Just Explain It
This story first ran on Yahoo on April 30, and it was the most popular video in our original "Just Explain It" series.
Thirty-eight million Americans rely on Social Security benefits in retirement. With such a big reliance on the program, a critical decision for retirees is at what age to begin taking these benefits.
The amount of money you will receive each month is based on your work history and your age at the time you apply for benefits. A person can receive full benefits starting at ‘full retirement age’ — defined as 66 years old — with some slight variations, depending on your birth date:
On the flip side, for every year you delay filing for benefits after 66, up to age 70, you can add an additional 8% per year. So that $1,300-a-month benefit grows to $1,716 at age 70.
What do you think? Do you plan to take social security early?
Rick Newman at Just Explain It 2 yrs ago
If you look in your wallet, you’ll probably find some “unfit currency” in there – bills that are worn, torn, stained, wrinkled, wadded up or just plain gross. We all deal with those kinds of bills. What you may not know, however, is that the nation’s supply of currency is refreshed nearly every day and cleansed of cash that’s past its prime. The Federal Reserve is responsible for putting new money into circulation and taking old money out. Banks send excess currency they don’t need to one of 28 Fed cash offices all around the country, in armored vehicles under tight security. Then, the Fed runs all that cash through sophisticated sorting machines that count it, check for counterfeits, and cull the bills considered unfit. Here are some examples of what the Fed considers to be “unfit”: - If a bill has holes totaling more than 19 square millimeters, about the size of an aspirin, it’s unfit. - Dirty and worn out bills are also sorted out with sensors. - Fives, tens and twenty-dollar bills printed before 1996 are automatically pulled from circulation, simply because of their age. The Fed places one order with the U.S. Bureau of Engraving and Printing each year for the amount of currency...
Having experienced the Great Recession earlier this decade, we’re all familiar with the dangers of over-extended consumers maxed out on debt with little savings to speak of. The consequences of those actions are so great, many financial experts started rethinking if there is such thing as "good" debt anymore. But the conventional wisdom remains: if managed properly and prudently, debt – for the right things -- can still add to your bottom line.
What is good debt? As opposed to credit cards with high interest rates that can be easily abused, good debt can provide long-term financial benefits. Traditionally, the two most common forms of debt that could be considered good are loans for school and buying a home.
How? Statistics still indicate a college degree is an expense that will pay dividends for years.
A graduate with a bachelor’s degree can earn, on average, $2.3 million over their lifetime, compared with just $1.3 million for someone with just a high school diploma. Lifetime earnings with a master’s degree jump to about $2.7 million.
But with those factors worked out, owning can actually save you money.
With the cost for cable TV increasing at 4 times the rate of inflation, it’s no wonder consumers are fed up and dropping pay-TV altogether. In the last five years, five million TV subscribers cut the cord to rely solely on online platforms like Hulu Plus and Netflix.
In a housing or real estate bubble, home prices inflate because of overly optimistic speculation that they'll keep rising. When people can't afford to keep up, the bubble bursts. Demand for homes decreases, while supply goes up and home prices drastically drop.
Today, certain markets across America are seeing home prices go up so quickly that people are starting to worry about another bubble. So where do we stand?
From 2000 to 2006, home prices were skyrocketing. Why? It was fueled by overly-optimistic speculation on real estate, careless lending standards and very low mortgage rates. At the height of the bubble, homes were overvalued by 39%.
Built on that shaky foundation, when prices cooled millions of people defaulted on their mortgages and the bubble didn’t just burst, it exploded, creating the biggest real estate and credit crisis in modern history.
Also see: 5 Millionaire Myths
If you’re one of the millions of Americans carrying an average $15,000 in debt, you know just how frustrating and daunting it can be to pay off.
It’s easy to fall into the red, whether it’s from credit card bills, student loans or unforeseen medical expenses. And it seems every expert has the perfect 5, 7 or even 13-step plan to get you out of debt fast.
Also see: 3 Harmful Money Lies We Tell Ourselves
Most debt-reduction programs advise tackiling the highest interest rate account first. That’s solid advice, but it doesn’t take factor in how paying down that balance actually makes you feel.
