05.11.23 Best Saving Strategies Right Now / Yes, Life Insurance. Let’s Do This!

This podcast is brought to you by Progressive. Are you driving your car or doing laundry right now? Podcasts go best when they're bundled with another activity. Like progressive home and auto policies, they're best when bundled too. Having these two policies together makes insurance easier and could help you save. Customers who save by switching their home and car insurance to Progressive save nearly $800 on average. Quote a home and car bundle today at progressive.com. Progressive Casualty Insurance Company and affiliates. National average 12 month savings of $793 by new customers surveyed who save with Progressive between June 2021 and May 2022. Potential savings will vary. I'm so glad you're here with us on the Clark Howard show. Our mission to serve you and empower you to make better financial decisions in your life. I got questions repeatedly now and I went through years. Nobody was doing this asking me where to stash your cash savings accounts CDs, bonds, series, I savings bonds or series I savings bonds still good or bad. Or what's the deal? I'm going to fill you in on what's going on with the cash you stash. And later. Many of my fellow Americans are neglecting such a key part of protecting their families. Life insurance. Number of people buying life insurance is going down, down, down. There was a brief spike during COVID, but now it's resumed. It's declined and it's leaving people so exposed to financial difficulties. I mean, think about it's enough to have to grieve over the loss of a spouse, a loved one. And then in addition to that grief being flat out broke because now you don't have that income coming in anymore. We got to talk about this. So you feel any guilt yet? If guilt's what motivates you, then we'll use guilt. Whatever it is that gets you to think through how to protect the ones you love is what I got to do here. So we got a shift in the marketplace. And I want to start with the thing that we are getting deluged with questions about at our team Clark Consumer Action Center series I savings bonds. The reset I told you was coming, I told you about April, it's here. And if you buy new series I for inflation, savings bonds, you're now earning 4.3%. Now you go back just a year ago, people were earning right at just a little below 10%. And then six months ago, it reset because it resets every six months. The series I savings bonds were earning 6.6.6.5 whatever. And now down to 4.3. So in our own lives, most of us I'm old enough to remember when we had really bad inflation, nearly galloping inflation in the United States. But for most people today, this is the only bout of ugly inflation because we have inflation year in and year out. But ugly inflation, only one you've experienced in your life. And so there's a lot of trauma to us with that. And so it's hard to see that inflation actually is declining significantly. And the series I saving spawns ride the wave of inflation up or down. So series I saving spawns were a phenomenal deal for people who bought them when the interest rate was nearly 10%. But remember the rate resets every six months. And people buying them now, if you buy them today, you're going to earn 4.3%. But if you hold series I saving spawns for a long time, one of the weird things about the way they work is it's crazy to say. But somebody who buys one of today's at 4.3% versus somebody who bought when they were nearly 10%. The person buying the 4.3 over the years will end up with more money in their pocket than somebody who bought the ones at nearly 10% last year. How could that possibly be? Because when the US Treasury sold us and you're allowed to buy up to $10,000 of these per person each year, if you got a tax refund you can do up to another $5,000 in a year. When they were sold a year ago, what the promise was from the Treasury was you'd always get, for a period, if you can hold them up to 30 years, you would get whatever the inflation rate is reset every six months. Now, if you buy them in order to encourage people to buy them, you get the inflation rate of the time plus 9 tenths of a point bonus. So you're always nearly a point ahead of the rate of inflation. So this is now where almost 10% of a year ago, that became a short-term benefit. I mean, people who bought them a year ago can sell now and give up 90 days. Don't do that. Let's wait till the rate resets to even lower amount. And then the 90 days you're forfeiting is at a much lower rate. So the pain of the 90 days isn't as much. That's a complicated thing that I know is going to generate questions. But the advantage of the ones today, the one thing that's great with your savings is if they can keep up with inflation. The series I savings bonds being sold now not only give you the rate of inflation, but you get a bonus point on top or almost 0.9. That's a good deal. And weirdly, a better deal than what we had with the headline popping number of nearly 10%. When you couldn't earn anything close to that on savings. Ironically