MONEY Health Care

Even an Appendectomy Can Hurt Your Credit Rating

150520_EM_AppendectomyCarLoan
Steve Wisbauer—Getty Images

The medical billing error from hell

When Saideh Browne had an emergency appendectomy in the summer of 2012, she had no idea it would raise the cost of a car loan three years later.

The 44-year-old personal trainer from New York recently visited a dealership to buy a new Honda Accord and discovered her credit score had been dinged by two lingering medical bills for $770 that had gone to collection.

Browne says she did not purposefully ignore the bills, nor did she shirk them because she could not pay. Like many other people, she got caught in an endless loop of indecipherable paperwork between the many providers involved in her care and the insurance company. The amounts due and the reasons listed for the charges kept shifting. Browne did not want to pay a wrong bill and never see the money again.

“I’m an astute consumer, but it gets confusing,” Browne laments. “You don’t know what bill is what.”

Almost 50 percent of medical bills have errors, according to government data studied by NerdWallet, which has a medical bill review service.

“It’s quite staggering,” says Christina LaMontagne, a general manager for NerdWallet. “Probably all of us have been mis-billed on a medical service.”

That includes LaMontagne, who recently received a medical bill she did not understand that was due in 30 days. Her first recommendation to consumers: ask for an itemized statement.

Therein lies the dilemma for most consumers.

“There are cobwebs in the system,” LaMontagne says.

So what is a consumer to do? Here are the three steps to keep your credit healthy:

1. Communicate immediately, in writing

You can pick up the phone to call your provider and the insurance company, but you need documentation, says LaMontagne. The doctor and insurance company need to respond back to you in writing, or you have grounds for appeal because you were not properly notified.

Disputing a charge should stop the clock, but there is no guarantee your unpaid bill will not be sent to collection.

The average time a provider will carry a bill is usually 120 days, which is how long Medicare providers are required to wait, says Chad Mulvany, director of healthcare finance policy for the Healthcare Financial Management Association, a trade group for hospitals.

LaMontagne says significant anecdotal evidence exists that more bills are being sent to a collections agency after 90 days, so the transition to collection could be quick.

1. Get outside help

If you are getting nowhere with your provider, turn to your state insurance commission.

You can also hire a bill resolution company, such as NerdWallet Health or Medical Billing Advocates of America, which charge either a flat fee or take a percentage of the savings you achieve.

Some workplace human resources departments also offer assistance, or at least can run interference with insurance companies.

Expert help is important because many collection agencies prey on consumer fear and tend to go away quickly if confronted by somebody who knows the law, says Pat Palmer, president of Medical Billing Advocates.

For instance, collection agencies are not supposed to be familiar with your medical details. So the first thing Palmer does for clients is call and ask about the charges. If the agents know what the bills are for, she tells them they have violated medical privacy laws. “You never hear from them again,” Palmer says.

3. Negotiate a payment plan

Most medical providers want to close out your account. Setting up a payment plan could get the monkey off your back, says Healthcare Financial Management’s Mulvany.

Most of all, paying something allows you to move forward, says credit expert Beverly Harzog, author of “The Debt Escape Plan.”

“If you don’t take care of it, it’s going to drag you down,” Harzog says.

That is exactly what Browne has done, setting up a payment plan for the unexplained bills.

“At this point, I just want it to go away,” she says.

MONEY Kids and Money

The Best Way to Bank Your Kid’s Savings

150403_FF_KidBankAcct
YinYang—Getty Images

After the piggy bank fills up, here's how to launch your child on the path of saving and investing.

When I told my 7-year-old that her wallet was getting full and it was time to open a bank account, her eyes widened. She wanted to know if she would be allowed to carry her own ATM card.

Um, no.

When transitioning from a piggy bank to handling a debit card linked to an active account, financial experts say it is best to start with a trip to a bank, but which one and when? Here are some steps to get started:

1. Bank of Mom and Dad

Don’t be in a rush to move away from the bookshelf bank, says financial literacy expert Susan Beacham. There are lessons to be learned from physical contact with money.

Sticking with a piggy can be especially effective if you teach your kids to divide their money into categories. Beacham’s Money Savvy Pig has four slots: save, spend, donate, invest.

