life

Putting Unused Gift Cards to Good Use

Life and Money With Helaine by by Helaine Olen
by Helaine Olen
Life and Money With Helaine | December 24th, 2019

Hi, Helaine: For a recent significant birthday, I received a number of gift cards as presents, but I didn't use most of them. They are collecting dust in my wallet. Now that it's the holiday season, am I allowed to regift the cards, as long as I make sure not to give them back to the person who gave them to me? Or do I buckle down and find something to buy with them? -- Not a Proud Cardholder

Dear Not a Proud Cardholder: Years ago, we were told it was tacky to purchase a gift card in lieu of a gift for any reason, unless we knew for a 100% fact that the place was the recipient's favorite store or restaurant. Those days are behind us. Most of us will buy a gift card for someone at least occasionally. We do it because we are pressed for time, or because we don't want to buy something someone might not want. If we turn to a gift card to deliver just the right gift, we think we are expressing a kind thought while at the same time ensuring the recipient will get something they want.

It's also true gift cards are marketed incessantly -- and there's a rather obvious reason for that. It's easy money for a retailer or restaurateur or other service provider: An estimated 5% of the money put on gift cards will never be spent. Federal law also permits companies to charge fees on an unused balance after a year -- something some, but not all, states ban. Finally, research shows that people using gift cards will spend more than people using their own money.

I would hate to see these cards go to waste. There is a compromise position here: Use the card to buy gifts for your friends, and then wrap them up. That might just be the win-win you are looking for. You could also sell the cards online -- there are a number of sites that permit you to do just that.

But if you don't like either of these options, you can regift the cards. Make sure to check the balance remaining on the cards before regifting them. It would be rather embarrassing to discover you thought you were giving out a $25 card, but your friend got $23.01 because a company charged a $1.99 fee on it. You can easily do that by calling the phone number on the back of the card.

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

life

How Best to Pay for Law School

Life and Money With Helaine by by Helaine Olen
by Helaine Olen
Life and Money With Helaine | December 17th, 2019

Dear Helaine: My wife has been accepted into law school. It’s a private university -- a fancy, highly ranked one that costs a lot. A lot! I’m in my 40s and she’s in her mid-30s. We have investment savings, and our IRAs are on par with what is expected of folks gearing up to retire in their early 60s. We also just sold our house in San Francisco, which left us with a tidy nest egg -- enough to pay for her to attend the school, with a chunk of change left over.

My question: What should we do in terms of taking out loans vs. spending our savings? My wife wants to use her law degree for political advocacy work for the underdog, so it’s not likely we’ll have a high salary from her degree. While she is in school, my salary will support both of us, but not leave much to contribute to any kind of savings. Do we take out loans, ones that will accumulate interest while she’s studying? Or do we spend our cash on her schooling? -- Legal Loans or Savings

Dear Legal Loans or Savings: There’s a lot to unravel in this deceptively simple letter. A “fancy” law school that costs “a lot” is not necessarily synonymous with quality or future job placement outcomes. I would urge both of you, if you have not already done so, to look at law school job placement stats and determine how many people graduate with a law job in hand, or obtain one shortly after graduation, and how many of those people work in the non-profit or advocacy sector in some way. Is there a less-expensive public university that would offer an equivalent or better outcome?

But let’s say the school passes all these questions with flying colors. My advice: Use the cash set aside to pay for law school, and don’t take out loans if you can help it. This will give the two of you the most financial freedom in the long run. Many people say they want to work for the non-profit sector, but find their loan payments so fiscally constraining, they end up taking higher-paying positions (read: corporate law) they don’t really want to pursue, simply because they need the larger salary to pay their student loan tab. Do you really want to put your wife in that position?

At the same time, there is nothing stopping your wife from getting a direct, unsubsidized loan from the federal government if your family circumstances change in the future -- say, you lose the job that’s supporting the family while she’s in law school. One thing I wouldn’t factor in to the decision: public service debt forgiveness offered by the government. It’s not simply that it’s not working as intended, and few recipients are receiving the forgiveness they were led to expect -- a scandal in itself. It’s that plans change, and if your wife decides she ultimately doesn’t want to do advocacy for a non-profit, she won’t receive the debt forgiveness.

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

life

High Health Care Expenses in Retirement

Life and Money With Helaine by by Helaine Olen
by Helaine Olen
Life and Money With Helaine | December 10th, 2019

Dear Helaine: I’m writing with a question about medical expenses in retirement. Over and over, I keep reading something to the effect that “a couple retiring today can expect to spend $250,000 on medical expenses during their retirement, even with Medicare.” I realize Medicare doesn’t cover everything, but this seems like an unbelievably high number. Can you tell me where this figure comes from? Is it assuming some form of long-term care will be necessary? I am in my mid-40s and would like to know more about what those expenses are and how to plan. -- Young and Healthy Now

Dear Young and Healthy Now: The information you are thinking of almost certainly comes from Fidelity Investments, which releases an annual study attempting to estimate the medical expenses of a theoretical 65-year-old couple retiring in the current year. They released the most recent one this past April, and the number is $285,000 -- worse than you think. Women can expect to spend $150,000, while men spend a slightly lower $135,000. It’s possible these numbers are low -- they do not count such things as dental expenses or long-term care. HealthView Services, which also performs an estimate and includes these things as well as other costs not covered by Medicare, puts the number at $387,644 in today’s dollars.

Now of course Fidelity has a reason for wanting you to know that number: The press release trumpeting their finding also contains a pitch for Fidelity’s Health Savings Accounts, which you can use if you have a high-deductible health insurance plan. The money is contributed and grows on a pre-tax basis and there are also no taxes due if the money is withdrawn and used to pay medical bills. And this is indeed one way to plan. If you are saving the recommended amount for retirement, and you can afford to still put more money aside, you might want to put $3,500 -- the maximum an individual can contribute -- in an HSA. (Families are permitted $7,000.)

But the bigger question is: Why is the amount we will spend on doctors and hospitals and other medical needs in retirement so high? Americans pay significantly more for their health care than any other nation. Medicare -- despite what many think -- does not pay for everything. It comes with co-pays and a host of gotchas -- for instance, if a hospital doesn’t formally admit a Medicare patient, and keeps them on “observation” status, the program won’t pay for a stay at a rehab facility, even if it’s needed.

Yes, it’s good to save. But no other first world nation imposes this sort of burden on its residents. Fixing that would be the best savings plan of all.

(To ask Helaine a question, email her at askhelaine@gmail.com.)

(EDITORS: For editorial questions, please contact Sue Roush at sroush@amuniversal.com)

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