president at ATTOM Data Solutions, said in a press release. “This unhealthy combination resulted in worsening affordability in 63% of markets despite mortgage rates that are down 45 basis points from a year ago.”

The counties whose prices are less affordable than their historic averages include:

  • Harris County (Houston), Texas
  • Kings County (Brooklyn), New York
  • Dallas County, Texas
  • Bexar County (San Antonio), Texas
  • Alameda County, California, near San Francisco

Meanwhile, affordability improved in 153 counties (37%), including pricey spots like Marin County, California, in the San Francisco Bay Area and Arlington, Virginia (5%).

“Some silver lining in this report is that affordability actually improved in some of the highest-priced markets that have been bastions of bad affordability, mostly the result of annual home price appreciation slowing to low single-digit percentages in those markets” Blomquist continued. “This is an indication that home prices are finally responding to affordability constraints — a modicum of good news for prospective buyers who have been priced out of those high-priced markets.”

But that good news ends there. Any relief provided by improvement in household wages, as suggested by the recent Census report, was overwhelmed by housing price increases. “Annual growth in median home prices outpaced wage growth in 368 of the 414 counties (89%) included in the analysis,” the report said.

This is on trend: Since the beginning of 2012, median home prices nationwide have increased 60% while average weekly wages have risen just 6%, ATTOM said.

Buying a Home

Prospective homeowners may have little control over housing prices in their area, but a substantial down payment can help you save over the life of your mortgage. So can a good credit score, since it generally entitles borrowers to the lowest interest rates. (You can see where your credit stands by viewing your free credit report summary, updated every 14 days, on Credit.com.) If your credit needs to be polished, you can improve your scores by paying down high credit card balances, disputing any errors on your credit report and limiting new credit inquiries until your standing rises. You can also potentially cut back on the costs of a home by negotiating a good price. You can go here to learn more about how to do so.

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This article originally appeared on Credit.com.

Chipotle to pay more than $7 million in sexual harassment lawsuit

A jury awarded $7.65 million plus legal fees to a Texas woman on Monday, and Chipotle will have to pay the bill.

>> Read more trending stories  

In a lawsuit filed in 2014, the woman said she was sexually harassed by two managers at a Chipotle restaurant that she worked at in Houston for four months.

The lawsuit, which deemed the woman's then-assistant manager and general manager responsible, also claimed the chain itself was liable, saying the restaurant allowed the harassment to happen.

The victim, now a 19-year-old college student, was 16 at the time of the harassment.

"We feel an employer has an obligation to provide a safe working environment, especially when the employer knows the employee is a minor," attorney Adrian Villacorta said in February

According to WDAF-TV, the assistant manager, Gerardo Solis, started touching the woman inappropriately in the workspace weeks after she was hired.

The lawsuit claimed Solis initially said the touching was accidental, but he later began regularly touching her and "grooming" her for sex at the Chipotle restaurant. By the summer of 2014, Solis was having unprotected sex with the victim "at the restaurant dumpster, in the restroom, in the office and other places," the lawsuit stated.

"In a matter of six weeks, her supervisor was bumping into her breasts, commenting about her breasts," said attorney Ben Hall. "Other supervisors were using cameras to look at the butts and breasts of women at that restaurant."

The lawsuit described a work environment in which managers "would have sex, kiss, hug, sexually touch and pursue intimate relationships."

"It's almost like a brothel that just served food. That's the best way to characterize this restaurant," Hall said. 

Villacorta said the restaurant's then-general manager was aware of the activity and did nothing to stop it.

According to WDAF, the victim's mother said that on one occassion, she went to the Chipotle to pick up her daughter from work and found that she and Solis were not at the restaurant. The mother said the general manager "begged" her not to call police.

"The evidence showed that one of the supervisors had more than 50 (incidents of) unprotected sexual intercourse with this child and oral sex," Hall said.

Hall said the sexual encounters happened every three and a half days on average.

The victim eventually quit her job because of the abuse, KPRC-TV reported.

 "It was definitely hard. I never expected it to be like that," the victim told KPRC. "I just went there to work and earn some money, and I never expected that from managers to treat women like they're not supposed to be treated."

"The fact of the matter is that these sexual assaults were being committed by managers," said Villacorta. "These aren't low-level crew members. These are managers, agents of the corporation. So the jury grasped on to that concept that the manager, who was committing sexual assaults, and an upper level manager, who helped facilitate the assaults, were Chipotle. What they knew, Chipotle knew."

"Chipotle's conduct in this case was outrageous," said Hall. "Chipotle wanted to couch it as a relationship, but the jury was clear you cannot have a sexual relationship with a 16-year-old child. That's why they call it a sexual assault."

Chipotle released a statement, saying, "We care deeply about all of our employees, but even our rigorous policies specifically designed to protect our employees cannot prevent private relationships that happen away from the workplace during non-work hours, such as occurred in this case."

It continued: "We continue to offer our support for this former employee, and hope for her well-being. Chipotle goes to great lengths to provide safe and productive work environments. We have internal policies, procedures, and training to address issues and potential problems between employees, if ever they arise. None of our employees were made aware of this relationship, which took place outside of work. We learned of it only when the former employee's parents demanded money and filed a lawsuit, and by that time, neither of the employees worked for the company any longer."

A jury in Harris County District Court took 3 1/2 hours to reach a verdict. Jurors found Chipotle liable.

"In the words of the jury, they had made up their mind the first week, and they wanted to make sure that the little 16-year-old was taken care of for the rest of her life," Hall said.

"I'm just glad that it's over and justice was made," the victim told KPRC.

She also said the legal victory is "going to help other people to not be scared to speak out." 

Solis is believed to have fled to Mexico to avoid criminal prosecution, WDAF reported.

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