When you cannot stuff one more dime into the slots, it is time to crack it open and seek your next teachable moment.

2. Neighborhood Convenience

Many adults bank online, but kids still benefit from visiting a branch, says Elizabeth Odders-White, an associate dean at the Wisconsin School of Business in Madison.

Do not worry about the interest, Beacham says. “A young child who gets a penny more than they put in thinks it’s magical. You’re not trying to grow their money as much as grow their habits.”

Your second consideration should be fees. Your best bet may be where you bank, where fees would be determined by your overall balance and you could link accounts.

Another option is a community bank, particularly a credit union, which are among the last bastions of free checking accounts.

“The difference between credit unions and banks is that credit unions are not-for-profit and owned by depositors,” says Mike Schenk, a vice president of the Credit Union National Association.

At either type of institution, you could open a joint account, which would be best for older kids because it allows them to have access to funds through an ATM or online, says Nessa Feddis, a senior vice president at the American Bankers Association.

Or you could open a custodial account, for which you would typically need to supply a birth certificate and the child’s Social Security number. Taxes on interest earned would be the child’s responsibility, but likely would not add up to much on a small account. A minor account must be transferred by age 18 to the child’s full control.

3. Big Money

If your child earns taxable income, the money should go into a Roth individual retirement account, experts say. There is usually no minimum age and many brokerage firms have low or no minimums to start an account. You can pick a mix of low-cost ETFs, and let it ride.

Putting away $1,000 at age 15 would turn into nearly $30,000 by age 65, at a moderate growth rate, according to Bankrate.com’s retirement calculator.

Not all kids can bear to part with their earnings, but there are workarounds. One tactic: a parent or grandparent supplies all or part of the funds that go into the Roth, akin to a corporate matching program.

The other is to work with your child to understand long-term and short-term cash needs. That is what certified financial planner Marguerita Cheng of Blue Ocean Global Wealth in Potomac, Maryland, did with her daughter, who is now in her first year of college.

While mom and dad pay for basic things like tuition, the teen decided to pool several thousand dollars from her summer lifeguard earnings, money from her on-campus job and gifts from her grandparents to fund several educational trips.

“She would make money investing, but it’s only appropriate if you have a longer time horizon,” says Cheng. “It’s not even about the money, it’s the pride she gets from paying for it herself.”

MONEY Taxes

3 Tax Loopholes for the Merely Middle Class

You don't have to be super wealthy to find profitable loopholes in the tax code.

Former presidential candidate Mitt Romney’s legendary tax deduction for his horse may sound like the ultimate boondoggle of the super rich.

Ditto for writing off the private jet, stashing money in offshore accounts and paying the nanny as a corporate employee.

Here are some other tax loopholes that might be within your reach:

1. Maximize your 529

The tax benefits of a 529 college savings plan are baked right into the plan—you put in after-tax money and the proceeds grow tax-free, like a Roth individual retirement account. In some 34 states and the District of Columbia, you also get a tax benefit on your state taxes. But there’s more to it than that.

Depending on the state, each parent can make a contribution for each child. That’s why Patrick Beagle, a financial planner at WealthCrest in Springfield, Va., has four accounts for his two children. Beagle and his spouse each contribute the maximum of $4,000 per year for his state’s tax break, for a total of $16,000.

You can also front-load your 529 savings by making several years of contributions at once, something President Barack Obama and his wife Michelle were able to take advantage of for their two daughters, putting $240,000 away all at once in 2007.

Depending on the state, there may be no time limit on how long your contribution has to stay in the 529 account before you get a deduction. If you have a child who is already in college, you can make your yearly contribution, get the tax credit and then withdraw it for use immediately.

2. After-tax Roth conversions

Want to fill up your Roth IRA but either make too much to qualify or find the $5,500 per year limit too low? You can contribute after-tax money to your 401(k) and convert it to a Roth, thanks to a new Internal Revenue Service notice.

Jim McGowan, a certified financial planner with the Marshall Financial Group in Doylestown, Penn., altered his tax-planning strategies for many of his clients because of this change.

For those whose companies allow it, McGowan is having clients put aside $20,000 to $30,000 extra in their 401(k)s after they have maxed out the $18,000 allowed with pre-tax money.

