Financial Beat

December 9, 2002

Real estate, Savings, Retirement, College, Mortgages, Taxes, Gifts, Insurance, Bonds, Credit cards

 

Financial Beat

By Yvonne Chilik Wollenberg

Jump to:Choose article section... Are homes in your area overpriced? Early retirees get a break from the IRS Help sorting through college savings plans Tuition is taking a bigger bite College costs for 2002-2003 Shocked by last-minute closing costs? IRS makes electronic filing easier An easier way to give money this holiday season Customers rank auto policy companies Interest rates are creeping up again One less thing to take to the safe deposit box

REAL ESTATE

Are homes in your area overpriced?

Austin, TX, tops the list of metropolitan areas running a high risk that home prices will decline by more than 10 percent over the next two years, says a survey by PMI Mortgage Insurance, a leading provider of private mortgage insurance. San Jose, CA, is the second-most overpriced market, followed by Portland, OR-Vancouver, WA; Seattle-Bellevue-Everett, WA; Salt Lake City-Ogden, UT; Phoenix-Mesa, AZ; Denver, CO; San Francisco, and Oakland, CA.

Despite fears that the real estate market bubble is ready to pop, some experts say real estate is still a bargain in a few cities. The most undervalued city is Buffalo, says a study by Fidelity National Information Solutions, a real estate valuation company. Philadelphia is the second-most underpriced area, followed by Canton-Massillon, OH; Springfield, MA; Albuquerque, NM; Newark, NJ; Springfield, IL; Trenton, NJ; Pittsburgh, PA; Louisville, KY; and Little Rock, AR.

RETIREMENT

Early retirees get a break from the IRS

Those who retired before age 59 1/2 and elected to take fixed payments from their 401(k) or IRA when the market was flush may now be cringing as the tanking stock market gobbles up their savings. The IRS will give these retirees a one-time chance to switch to a payout method determined by the value of their account each year. If your account balance shrinks, so will your required withdrawal; when the market and your account balance blossom, so will your payout.

Annual payments with the new method will generally be smaller than with the fixed-payment method, and that will make your nest egg last longer. Remember, though, that if you switch methods, you won't be able to switch back.

SAVINGS

Help sorting through college savings plans

If picking the right state-sponsored 529 college savings plan is causing headaches, read a new brochure that explains how the tax-free plans work. Put out by the College Savings Plan Network, the North American Securities Administrators Association, and the Investment Company Institute, the booklet answers common questions about 529 plans. It also offers a checklist for picking the right one. You can download a copy of the brochure at the Web sites of any of the sponsoring groups: www.collegesavings.org, www.nasaa.org, or www.ici.org . You can also write to the ICI Investors Awareness Program, P.O. Box 27849, Washington, DC 20038-7850.

COLLEGE

Tuition is taking a bigger bite

The price tag at public universities—though still a bargain—increased this school year nearly twice as much as at private schools, says the College Board, a membership association of schools and universities. Declining tax revenues are to blame for the price hike at public schools.

College costs for 2002-2003

Tuition fees% increase from 2001-02Room and board% increase from 2001-02
4-year private colleges$18,2735.8%$6,7794.6%
4-year public colleges4,0819.65,5826.0
2-year private colleges9,8907.55,3271.6
2-year public colleges1,7357.9—*—*

 

MORTGAGES

Shocked by last-minute closing costs?

Shopping for the best mortgage deal will get a lot easier under rule changes proposed by the federal Department of Housing and Urban Development. HUD would make the Good Faith Estimate that lenders must give to loan applicants more meaningful by requiring that it clearly set out what consumers can expect to pay and limiting how much estimated costs can rise before the closing. Another change would allow lenders to offer a mortgage package with a guaranteed price and interest rate.

TAXES

IRS makes electronic filing easier

Most individual taxpayers will be able to file their taxes online this year, without having to pay a software firm for the service. The IRS worked out a deal with a group of companies to offer free tax filing services to about 60 percent of taxpayers. (The agency has yet to announce which taxpayers will be eligible for the free service.)

The new option should be available at links on the agency's Web site at www.irs.gov by Dec. 31 for the 2003 tax season. Taxpayers who e-file will get their refunds twice as fast as those submitting traditional returns, says the IRS.

GIFTS

An easier way to give money this holiday season

American Express now sells a gift card that comes embossed with the recipient's name. With a minimum value of $25 and a maximum of $500, the cards can be purchased online at www.americanexpress.com, for a $5.95 fee. The card can be used at stores that accept American Express until the funds are depleted. If it's lost or stolen, it can be replaced for another $5.95 fee.

The cards can also be useful if you have teenage shoppers in your household. It allows them the freedom to shop wherever they want, but lets you limit the total bill.

INSURANCE

Customers rank auto policy companies

Amica Mutual scored the highest grade for customer satisfaction in a study of auto insurance providers conducted by J.D. Power and Associates, a marketing information company. But overall satisfaction with auto insurance in general fell for the second straight year, mostly because of higher premiums.

 

Top 10 auto insurance companies for customer satisfaction

1. Amica Mutual6. California State Automobile Association
2. Automobile Club of Southern California7. 21st Century Insurance Group
3. Erie Insurance Group8. The Hartford
4. GEICO9. Auto Club Group
5. State Farm Mutual Automobile Insurance10. American Family Insurance

Source: J.D. Power and Associates

 

CREDIT CARDS

Interest rates are creeping up again

BONDS

One less thing to take to the safe deposit box

You can now buy a paperless US Savings Bond. Electronic Series I Bonds are available at TreasuryDirect (www.treasurydirect.gov ), a direct link to the US Treasury. With a minimum purchase of $25, the bonds are available in increments of as little as a penny, up to $30,000. Bondholders can keep track of their investment in an online account with the Treasury.

The Series I bond earns a real rate of return above inflation for as long as 30 years. The federal government plans to make other savings bonds available online in the future. One drawback: you can't tuck these bonds into birthday or graduation cards.

The author is a freelance writer in Teaneck, NJ.

 

Yvonne Wollenberg. Financial Beat. Medical Economics Dec. 9, 2002;79:12.