You might think you’ll do better when you move to a company that pays “higher” but you may be doing yourself no favor. Changing employers frequently makes it very difficult for you to save enough for retirement. Company pension plans today reward highly-paid, long-term employees significantly more than short-tenure workers. Aside from this, job hoppers also have a tendency to cash out 401(k) balances when they need money. They also move in and out of retirement coverage which leads to a smaller balance come retirement.
It should be noted that defined benefits pension take into account your average salary and the length of tenure. Employees will not receive maximum benefit from traditional retirement plan because of this formula. In fact, it is also possible for workers not to receive pension if they do not stay with their employers for at least 5 years.
Importance of 401(k) Plans
Workers who have 401(k) plans may also lose out if they don’t consistently increase their account balance. This is especially true if they don’t put assets in certain savings or investment vehicle. If they fail to tap into this source of supplemental income, they might be forced to work beyond retirement age just to sustain their living expenses.
It should be noted that certain 401(k) plans charge lower fees and provide better options for investors. Employees need to be aware that the formulas differ from one company to another. Short-term workers usually don’t get a match. According to Profit Sharing/40k Council of America, a mere 37 percent of 401(k) plans provides immediate vesting (as of 2008). Meanwhile, some plans require workers to remain with the same employer for a specified number of years before they can keep the match. It is disturbing to see that if you leave the employer before this match is vested completely, it is possible to forfeit all your employer’s contribution.
Citigroup was the hardest hit among the biggest US banks after it reported a loss of $7.6 billion in the fourth quarter of 2009. The losses can mainly be attributed to the cost of repaying $20 billion worth of government bailout as well as failed loans. Despite the significant losses, Citigroup plans to give its top executives large bonuses.
Citigroup’s Diminished Stature
The report released on Tuesday reveals what analysts’ suspected all along. It also highlights the banks’ struggles as well as its diminished stature in the banking sector. Along with other big lenders, the bank was also forced to set aside $8.18 billion as coverage for the loans their clients can’t repay. Unlike its major competitors though, Citigroup no longer has enough buffer against losses because it has shed its brokerage and investment banking unit during the crisis.
Right now, the company has no choice but to concentrate on loans which isn’t a large money-maker due to the uncertainty today. While worrying, John Gerspach, the bank’s chief financial officer, said that credit card loans and mortgage loans that are delinquent are starting to stabilize. This provides a lot of hope for the company. Gerspach added that “the US credit store is still very much developing.”
However, an analysis by Alois Pirker from Aite Group said that Citigroup is in a “higher risk position” because it is trying to compete with other big banks its size without its investment banking unit or trading operations.
JPMorgan Chase and Others Still Cautious
Citigroup’s report contrasts sharply with JPMorgan Chase & Co when it reported an earning of $3.28 billion during the same quarter. This growth can be attributed to its investment banking unit. JPMorgan also reported that it has set aside $7.28 billion as coverage for failed loans. Company executives added that it is unsure whether it will be able to stop adding to this reserve.
When the Credit Card Act of 2009 was introduced, the consumers hoped that this will be the end of abusive practices. But with credit card companies the way they are, it seems like clients were too optimistic. Today, consumers should only look at their latest credit card statements to know that they’ve been had, again. Bank and other card issuers have created new ways to collect millions from users. They have also expanded the fees and coverage to squeeze every penny from credit card users.
According to Joshua Frank from the Center for Responsible Lending, “Credit card issuers are going to more than ever try to find ways to make extra profits”. A lot of changes were made in the way charges were calculated. All this resulted to a burgeoning balance in the cardholder’s account. Meanwhile, other abusive practices were also put into place even before the Act was passed as a result of the recession. If there’s one ting they have in common, it’s that none are “explicitly prohibited by the Credit Card Act.”
Changes to be Aware Of:
Hidden Rate Adjustments
Cardholders with fixed-rate card need not worry. But variable rate cardholders, which majority of the market is comprised of, should be cautious. Previously, the charges were pretty straightforward. Card issuers will choose the highest prime rate in the current cycle as the starting point. Now, they have changed the terms so they can select the highest rate in a 90-day cycle. This will cost cardholders $720 million per year.
New Fees and Expanded Charges
Rate changes are not the only tricks that interests credit card companies. They also found a loophole in charging penalty fees. Some of these so-called “penalty” fees are so extreme, it looks silly. Except that you won’t be laughing when you’re the one hit with these charges. Some of the fees you need to look into carefully these days include the late fee, minimum finance charge, inactivity fee, and cash advance fee.
Many had hoped that December 2009 would restart job recovery. But if the economic data of the past year is any indication, it would seem that full recovery is a long way off. True, the banks might be more stable today than several months ago but the recession’s impact on individual life and families will take years to restore, if ever. The endless string of job losses in the last two years has left a bad taste in everyone’s mouth, especially to the people that experienced it firsthand.
Currently, the unemployment rate is hovering at 10 percent. It might improve slightly although economic experts warn that it has a high likelihood of staying uncomfortably high in the near future. More worrying though is that some analysts even suggest that the job market cannot recover from the 7.2 millions job cuts it suffered from since 2008 before the next round of economic problems.
Unemployment to Stay High, and Keep Going Up
Lakshman Achuthan from the Economic Cycle Research Institute said that “the problem is recovery doesn’t mean recovered.” This is because while growth is expected, it will be slow. It can take up to 10 years before the 7 million jobs lost in less than 2 years are recovered. In addition, it should be noted that even if employers add to their payroll, the economy needs to generate 100,000 jobs in a single month just to keep up with the population growth.
The economy should also be prepared a large pool of out-of-work individuals. Majority of these 6-million strong workforce have been laid-off during the recession. While they have been discouraged recently, there is a good chance they will enter the labor force again once the situation improves. Their reentry will increase the unemployment rate. The job recovery will not be explosive. At best, the unemployment problem will be resolved in several years.