The total an individual can save per year, including any matching funds, is $53,000, so there is plenty of wiggle room.

McGowan’s clients are just starting to utilize Roth conversions, so nobody has rolled over funds yet. “Potentially, it could be an enormous benefit tax-wise,” he says.

Not the least of which is that if you put the same amount in a brokerage account, you’d be paying capital gains every year. But with the extra in a 401(k) and then rolled into a Roth, the funds are sheltered.

Likewise, you can make a “back-door” Roth contribution, even if you are over the income level of $183,000 for singles or $193,000 for married couples.

First, you contribute after-tax dollars to an IRA, which you can do up to the regular limits of $5,500 or $6,500 for those over 55. You can then convert this “non-deductible IRA” at will to a Roth, says Harvey Bezozi, a tax accountant with his own firm in Boca Raton, Fla.

“Some people commingle the funds with a traditional pre-tax IRA, but I like to keep them separate so you can keep track of what you did,” he says.

3. “Business” income

You don’t have to buy a farm, like one of Patrick Beagle’s clients did, just to get some additional expenses to off-set income. Any small business will do.

Beagle has clients who sell products at home-based parties through companies like Thirty-One and Silpada. This opens up a lot of other deductions because they are using part of their home as an office or to store merchandise. There are also phone costs, office supplies, and advertising costs to consider.

And all that guacamole for the handbag party? A legitimate business expense.

MONEY Kids and Money

The Best and Worst Ways to Give Your Teen Credit

When your kid needs access to serious money, what kind of plastic is best for the job?

When your children’s concept of pocket change involves actual change, helping them keep track of their money is pretty easy. But when they start needing serious coin to gas up a sports utility vehicle, or travel abroad, you need more sophisticated financing alternatives like a credit card.

Keith Singer saw the light when his teenage son’s backpack was stolen at school, and he realized there had been $300 in his wallet. “He lost all his money,” says Singer, a wealth manager from Hollywood, Florida.

Here are some options, along with what you need to know before you give your teen access to credit:

Your Credit Card

Pros: Adding your child as an authorized user should take a simple phone call, and the child will have her own card to use. You can usually get a separate accounting of their charges.

Cons: The card will have your credit limits. Plus, no restrictions will be imposed on spending. Also, U.S. cards do not always work in foreign countries. They often have high transaction fees abroad, especially for cash advances.

Parents say: It’s hard to trust a teen with your own credit. Curtis Arnold, editor-in-chief of cardratings.com, added his two oldest children as authorized users on his accounts, but never gave them the cards. “We’ve never felt comfortable handing them a card other than for one-time use,” he says. His top fear: they would lose it.

Bank Account with ATM Card

Pros: It may take an in-person visit to a bank to open up an account for a minor, but then you can link it to a parent’s account to easily transfer funds. The ATM card makes it easy to get cash while traveling and can be used as a credit card. If you do not sign up for overdraft protection, transactions will be denied when funds are not available.

Cons: Beware that fees can rack up if the account does go negative or below a required minimum. Debit cards do not offer all the same consumer fraud protections as credit cards. They may incur overseas transaction or ATM service fees, and they require parental attention to keep adding funds.

Parents say: When one of Elizabeth Powell’s 16-year-old triplets went to England last summer, he opened up an account at his dad’s credit union. Then she transferred in several hundred dollars a month. The teen was able to use the debit card for his needs in British pounds, with minimal fees. “The system worked perfectly,” Powell says.

Keith Singer says one additional benefit for the bank account he opened for his son, who is now 17, is that it encouraged the teen to deposit his summer earnings.

Prepaid Debit Card

Pros: Getting one is easy, and most have slick mobile interfaces. As they are not linked to any bank account or credit line, there are fewer worries about overspending, loss or identity theft. Some cards, like Oink, allow parents to restrict spending in certain categories, like alcohol.

Cons: Some prepaid cards come with lots of hidden fees just to access your own money. They do not help build a credit history.

Parents say: Arnold likes the Bluebird card offered by Wal-Mart and American Express because, he says, “it’s like a credit card on training wheels.”

Most of all, he likes the relative safety of it. His oldest son had a credit card that was compromised while he was a senior in college. “With a prepaid, you don’t run that risk because they could wipe out the account, but not the whole checking account,” Arnold says.

