ABCDE BUSINESS sunday, july 18, 2010 IN OUTLOOK
A petro-state in the U.S.A. Even with oil wealth, Louisiana is a land of ruin and corruption.
KIPLINGER’S PERSONAL FINANCE Take this to the bank
Investors thirsty for financial information can drown in it. G3 CAR PAGES
Rugged. But $70,000-plus. Warren Brown reviews an SUV in which you might shy from mud: the Range Rover Sport Supercharged.
Plus, ads for thousands of vehicles. Starting on the back page.
F ALEX BRANDON/ASSOCIATED PRESS
With financial regulatory reform passed, regulators will have tools to respond more quickly to crisis. It’s fair to ask: Will it be enough?
inancial reform has passed. The sprawling legislation is meant to be an air bag
protecting us from the next major crash, which of course raises the question: Will it work? “We would have loved to have
something like this for Lehman Brothers,” said Hank Paulson, the Treasury secretary when the financial system melted down in 2008. “There’s no doubt about it.”
And he’s right: The next time there’s a financial crisis,
EZRA KLEIN Economic and Domestic Policy
regulators will say a quick prayer of thanks to Barney Frank and Chris Dodd for giving them the power and information to
quickly figure out what’s happened and how to respond. The legislation ushers
derivatives out of the darkness and onto exchanges and clearinghouses; gives regulators the power to oversee shadow banks and dismantle failing firms; convenes a council of super-regulators to watch the mega-firms that pose a risk to the financial system; and much more. That’s not the same, however, as averting crises in the first
G AX FN FS LF PW DC BD PG AA FD HO MN MS SM
MARKETS A double-fisted drumming
Dashed corporate earnings and consumer confidence put markets in a late-week tailspin. G5 YTD: Dow
NASDAQ S&P 500 +0.2% +1.8% +0.2% Five places to look for the next financial crisis
place. It might make them less likely, but think of the difference between public health and medicine: The bill is medicine — it’s primarily about helping the doctors who figure out when you’re sick and how to make you better. It doesn’t dramatically change the conditions that made you sick in the first place. Many of the weaknesses and imbalances that led to the financial crisis escaped this
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DOES BEING GOOD MAKE US BAD?
MARC ROSENTHAL FOR THE WASHINGTON POST by Michael S. Rosenwald L
y husband and I are hoping to retire — or at least reduce our work schedules — when our youngest child, who is now 9, graduates from college. We decided to wait until that benchmark is met to make sure we’re still in our peak earning years to pay for all the children’s education without incurring debt. Before we retire, we also want to have enough saved to replace a certain percentage of our pre-retirement salaries. Most importantly, we decided not to take a mortgage into retirement the way some people take overstuffed luggage on a long vacation. We want to be rid of that financial baggage as we coast into our sunset years. That’s our plan. So, let me ask you, what benchmarks are you using to determine whether you can live comfortably in retirement? I ask because I’ve run into far too many folks whose only
M
MICHELLE SINGLETARY The Color of Money
benchmark is their age. They have no plan, no checklists. “I’m out of here at 55,” one woman told me. “Can you afford to retire at 55?” I asked. She didn’t know. “When you are in retirement and you’re on a fixed income and that fixed income is all you have forever, you better have a plan,” says Darsi Ringer, vice president and financial consultant for Charles Schwab. Ringer advocates considering the following to determine whether you are ready to retire: Will your mortgage be paid
off? Could you cut your spending by 20 percent in retirement during hard times? Can you wait past age 62 to start collecting Social Security? Can you replace at least 40 percent of your pre-retirement income? (Ringer advises having at least two years of retirement expenses in cash, for years like we’ve had of late.) Do you have enough savings to reasonably last you to age 95 (barring a catastrophic illness or financial calamity)? Let’s begin with the house, which is most people’s biggest
ike most Whole Foods shoppers, Da- vid Bain thinks he is a decent citizen of Earth. His family buys mostly or- ganic food. They recycle. He recently fortified his green credentials by re- moving a leaking oil tank in his yard. But here’s a head scratcher:
Though the Bains live in Arlington within walk- ing distance of Whole Foods, they often drive there in an SUV that gets just 19 miles per gallon. He has noticed that his SUV is not alone in the lot. Does that make Bain a hypocrite? He paused be- fore responding: “I could see how people would come to that conclusion, but I don’t have the illusion that people’s decision-making is always logical.”
Do you swear by solar heat — and drive a Hummer? Why efforts to go green won’t necessarily make you better or save you money.
We drink Diet Coke — with Quarter Pounders and fries at McDonald’s. We go to the gym — and ride the elevator to the second floor. We install tankless water heaters — then take longer show- ers. We drive SUVs to see Al Gore’s speeches on global warming. These behavioral riddles beg explanation, and social psychologists are offering one in new stud- ies. The academic name for such quizzical behav- ior is moral licensing. It seems that we have a
good/bad balance sheet in our heads that we’re probably not even aware of. For many people, do- ing good makes it easier — and often more likely —to do bad. It works in reverse, too: Do bad, then do good. “We have these internal negotiations going in our heads all day, even if we don’t know it,” said Benoît Monin, a social psychologist who studies moral licensing at Stanford University. “People’s past behavior literally gives them license to do
that next thing, which might not be good.” The implications of moral licensing are vast,
stretching beyond consumer decisions and into politics and environmental policy. Monin pub- lished a study showing that voters given an oppor- tunity to endorse Barack Obama for president were more likely to later favor white people for job openings. Social psychologists point to gov- ernment standards for fuel efficiency as another example of moral licensing at work: Automakers can sell a certain number of gas guzzlers as long as their overall fleet achieves a specified miles- per-gallon rating. “There are so many contradictions in today’s world, especially when it comes to green issues,” said Keith Ware, who has watched with raised
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LIVING WELL LATE IN LIFE Your money, not your age, signals when to stop working
When to collect Social Security benefit payments differ based on the age you start receiving them.
Monthly payment if your benefit is $1,000 and retirement age is 66
1,200 1,500
300 600 900
0 $750 $1,320 $1,000
Wanna eat when you retire? If you’re under 40, listen up.
by Jonathan Kern Special to The Washington Post
If your junior-high sound-
62 63 64 65 66 67 68 69 70 Age you start taking benefits
SOURCE: SSA THE WASHINGTON POST
expense. With no mortgage, you’ve immediately reduced your retirement expenses by at least 30 to 40 percent. You’ll still have
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track was more Bangles or Brit- ney than Beatles, I am going to try to scare some sense into you with three words about life in retirement, based on personal experience: The paychecks stop. I retired last year after 30 years as a broadcast journalist. Unlike most baby boomers who have retired, I do not receive a pension. This surprises and ap- palls my fellow early retirees, who are either enjoying income from a spouse who’s still work- ing or receiving checks from old employers. If you’re, say, under 40 — and especially if you’re under 30 — you probably have worked only at firms or agencies that offered 401(k)s or their nonprofit
cousin, the 403(b). That means that when you finally do retire 25 or 35 years from now, you will be responsible for provid- ing for your own income. No pension for you! Much has been written tell- ing you how to prepare for that day — namely, to save every cent you can. A recent study shows that most people ignore that advice. In the wake of the recession, the Employment Benefit and Re- search Institute found that, among other things, fewer workers are saving for retire- ment, a quarter of those sur- veyed have nearly no savings (i.e., less than $1,000), most workers don’t know how much they’ll need to retire and more than half say their total savings is less than $25,000.
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