enough, today, right now, you can earn more on a one-year CD. You can earn more on a two-year CD, 3, 4, 5, all are paying a higher rate than what the series I savings bond you buy today would earn you. That's why we're going back the last two buying periods series I savings bonds were a strategy for potentially earning a decent amount for a shorter period of time. Today, I bonds are back to their historical purpose, which is having protection against inflation, I for inflation plus the bonus for as long as you want to hold them, preferably a long time if you buy one now with that 0.9 bonus. Now, if you do want to buy CDs, the big push, if you look at any online ad, if you still look at a physical newspaper, they're all pushing one-year CDs, or 15-month CDs, or 13-month CDs. They're all really pushing great rates on shorter term CDs, and by great, I mean somewhere around 5%, 5.25%, somewhere in the fives, unless you go to a big bank, in which case they're happy to pay you 1.100% to 1%. But the smart money looks at 5-year CDs. See, the inflation trend is going down, down, down. Still too high, but it's going down. Grocery prices are actually going down overall right now after we had brutal price inflation in the supermarket. The inflationary cycle that we've been in is still with us, but much less dangerous than it was. It doesn't mean the work's done. We've got to get inflation back to a lower level than it is right now, but the trend on inflation is your friend, which is why I'm looking right now at the bank rate list, the best rates on 5-year CDs, and they're capping out generally at 4.5%. The one-year CD paying as much as 5.5%. So you're thinking, why would I tie money up for 5 years, if 4.5, when it can tie it up for a year, if I point something? The reason is the inflationary trends suggest, and the slowing economy suggest, that the odds really favor that a year from now, the CD rates are going to be a lot lower. And the 5-year gives you the ability to know that for the next 5 years, you will earn 4.5% more or less, depending on where you go. 4.5% FDIC insured is great. So this is a time where I'm saying earn less and it will earn you more than earning more because ultimately that will earn you less because if we were in a time of expectations of rising inflation, I would tell you to go short. But in a time of expectations of lower inflation and a slowing economy, I'd tell you to go long. The compromise, the latter. And I talked about the latter recently, Krista. The idea that you divide your money into equal piles of 1-year, 2-year, 3-year, 4-year, and 5-year CDs. And then you're splitting the difference, you're getting some really, for savings, a long-term thing of 5-years, and then each gradient back to 1, that would be the way to split the difference. And actually, there's a question from Mark in Washington about that. He says, I'd like to move my savings into latter CDs. Brokered CDs like those sold on Vanguard have a higher interest rate than those sold in banks, but are bank CDs safer? No, bank CDs are not safer. In fact, this is one of the ironies that's been exposed by the bank failures. I looked and do you know just a little less than half of all money in banks now is no longer FDIC insured? And that's why we've had the three big bank failures because so much of the money is not FDIC insured. People freak out about a bank, start to run on deposits, blah, blah, blah. When you do a broker-placed CD through Vanguard, in your case, Schwab or Fidelity, you will get the best rates in the marketplace and you have millions of dollars of FDIC insurance the way they broker-place these at different institutions. So you get the double benefit of more FDIC insured protection and higher rates. Monica in Ohio says, I've been shopping around and investing in CDs since last July, just in a 13 month of 5.12%. Now my bank has a guaranteed 5.12% money market account, which you have to keep $25,000 in to get that rate. But you can add more throughout the year and you can withdraw as long as you don't go under the $25,000. Now my credit union is offering 5% for a two-year CD. Should I consider this as well? So excited to finally start earning some interest. We are hoping to buy a new house next year. Well, first of all, congratulations. And because of the cycle, Monica, your desire to own a home, you can't look at the five years I'm talking about. So I'm just spreading the money around like you're doing. Great idea. There's something I want you to check out though. Money market funds have a daily rate of interest. And the 5.12% on the money market, it would be very odd and unusual that they were guaranteeing you that rate over a specific period of time. I want you to go back and make sure that it's not a floating rate. If it is a floating rate and you know you've got a year till you're going to need the money, I would do a one-year CD and get the 5 plus percent potentially up to 5.5% that I'm seeing right now on the one-year CDs. And Carolyn and George, just says, what is your recommendation for a home security