Personal Credit Card

Pros: Building a credit score at 18 is smart. A typical newcomer does not start at zero, but rather at around 600, says Greg Lull, head of consumer insights at Credit Karma. That is in the middle range between the top of 850 and the bottom of 300.

Cons: If your young adult is not ready to handle the responsibility, his credit score will drop, and he will build up debt. Most young adults bottom out at age 21 before turning things around, says Lull.

Parents say: When our kids are ready, we’ll go for it. Arnold says of his third child, who is now 17: “Once he gets through freshman year of college, maybe we’ll do regular debit card, and then as an upper classmen, get a student credit card for him.”

MONEY Taxes

How to Avoid Audit Red Flags When You Change Up Your Taxes

red flag
iStock

A break from how you normally file your taxes can lead to costly mistakes—and attract the attention of the IRS.

Taxes are one of the few constants in life, but what happens when you change the way you do your return?

People move or get divorced, tax preparers pass away. There is always the lure of do-it-yourself—the number of people using tax software to file, like Intuit’s TurboTax, increases by 6% annually, according to the Internal Revenue Service. And then there is the reverse exodus of people who have decided their financial lives are too complicated, and they need to hire a professional.

With so many changes, consistency takes a beating. If you are on the wrong end of it, you could end up drawing the dreaded attention of the IRS.

Here are the items that can trip up taxpayers when they switch the way they do their taxes:

1. Mileage logs

When John Dundon took over his father’s tax business after he passed away last July, the biggest surprise for the Denver, Colorado-based tax preparer was that road-warrior clients were not keeping mileage logs.

“Boundaries erode all the time between practitioner and taxpayer,” Dundon says. Laziness seeps in disguised as trust, and years later, there are simply no logs.

Dundon tells his father’s crossover clients they need a renewed zeal for paperwork—get a GPS device or a smart phone app for next year. For 2014 taxes, he is asking clients meticulously through calendars and maps to sort it out.

2. Rental property depreciation

Depreciation is a deduction you can take on certain assets, like rental property. The tax impact can be pretty significant, especially if you are trying to off-set income like rent.

The dollar amount is determined by a formula you follow year-after-year, called a depreciation schedule, which could run almost the full course of a 30-year mortgage.

“You definitely need that schedule. You can try to guess at it, and you’d probably be okay, but you wouldn’t be doing it 100% right,” says tax preparer Anil Melwani, who runs his own firm, 212 Tax & Accounting Services, in New York.

If it was not done at all previously or done wrong? You’ll need to file an amended return to correct it, Melwani says.

3. Carryforward losses

The IRS allows taxpayers to take $3,000 in losses a year on investments, and to carry forward those losses indefinitely until the amount is all used up. But use it or lose it—meaning, if you miss a year because you forget, you can’t pick it up in the following years as if nothing happened.

Harvey Bezozi, who has his own firm in Boca Raton, Florida, has a new client this year who will likely have to file amended returns because she skipped over this with her last preparer.

4. Home office

Taking the home office deduction? Stay consistent with the square footage of your home office. The best way to do that is to get out your tape measure and only include space that you use exclusively for work.

If there’s a pingpong table in the middle of the basement study you’re trying to claim, that’s a no-go, says Dundon.

5. Life changes

There is a lot that a new tax preparer—or a tax software autobot—can learn about you by just looking at your past returns, but their questionnaires will not catch everything. If you have a baby, buy a house, get divorced, have income in a foreign country or have job-hunting related expenses, you’ve got to speak up.

But things can get missed when people do not know enough to know what they are missing. That’s what drove a DIY-type like Ben Jaffe into the hands of a paid tax preparer this year.

Jaffe, a 29-year-old who works in PR in New York, bought a house in 2014 while his wife had a baby. He made the switch away from tax software because, he says, “I wanted an expert opinion to verify that I was doing everything right.”

One hour and $500 later, he’s feeling confident: “It saved me a lot of time and stress.”

MONEY Credit

Getting a Free Credit Score is Now Easier Than Ever

The reason your number is going up or down can still be a mystery, though.

As a Citibank customer, I have been receiving my credit score on my statements since January. In February, my number went down five points, leaving me wondering: What did I do wrong?

