Does it Make Financial Sense to Buy Life Insurance for Children?

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Back in June 2008 I took a look at the Gerber Life Insurance Grow-Up Plan after seeing a TV commercial. I suppose with one kid jumping off the couch and the other one horsing around near the light socket that perhaps I could have been immediately drawn to the plan. But does the average kid really need a life insurance policy? Since 4 1/2 years have passed by, let's take another look.

The plan is summarized at www.gerberlife.com.  It is a whole life policy with coverage ranging from $5K to $50K ($35K in 2008).  You can purchase a policy for your kid or grandkid anytime between the age of 14 days to 14 years (the high end was 12 years in 2008). At age 18 (previously 21) the policy automatically doubles in value as long as you pay the premiums.  Your child can subsequently increase coverage by a factor of 10 at the then applicable rate under the plan when they become an adult.

This time I looked at the $35K policy, which for a boy under the age of one has a monthly premium of $21.05. Hmm, sometimes it pays to be a girl...the cost of a girl's policy is $17.52, nearly 17% less than the boys' policy.

Let's stick with the boy's premium. They say that after 25 years (this was 20 years in 2008) the "cash value" of the policy equals or exceeds the premiums you paid.  So for a 2 week old baby boy that would mean you'll have paid in $6,315 by the time junior is 25 years old in the year 2038.

There's a 1 in 5,555 chance that your child will die between the ages of 1 and 14 in the United States, based on recent statistics (1 in 6,666 chance in California). Inversely, there's a 5,554 in 5,555 chance your kid will NOT die by the age of 14. Those stats change to 1 in 1,900 for teen

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Payroll Taxes For U.S. Employees Set to Increase Beginning January 1, 2013

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The last few years, we have enjoyed (for lack of a better word) a 2 percentage point reduction in our 6.2% Social Security (FICA) tax rate, to 4.2% of wages earned during 2011, temporarily extended through 2012 by the aptly named Temporary Payroll Tax Cut Continuation Act of 2011.

Unless the tax rate is extended again, in 2013 we will once again be paying into Social Security at the rate of 6.2%. That means $1,000 less to spend next year if you make, say, $50,000 per year.

Social Security is also referred to as Old Age, Survivors and Disability Insurance (OASDI). Social Security has a nicer ring to it I suppose.

The 6.2% OASDI withholding rate has been in place since 1990. The statutory OASDI rate started out at 1% on employee wages from 1937 to 1949 and increased about 20 times through the years until it reached its current 6.2%.

Though the Social Security tax rate itself hasn't increased over the last 22 years, actual taxes paid have indeed grown as the annual maximum wage base has increased.

In 2013, the FICA wage base increases from $110,100 to $113,700. Th

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High Dividend-Yielding Stocks Can Reap Solid Returns for Cautious Investors

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In April 2010 and March 2009 I highlighted some stocks that pay decent dividends, as an alternative to low yielding bank CDs and bonds. The market was up a nice 40% from March 2009 to April 2009. Throw in a 4 to 5% dividend and you were looking pretty good!

From April 2010 to today (December 2011), the market was fairly flat overall. While the Dow Jones Industrials were up 5.5%, the broader S&P 500 index was flat. Given the volatility of the market with the European debt crisis, ongoing U. S. economy concerns and other current events, investing in the stock market can make you sick to your stomach. But other low-risk investments like bank CDs yield practically nothing.

As an alternative, check out some of these high-yielding stocks. While there were a couple duds, overall these stocks were up nearly 6% over the last 18 months, beating the S&P 500. Plus, they paid investors between 4 and 5% in cold, hard cash! Here's an update.

  • Altria (Symbol: MO) Stock was $21 in April 2010 and is $29 today ($17 in March 2009). With a current yield of 5.6%, why not profit on someone else's vice (hopefully not yours...lung cancer will cost you plenty long-term).
  • BP plc (BP) BP was one of only 2 duds in this line-up but only because of the Gulf oil spill in May 2010. It is at $40 today, down from $60 in April 2010 (t
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California Sales Tax Rates Set to Drop by 1% on July 1, 2011

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Unless our State Legislature votes to extend the 1% sales and use tax rate increase that was put into place in April 2009, we will be receiving a 1% tax rate deduction effective July 1, 2011.  It is now June 28th and it appears we are in the clear. So sales tax rates in most of Ventura County will drop from 8.25% to 7.25% (8.75% to 7.75% in Oxnard and Port Hueneme).

8.25% is currently the highest base sales tax rate in the United States. Congrats, California! And when the rate it drops back down to 7.25%, it will still be the highest! Yippee!

Hmm, if you're looking to buy something big, like a car, this month, you might want to wait until July. A 1% sales tax drop on a $40,000 Toyota Highlander Hybrid is $400.

The highest sales tax rates in the state will continue to be in Pico Rivera and South Gate, where rates drop down to 9.75% on July 1st. No wonder I never go shopping in those cities!