camera and what are the pros and cons of different ones? So there are so many brands of home security cameras. It's mind-blowing. And they have different capabilities and prices. I'm a big fan of the WISE Cams, WYZE. They have a very wide variety of cameras to look at, various levels of sophistication. And they are the lowest price consistently for the capabilities of the cameras offered. WYZE is a company that takes product areas already developed and offers products in that category that are cheaper than the ones that are the known and recognized brands. They sell things like noise canceling headphones, I think is an example of stuff they sell. A wide variety of electronics. And if you want to get into a specs kind of thing and what's absolutely the best and all that, ironically enough Amazon has become the market leader in home security cameras. Why would Amazon be willing to sell cameras below their cost to get in the marketplace? You may know why. You may know why. Krista, you want to guess? I would guess a couple of things. One would be that you're loyal to them and you want to buy more things from Amazon. And then also potentially like porch pirates and stuff. They want people to have the only reason. Okay. Amazon suffers so much from porch pirates. And if you look at the quality of the video of the cameras, the doorbells, all that, that Amazon sells under the different brand names, they subsidize or they own, the Amazon line of cameras is extremely high quality video. And it's so that they can try to reduce the number of porch pirates that are invading our castles, our homes and stealing our packages. So I would say those are, there are many other brands and there are people saying, why aren't you talking about blah, blah, blah, blah, blah, blah, brand? Okay. I'm just telling you, bang for the buck. Wise cams, the runaway choice in terms of cost and quality and features. The Amazon owned line of cameras and subsidized line of cameras is where I'd put my efforts. Again, why is this WYZE? And we often have deals on those at ClarkDales.com too. Yeah, because WYZE is very, not only are their products cheap to start with, but they're very promotional as well on the sale of their cameras. And the wise cams are so easy to set up. Even a techno idiot like me has been able very easily to set up and monitor the wise cams. And they typically start at 25 bucks a camera. Coming up ahead, I'm going to talk about a deadly subject. Life insurance. When the people avoid like the plague, I'm going to tell you why you need to stop avoiding considering or buying life insurance. Did you know the term financial advisor is utterly meaningless? Anyone can pretend to be one, including commission stock brokers and insurance agents. Are you aware that even professionals trying to beat the market by picking stocks or timing have been shown on average to return less over time than index funds? Are you looking for a podcast that will give you sane, simple consumer-centric advice about managing your money? I'm Don McDonald, and my co-host Tom and I invite you to listen to talking real money on this and every podcast service. We promise to tell you the hard truths about money and investing because the truth will set you free to build a better future. We advocate for investors, not the financial industry, plus we think you'll be entertained in the process. Make talking real money your source of fiscal truth. When you're finished with this podcast, just search for talking real money. You have almost nothing to lose and a secure financial future to possibly gain. Visit talkingrealmoney.com or search for talking real money. This episode is brought to you by SAP. Welcome to the window, the window of opportunity. When your next move can either make your business famous or obsolete, so you need to be ready. Be handling good surprises and bad ones ready. Be opening a Portland, Houston and Providence location on the same day ready. Be stock options plus paid family leave ready. SAP has been there and can help you be ready for anything that happens next because it will. Be ready with SAP. This is a very, very serious topic that I'm quite distressed about and it's the number of Americans that will no longer consider buying life insurance. And Krista, what really triggered me to want to talk about this is a post that you told me about. Mm-hmm. Yeah, and I have it here. Brian and Laska wrote in and he said, I want to thank Clark and the team for your help. I used to listen to your show years ago on our local radio station. After hearing repeated exhortations to purchase term life insurance, my wife and I followed through using the list of highly rated companies that we found on your website. Unfortunately, my wife passed away very unexpectedly this past winter. I'm sorry. So sorry. While we didn't have all of our affairs in order, thankfully, we did have life insurance policies in place. While nothing can replace what we have lost, as we move forward, the reality is that I will have the resources on hand to support our children and raise