There are still some mysteries in the world of credit scores, which financial institutions use to determine whether to give a person a loan and how much to charge for it. But the biggest unknown—what is your score?—has been solved.

While consumers could get their credit reports for years at no charge, their scores were not available, or they had to pay for them. In the past year, however, more than 60 million Americans suddenly were able to get either their FICO score, provided by the Fair Isaac Corp, or their VantageScore, from a system developed by the credit reporting bureaus.

Among the other financial institutions giving out scores each month are Ally, Chase, Bank of America , Barclays, Discover, and USAA.

“I keep this growing list of all of the free credit-related services that are now being given away from websites and credit card issuers,” says John Ulzheimer, president of consumer education at CreditSesame.com. “It’s cool to see the momentum.”

The push for open access came from both market forces and the U.S. government. The hope is that consumers with ready access to their scores will make smarter financial choices, like not paying bills late.

So far, so good. “The anecdotal evidence we’re seeing from both lenders and consumers indicates people who know their FICO Scores tend to develop healthier credit habits than people who don’t know their scores,” says FICO spokesman Jeff Scott.

Discover, which has provided about 10 million scores a month for the past year, has seen customer questions evolve from basics to the minutiae of the many factors, such as your payment history and the amount you owe, that drive the credit score algorithm. The company added a specially trained customer service unit to deal with questions, says Discover President Roger Hochschild.

What consumers generally need to know is that credit data is collected by three reporting agencies—Equifax, TransUnion, and Experian—and there are a range of scores generated. Car dealers may use a slightly different score than mortgage lenders, for instance.

Most people will find that their scores do not shift much, month to month. At Discover, 80% see a move of less than 20 points a month, according to Hochschild.

Also, most volatility is at the high end, above 775, on scores that top out at just above 800. But that in itself is nothing to worry about. “When you move from 790 to 750, you’re still in the great range,” Hochschild says.

A score below 600 is considered bad, while roughly from 620 to 690 is average.

My score probably fluctuated because of some big charges last month. Even though I paid them off in full, it would have lowered my available credit temporarily.

How to Affect Change

Whatever score you see you on your monthly statement will be a good indicator of your general creditworthiness. If it shocks you, you can take action.

Order full copies of your credit reports to see the details. You can get one free report annually.

Do not bother calling the financial institution providing the score, as you are unlikely to get much detailed information, says CreditSesame’s Ulzheimer.

Sometimes a low score is simply a mistake or a matter of one reporting bureau not aligning with the others.

This happened to Kevin Yuann, director of credit cards at Nerdwallet.com, a credit card information website. He found that one bureau did not have a listing of an account the others had, so it gave him a lower score. He was able to get the bank to report the account to the credit bureau.

You will not be able to change an item like a ding for a late payment. But it is useful as a deterrent for the next time.

In fact, Discover’s Hochschild thinks this might be one of the most valuable things about ready access to one’s credit scores: “It’s like knowing your cholesterol.”

 

MONEY Housing Market

Why More Home Buyers May Be Trading Up to Bigger Digs This Spring

fish jumping into bigger fishtank
Phil Ashley—Getty Images

A tight inventory of houses for sale has been stymying buyers who want to trade up. That could change soon.

Joe and Debbie Valerio, a couple in their 60s, put their Westport, Conn., home of more than 20 years on the market because it was getting too big for them.

When they found a nearby condo they loved, they pounced. That set off a chain reaction allowing Peter and Leah Baiocco, a couple in their 30s, the ability to trade up.

The Baioccos lived a few miles away, contemplating a future move to a bigger home once kids came along. With favorable economic conditions, they jumped at the chance to buy the Valerios’ $2.7 million house last April. After renting it out for nearly a year, the Baioccos’ starter house in Fairfield, Conn. is on the market for $739,000.

This seemingly simple sequence of events is still relatively rare in the U.S. housing recovery. Despite an improving economy and rock-bottom rates, inventory of available homes is inconsistent. Anything more than a trickle of listings sends prices down, causing sellers to pull their homes off the market.

Then prices go up again because competition gets fierce, and sellers re-emerge. As a result, a bustle of trade-up activity is expected for this spring’s selling season, before conditions change again.