The "debt snowball" method focuses on paying the smallest debt first, then the next and the next, until it snowballs until, eventually, your debt is gone. Paying off a small balance gives you a quick victory and the emotional motivation to keep going.
What do you think? Let us know on Twitter.
Zelkadis Elvi at Just Explain It 2 yrs ago
Imagine paying over 18% interest on a 30-year fixed mortgage. It’s almost unthinkable. But that was the reality for home buyers in October 1981 – a year when the average rate was almost 17%.
Unlike today, in the early 1980s, the Federal Reserve was waging a war with inflation. In an effort to tame double-digit inflation, the central bank drove interest rates higher. As a result, mortgage rates topped out at 18.45%.
In this Just Explain It, we’ll take a look at how mortgage rates affect home loan payments, and show you what you can do to save money.
Back in the early 1980s, high interest rates had a negative effect on the housing market. Affordability dropped to an all-time low as rates climbed to record levels. Simply put, mortgage rates priced most Americans out of the market, and it took years for home sales to rebound. Today, rates are historically low for a number of reasons, thanks in large part to the Federal Reserve which has gone to great lengths to keep rates down to facilitate economic recovery.
In both cases, 82% of your payments over 30 years would go towards interest.
Zelkadis Elvi at Just Explain It 2 yrs ago
Billionaire investor Warren Buffett is not a fan of company stock splits.
Buffett's stance against stock splits is nothing new. In a 1983 letter to his shareholders, the Berkshire Hathaway CEO wrote: “Splitting the stock would increase that cost (transfer costs), downgrade the quality of our shareholder population, and encourage a market price less consistently related to intrinsic business value. We see no offsetting advantages."
But not all CEOs agree with Buffett's logic. VF Corporation (VFC), maker of Timberland, North Face and Wrangler apparel, plans to split its stock 4-for-1 next month. The company announced the move after shares topped $200 each.
In this edition of Just Explain It, we’re going to take a look at some of the reasons companies offer for giving stock splits.
Here are just a few of them.
The first argument is that splitting the stock lowers the price -- making the stock more attractive to smaller investors.
Zelkadis Elvi at Just Explain It 3 yrs ago
Credit card debt in America currently stands at over $850 billion. Only mortgage ($7.86 trillion) and student loan ($999.3 billion) debt totals are larger according to the Federal Reserve.
Related: How to Avoid Credit Card Debt
There’s some good news is though. American credit card debt dropped $2.7 billion in June. That’s 16.5 percent below its July 2008 peak. Today, cardholders are making more of an effort to avoid high interest rates and pay down balances.
But why are credit card interest rates so high compared to home mortgage rates? We’ll tell you…in this Just Explain It.
Don’t expect credit card rates to mirror the interest you pay on a car loan or mortgage. Credit card rates will continue to be higher because it’s a risky product. Unlike car loans and mortgages, credit cards aren’t tied to actual collateral. So, if you default on your car or home loan, the bank will take them from you. On the other hand, if you fail to pay back your credit card loan, the bank gets stuck absorbing the loss.
Besides the risk factor, other conditions can determine credit card rates.
Zelkadis Elvi at Just Explain It 3 yrs ago
The $100 bill is about to get a facelift.
Despite production problems, circulation of the redesigned bill will begin next month on October 8th. About 30 million defective bills, which contained too much ink, were sent back to the facility where they were printed.
When the notes are released, they will incorporate two new security features such as a blue, 3-D security ribbon, and a color-shifting bell in the ink well. You’ll also find a portrait watermark of Ben Franklin and an embedded security thread on the left side of the bill.
Last year, over $300 billion worth of $100 notes were delivered for circulation. And today over one trillion dollars of U.S. currency is in circulation.
But how many U-S dollars are printed and destroyed each year? We’ll answer that question and more in this Just Explain It.
The creation of money in the United States is handled by two agencies -- the Bureau of Engraving and Printing and the United States Mint. The bureau designs and produces Federal Reserve Notes - or paper money – for circulation. Coins, on the other hand, are the responsibility of the Mint.