them in the way that we always have. I cannot thank you enough. I truly don't think that I would have followed through with purchasing life insurance had I not heard the same message over and over. And I am also thankful that I chose to work with a reputable company that processed our claim quickly and fairly. Your help matters in a very tangible way and I wanted you to know that it's making a very real difference in the lives of my children. I hope that the pain in your kid's hearts, in your own heart, heal over time. I'm really, really sorry about the loss of your wife. It's a very difficult transition in your life. I'm glad that hearing me talk over and over again about buying life insurance did have that benefit for you and your kids. I want you to know that most people will not buy life insurance. It is a product that is sold. What does that mean? Death is an uncomfortable topic for most people. For some reason, for me, it's not. I talk about it like I'm talking about, yeah, I found this deal at Costco today. By the way, you can buy discount caskets at Costco, but that's a topic for another time. I mean, it's inevitable for all of us. We hide from it because of fear and pain. But you cause more pain if you don't face the reality. It's not a possibility, the reality that someday you're going to pass away. And why am I talking about this like this? Because the life insurance industry is going through an absolute crisis. The average age of a life insurance sales person is older than Methuselah. Nobody young will go into selling life insurance. It's led to a complete dynamic change. The insurance agents that remain only make money if they sell you garbage insurance, like universal life, variable universal life, and an insurance product that's high commission, that sometimes will be appropriate, but usually not, called whole life insurance. So we have this situation where you've got this aging sales force. We have a product that they only have worth their time to sell, which is insurance products that are incredibly complicated. Usually not good to own, have massive premiums. And if you buy one, you're not going to end up with enough coverage because of those huge premiums to have enough coverage to help your family. What that leaves us with is a problem. It means that you have to buy it, not wait for somebody to sell it to you. And so people will hear somebody like me talk about this, and they'll go get started maybe filling out an application for the only kind of insurance most people should have, which is something known as level term insurance. It is a simple death policy. It only pays if you die. The good news is if you pay for it year after year and you outlive the policy, yeah, you paid for a policy that you never got benefit from. Great! But if you did need it, it's there and it pays, and the benefit it pays is quite large for the amount of premiums you pay. So that's what you should buy. But what happens is people will say, okay, I guess I should do it. And they go look and they start to fill out an application and overwhelmingly the applications are abandoned. So that's why I put a big emphasis in my write up on level term insurance on Clark.com about you buying the way that particularly anybody under 40 wants to buy. Like you don't want to be told it's going to take four or five months for this policy to go into effect, and you're going to have to have a medical screening, you're going to have to go to a doctor's office or have somebody come to you and run tests and blah, blah, blah, blah. And so people don't buy it. So now there are lots of insurers that look at your medical history. And just based on that, they decide typically the algorithm they use will approve you or decline you or say, oh, well, you got to do it the old fashioned way. And they'll do it all in under two minutes. The application will take you probably 15, 20 minutes because they want to know everything about you, including how many pair of white socks you have in your sock drawer. I don't know why, but I mean, not really, but the questions go on and on. And that's why people abandon it. But if you can do it and you get approved for one of those policies, bam, you're good all in one sitting and you protected those you love. Now what a lot of people do is they say, this is too hard. I'm going to get the horrible, terrible, rotten life insurance they offer me through work. Don't do it. If they give you some life insurance through work and you can have it for free, take what they give you for free. But gut this one out and do the application for level term life insurance. So you won't leave behind. There's enough suffering when you're gone emotionally for those who love you. Don't leave them left high and dry financially by not having that insurance. Please get it done. And don't be conned by any insurance salesperson to buy garbage life insurance like variable universal life, universal life, or anything they say, I have a tax-advantaged investment for you. It is a wonderful new form of life insurance that's going to allow