“I think a lot of people have made a lot of money in the stock market the last few years. People who want to enjoy a luxury home, now is the time. Everyone has more cash available to them,” says Ken Barber, a real estate agent in Wellesley, Mass.

Other positive signs: new single-family housing starts are at a high since 2008, according to the Commerce Department’s latest report.

Also, fewer homeowners are renting out their homes to delay selling them, down to 35% in 2014 from 39% in 2013, according to Redfin, a real-estate brokerage.

And more consumers have positive equity. Last spring, 19% of homeowners in Redfin markets (such as Atlanta and Philadelphia) had low or negative equity. That was down to 11% in November. Nela Richardson, Redfin’s chief economist, expects it to hit 8% by March 2015.

Even better for buyers, interest rates are near-historic lows below 4%. “The question of staying versus leaving is shifting. For people who were afraid to leave their mortgage because they thought it was the best they’re ever going to get, now there is another good mortgage around the corner,” Richardson says.

Those trading up in 2015 should hit a sweet spot of selling near the top but not buying at the top, says Margaret Wilcox, an agent from agent in Glastonbury, Conn., for William Raveis.

Wilcox says a client couple recently traded up from a $500,000 house to a $1 million home. They did not get quite the price they wanted for the sale of their old home, but they got a discount of nearly $300,000 on their new purchase, Wilcox says.

There are a few red flags for buyers and sellers. Seller confidence is still low, with just 35% of sellers thinking now was a good time to sell, versus 48% the previous year, according to Redfin.

Keith Jurow, a housing market analyst who writes the Capital Preservation Real Estate Report, is something of a doomsayer and thinks talk of a housing recovery “is phony and only an illusion,” he says.

Given the number of mortgages originated between 2004 and 2010, he feels that too many of the people who would like to trade up still have little or no equity in their homes and are not prepared to do a sale below their purchase price.

“Unless you bring more cash to the table, you can’t trade up,” Jurow says.

Also, foreboding makes some people want to act now. They do not want to be the family that missed their chance, adds Bob Walters, chief economist for Quicken Loans. “People won’t delay forever,” he says.

The Valerios and the Baioccos have only happy thoughts about their real estate choices. They love their new homes.

“In our mind, it’s the house we’re going to be in forever,” says Peter Baiocco.

MONEY interest rates

4 Smart Moves for Borrowers and Savers in 2015

What rising interest rates could mean to you.

Most experts expect U.S. interest rates to rise in 2015, but no one knows when and by how much.

Rate increases rarely happen with great velocity, though. The last time the Federal Reserve raised the federal funds rate, which banks use to lend money overnight, was in June 2006. It brought the rate to 5.25% — after 17 increases.

By 2008, in the midst of the financial crisis, the federal funds rate was down to zero, where it has stayed.

A jump in interest rates in 2015 could have a big financial impact, however, especially if you are looking to buy a home, have credit card debt or own bonds.

Here is what to expect:

Consumer Loans

Rates for consumer loans, which include mortgages and automobiles, are bouncing around 3.75%, a quarter percentage point above historic lows reached in May 2013. Greg McBride, chief financial analyst for Bankrate.com, expects a series of rate hikes in the year ahead.

“This is going to be a very volatile year,” says McBride.

Overall, however, the net change will probably be within one percentage point.

For a car buyer, a change from 4% to 5% would be almost imperceptible. The average auto loan is $27,000, and borrowing that much over five years would mean a difference of just $12 a month.

Home loans are another story, so plan accordingly. Over 30 years, that one percentage point difference in interest rates on a $100,000 mortgage would mean you would pay about $22,000 more, according to an example provided by Quicken.

Credit Cards

Consumers looking to roll over credit card debt to a zero percent balance transfer should act fast, because offers have never been more generous.

“We don’t expect offers to get better,” says Odysseas Papadimitriou, chief executive officer of CardHub.com, which rates credit card offers. Duration of deals is at an all-time high, at an average of 11 months, and the average balance transfer fee is only 3%.

These deals could disappear if the Fed raises rates significantly or a tanking economy causes default rates to surge, Papadimitriou adds.

Consumers tend to focus on the length of the balance transfer deal, which can be up to 24 months, but Papadimitriou says you must also consider the monthly payments, annual and transfer fees and the interest rate after the introductory period ends.