For updates, visit the California Board of Equalization website at www.boe.ca.gov.

And for you history buffs, here is a history of sales and use tax rates in our wonderful state going back to when they were enacted on August 1, 1933. The trend is generally not our friend.

  • 8/1/33:  2.5%
  • 7/1/35:  3%
  • 7/1/43:  2.5%
  • 7/1/49:  3%
  • 1/1/62:  4%
  • 8/1/67:  5%
  • 7/1/73:  6%
  • 10/1/73:  5%
  • 4/1/74:  6%
  • 12/1/89:  6.25%
  • 1/1/91:  6%
  • 7/15/91:  7.25%
  • 1/1/01:  7%
  • 1/1/02:  7.25%
  • 4/1/09:  8.25%
  • 7/1/11:  7.25%

Over 3.2 Million Californians Seek Food Assistance in the CalFresh Program

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Guest post by formerly homeless Conejo Valley resident, Lon V.

According to the California Department of Social Services (CDSS), at the end of 2010, more than 3,200,000 Californians participated in the federally funded California CalFresh program.  The Calfresh program, formerly known as Food Stamps and federally known as the Supplemental Nutrition Assistance Program (SNAP), can add healthy and nutritious food to your table.

The food stamp benefits are given to you in the form on an ATM type debit card that the state CalFresh program funds, typically once per month.  You then utilize the card and associated PIN number to pay for your groceries at your favorite grocery stores.  You may only purchase unprepared food products; no paper products, pet products, certainly no alcohol or tobacco products.  You also cannot purchase deli products that are already prepared or products that you may open and eat immediately.

If you think about it, that does somewhat limit your possible food choices, especially if you’re homeless and you don’t have the means to cook anything.  Moreover, the homeless population cannot store many foods; therefore, you will often only buy what you plan to prepare and eat immediately.  Fresh foods will not last outdoors without spoiling, and you certainly cannot store any refrigerated products, so those are rarely purchased unless you intend to consume them right away.

The food stamp program, which dates back to the early 1960′s, does have a number of inherent shortcomings.  The first is the restriction on buying healthy, ready-to-ea

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2% Bonus for All Employees and Self Employed Individuals in 2011!

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On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law.

Who comes up with these names?  How about something like the Cut My Taxes or Else Act of 2010?

I digress. The biggest headline is that our Social Security tax withholdings are being cut from 6.2% to 4.2% in 2011. All employees will immediately benefit from this 2% "bonus" beginning with their first paycheck in 2011. Employers will continue paying their full 6.2% share of Social Security taxes in 2011.

So basically if you make $50,000 next year, you will retain an additional 2%, or $1,000, in your pocket.  The Social Security wage limit next year is $106,800, so if you make this much or more, your benefit will be $2,136. Care to share some of that bonus? Share it with us here at Conejo Valley Guide!!

The 2% tax reduction also applies to self employed individuals, who will temporarily pay a 10.4% self employment tax next year instead of 12.4%.

The cost of this temporary tax cut is $111 billion.

So why did they include "Job Creation" in the title of this law?? Because they are going to continue allowing businesses to write-off "bonus" depreciation on large capital purchases like equipment, furniture, fixtures, etc. That's nice and all for businesses to save on taxes but I'm not so sure that's gonna directly translate into new jobs.  What they need substantial tax credit to directly compensate companies for hiring, retaining and not laying off employees, not accelerated depreciation. Just sayin.

There's a nice summary of this law on the Wikipedia website.

Stop Identity Theft With a Credit Freeze

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(Originally posted in November 2007. Updated as of December 2010.)

Identity theft continues to be one of the fastest growing crimes in the country.  There are many types of identity theft, but one of the worst is when someone uses your personal information to borrow money or establish credit. 

Sadly, the 3 major credit bureaus, Equifax, Experian and TransUnion, have done little to help us prevent identity theft before it happens.  In fact, they make money by selling services that inform you if someone has accessed your credit file...after the fact.

SECURITY FREEZES

But over the last eight years, 47 states have passed laws that REQUIRE credit bureaus to offer "security freezes" to consumers that prevent access to your credit records.  A crook cannot take out a loan in your name if your file cannot be accessed.  Security freezes go a step further than "fraud alerts" offered by the bureaus that tell the lender to double check your identity.  The main problem with fraud alerts is that no law says the creditor must contact you.

California's security freeze law has been in place since January 2003.  Security freezes are free to ID theft victims, $10 per credit bureau for those under 65 and $5 per credit bureau for those 65 and older.  It costs another $10 ($5 to 65 and older) to "unlock" your account, either temporarily, for a particular creditor, or permanently. 

It takes a little work to set up your security freeze as the bureaus require a written request sent by certified mail.  The State of California provides guidance and sample letters for this purpose (click here for a link to the California Office of Privacy Protection website).  After registering, each credit bureau will send you a confirmation letter with instructions on how to remove the freeze.  Security freeze information is also available on the Experian, TransUnion and Equifax websites by clicking the links

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