you to have a new, enormous income tax free. Oh, don't fall for that pitch. Because what they're next going to do is con you into buying a variable or variable universal life insurance piece of junk. Okay, Elaine and Florida says after hearing the report from another listener regarding missing items or items charged to a grocery order that they didn't order, I thought I would share a recent experience. A fraudulent otter was placed through my Walmart app and the items were delivered to my daughter's home 40 miles away. She does not have access to my account. However, and I sometimes order things that are shipped to her. The order was just around $300 plus expedited delivery fee and a hefty tip for the driver. I was able to intercept the items from my daughter's home. She was out of town and returned them all to the store for a refund. The credit card was stored in my account, which I no longer do. Still no idea how the account was accessed or by whom. I tried to report to the police and they said there was nothing they could do since a crime was not committed to them. It was me who made the order. That was a police department. It's a little busy and they didn't want to get involved in a financial crime. I reported it to the FTC, but I have not heard back from them. Walmart customer service refunded the charges, the delivery fee and tip and gave me a $10 voucher from my eight hours of work. First of all, Elaine, your suggestion is one that has come up repeatedly and that is don't store a form of payment with apps you have on your phone. It's so easy to do that that it's such a common practice to store a form of payment. Criminal only would have been successful with this crime because a form of payment was stored. You were fortunate you were able to intercept this. The thing that's really odd here, your daughter would have been one of the people listed on your account for when you send stuff to her and whatever else. It's very very weird that somebody knew your daughter was out of town and did a delivery to her address. But the great news is you stopped everything and the most important thing that you said, I want to emphasize again, if you have forms of payment stored in apps for merchants, remove the stored form of payment, even though it means you got to type it in every time. It's a better idea to do that because this crime only works if there's a stored form of payment. John in Wisconsin says you often talk about how many newspapers you read, but I don't recall you ever mentioning how you keep these subscription costs in check. For example, I have a Wall Street Journal subscription and I continue to get hit with the loyalty penalty over time as the subscription continues to increase. Right now is it is at $40.94 per month. 500 bucks a year basically. Do you sometimes cancel these subscriptions and wait for a low teaser rate again to rejoin? Use another tactic to save or do you just stomach the ongoing increases? So I do just what you asked. I let my subscriptions expire and the calls and emails get steadily more desperate and they will offer you at many publications. A welcome back deal and so you just have to play hard to get. I mean, they've taken the page of the playbook of the cable monsters that keep pushing prices up and up and up on your internet connection. Or if you still crazily get television from a cable company, what they do is they punish loyalty, reward disloyalty. If you call to disconnect and you end up with a retention specialist, they offer all kinds of deals to keep you with a print publication, I guess we still call them print publications. With a traditional newspaper or magazine kind of thing that likely you're getting digitally, they do the same thing. The only deals go to people who say, I quit. And never do people who say I stay. Now, I'd be really remiss, John, if I didn't mention, because every time I don't mention this, we hear from someone, is now many library systems offer access to apps that get you newspapers and magazines for free just for being a member of that public library system. So that is an alternative as well that you could look at is the free digital lending of newspapers and magazines, particularly more magazines than newspapers that may be available to you. And I hope that I have saved you some money today, giving you information you can use in your life or share with someone you know, and please take to heart what you heard and what I said about life insurance. And remember, we are here to serve you around the clock at Clark.com where you can find our guide to buying level term life insurance. And our team Clark Consumer Action Center is here to serve you five days a week, Monday through Friday, answering your questions, talking to you about a problem you have, giving you advice, 30 hours each week, Monday through Friday, 10 in the morning, Easter, to four in the afternoon, Eastern time. 636-49-CART is the number. You want to know more about what we do at the Team Clark Consumer Action Center? Go to Clark.com slash CAC and have a great day. Day. ♪♪♪♪