To learn how much you will save each month, use an online calculator like Cardhub’s. It will tell you, for instance, that if you have average credit card debt of $7,000 and are paying the average rate of 14%, you would save enough to pay off your debt two months faster if you transferred it to a zero-percent card with no fee.

Most bank’s websites also provide some suggestions. For example, the Citizens Bank Platinum MasterCard offers a zero-percent balance transfer for 15 months with no balance transfer or annual fees.

Savings Rates

If you are a saver looking for higher yields, life is not about to get rosier in 2015.

“Rates are brutal,” says Morgan Quinn, feature writer for GoBankingRates.com. The yield on the typical savings account is less than 1%.

Good news in this category amounts to rates tipping over 1% on some CDs and savings accounts with high balances.

Interest rates on savings accounts probably will not head toward 3% until 2020, according to GoBankingRates latest report.

In the meantime, the highest rate Quinn was able to find was 1.4% at EverBank for “yield-pledge” checking with a $1,500 minimum opening deposit and an ongoing balance of between $50,000 and $100,000.

Bonds

The benchmark 10-year U.S. Treasury yield fell to 1.89% on Monday, its lowest since May 2013.

If interest rates go up, “it will be a tough year for bond investors,” Bankrate’s McBride says.

You can mitigate this risk with individual bonds by simply holding them to maturity, he says. But if you invest in bond funds, either directly or through target-date or managed funds in your retirement accounts, the value will probably decline.

That is not all bad news if you just stay the course. McBride’s advice: “Buckle your seat belt and hold on.”

MONEY Shopping

You May Already Be Too Late for the Hottest Holiday Toys

141210_EM_HottestToys
Richard Drew—AP If your kid wants Disney's Frozen Castle & Ice Palace Playset, let's hope you bought it already.

Favorites from Frozen, Legos, and more are gone from store shelves or going fast. Expect to pay up if you don't want to disappoint.

If you still have Disney’s Frozen Castle and Ice Palace Playset on your holiday gift list this year, you may already be out of luck.

With Christmas approaching, the $119 toy—made by Mattel Inc—is sold out. Of course, you can find it at resellers for about $225 and even as high as $700 on eBay. There are still plenty of other Frozen-themed toys available—but only for now.

Industry analysts, poring over results from the Thanksgiving holiday week, say the hottest 25 toys have already hit their price lows and will only get more expensive as Christmas nears and the remaining inventory flies off stores’ shelves.

The silver lining? Retailers made a huge bet on toy inventory this holiday season—ordering twice as many shipments of Legos as last year, for instance, according to research firm Panjiva.

Expect fierce price competition at major retailers like Wal-Mart Stores Inc and Target Corp, which carry thousands of toys, notes Jim Silver, editor-in-chief of Time to Play Magazine.

“There will be huge promotions going on,” he predicts.

The sales will not be nationwide shopping events like Black Friday, but will pop up sporadically, culminating in major sales on Dec. 20, the Saturday before Christmas which experts expect to be an extremely heavy shopping day.

“One by one, either loudly or quietly, they will be rolling out some amazing deals,” says Panjiva CEO Josh Green.

Early Birds Get Hot Toys

Consumers love sales, but Silver notes they may be very disappointed if they can’t find the hottest toys.

Besides the sold-out Frozen Castle, there are 12 to 15 items which are currently hard to find, including the Max Tow Truck. It is listed currently around $128 on Amazon.com, depending on color—well above its list price of $59.99. Another hot item is the Imaginext Supernova Battle Rover—currently available for $109.99 at Toys R Us, slightly below the list price of $119.

There are also about 25 to 30 toys that will sell out in the next two weeks, Silver says, especially the most popular new toys in the Lego, Barbie, My Little Pony, FurReal Friend, and Nerf lines.

Toys with a movie or popular culture tie-in drive demand, while interactive pets tend to be short-lived fads (think Zhu Zhu Pets or Furby).

“There are clear bets by retailers—orders for Frozen toys and My Little Pony toys are up massively versus 2013,” says Green.

Most hot toys hit their price lows on Cyber Monday, according to data firm MarketTrack. This year, for example, the FurReal Friend Get Up & GoGo dog, which has a manufacturer’s suggested retail price of $59.99, was being offered for $49.99 at most stores in early November. It went down to $39 just before Thanksgiving and hit $27 on Amazon on Cyber Monday.

The very next day, the dog, which responds to commands from a remote-control leash, was back up to $39. The price is now fluctuating at most stores because of limited supply.

Similarly, the My Little Pony Friendship Rainbow Kingdom Playset, which lists at $39.99, was on sale for $35 at Target on Black Friday and bottomed out at $19.99 on Cyber Monday on Amazon for a half-price sale. It is now back up to $34 at Wal-Mart and Toys R Us.

What should shoppers do if they want the hottest toys?

“Grab the hot items early and then get bargain toys when you can,” Silver says. But you may have to wait until next year to employ this strategy.

 

MONEY Shopping

Why You’re Shopping More for Yourself This Holiday Season

woman trying on shoes at store
Jason Hetherington—Getty Images

Is that giant TV in your shopping cart a gift—or for you? With more people snapping up holiday deals for themselves, retailers are starting to cater to these self-gifters.

Jill Bascou looked like a typical holiday gift shopper standing in line on Thanksgiving Day shortly after the Target in Marlton, New Jersey opened at 6 p.m.

Except she wasn’t buying for other people.

The 39-year-old was waiting to get herself an iPad. In her cart was the xBox her husband had been coveting, and her father was in another part of the store hunting down a giant, cheap TV—for himself.

Retailers call this self-gifting. Look at a major store’s circular advertising holiday gifts—from the $5 toasters at Kohl’s to a $279 Dyson vacuum at Target—and you’ll see the top draws are items people typically buy for themselves.

Marshal Cohen, chief retail analyst at NPD Group, started tracking the trend of self-gifting six years ago, after interviewing a shopper on Black Friday at a Macy’s.

The woman had a huge pile of clothes over one arm and a smaller pile on her other. Cohen was surprised to learn that woman was buying the big pile for herself. Her mother and sister were the designated recipients of the other pile.

Now 30% of purchases over the Thanksgiving holiday are attributed to self-gifting, Cohen says. Surveys from the National Retail Federation bear this out, showing that 77% of shoppers took advantage of discounts to buy for themselves over the holiday weekend.

Toys are the obvious exception, but almost everything else—the TVs, the home goods, even the clothing—are items that people are often buying for themselves.

Retailers have been catching on, adjusting inventories and messaging. Kathy Grannis, spokesperson for the NRF, points to a pop-up gift tag ad recently on Gap’s website that read “From Us to You,” and was clearly meant to engage self-gifters.

For clothing retailers, Grannis says the enticements to shoppers are often in the form of a significant discount off the whole store. Old Navy offered half off everything on Thanksgiving Day, which drew Sarita Henriquez, 36, of Burlington, New Jersey, to shop for herself, with no set spending limit in mind.

“I’m being greedy this year,” Henriquez said as she waited in her car for the store to open at 4 p.m.

“I hear self-gifting reported as greediness, but there’s really more nuance than that,” says Kit Yarrow, a consumer psychologist and author of Decoding the New Consumer Mind.

Yarrow breaks down self-gifting holiday shoppers to three types: those buying special things like outfits and decor in order to be more social; those delaying purchases because they are expecting bargains, and those who are buying on impulse based on what’s available.

Impulse buyers are the key target for retailers’ special doorbusters. These are folks like the Hartman brothers, (Ed, 25, Shawn, 24, and Tyler, 21) who, while visiting family for Thanksgiving, each waited for cheap TVs at a Best Buy near Cherry Hill, N.J. to put in their own homes.

Cohen’s advice for shoppers who missed out on the early sales and are still waiting for big discounts: “Be patient and wait for the price to come to you.”

Don’t obsess over getting the absolute rock-bottom prices if it means delaying what you want, Cohen adds. You can always return an item if you find it for less and try to get the store to price match—as long as you have your receipt.

And just wait until you see next year’s sales.

“Retailers will figure this out,” says Cohen. And then Thanksgiving week will be even more about self-gifting, “and then there will be another set of doorbusters for later in December.”

Your browser is out of date. Please update your browser at http://update.microsoft.com