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CONTENTS
KIPLINGER’S PERSONAL FINANCE
FOUNDED 1947

FIND THE RIGHT

AHEAD
ETFS FOR YOUR
GOALS. 9 TOPIC A Not ready to return to work? . . .
PAGE 16 Travel rewards cards add perks . . . Expect lower
Social Security benefits if you turn 60 this year.

INVESTING
16 FIND THE BEST ETFS FOR YOUR GOALS
Exchange-traded funds are more popular
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tant to choose the right mix. So we’ve updated
the Kiplinger ETF 20, the list of our favorites.
PLUS: Four model ETF portfolios.

25 PROTECT YOUR PORTFOLIO FROM IN-

FLATION Rising prices may not be a worry now,
but history shows inflation can pack a wallop.
It’s wise to factor it into your investing strategy.

28 STREET SMART Cash in on a housing

revolution, by JAMES K. GLASSMAN.

27 MORE ABOUT INVESTING Kiplinger 25

update (27). Mutual fund spotlight (31).

MONEY
COVER STORY
34 THE ELECTION AND YOUR MONEY The
presidential candidates are heading into the
final stretch before November, and each has a
different vision for the economy and issues that
will affect your pocketbook. Here’s how the
eventual winner will affect investing markets,
taxes, health care and your retirement security.

42 COLLEGE DURING COVID The pandemic

forced schools to close in mid March, and they
have had to make quick adjustments to reopen
CHARLOTTE FU

in the fall. Will colleges still offer the same edu-

cational value? You may need to make some ad-
justments of your own to get your money’s worth.

ON THE COVER: MICROSTOCKHUB / ISTOCKPHOTO.COM

2 KIPLINGER’S PERSONAL FINANCE 09/2020

 VOL. 74 NO. 9

47 TIME FOR AN INSURANCE REVIEW You
may want to make changes in light of COVID-19.
49 CREDIT/YIELDS Rewards for cell-phone
customers.
RETIREMENT
50 GET YOUR PLAN BACK ON TRACK If your
retirement plan has taken a hit since COVID,
these steps will help your portfolio recover.
53 LIVING IN RETIREMENT The joys of being
retired, by JANET BODNAR
FUNDAMENTALS 63 DRIVE TIME Get your car on the cheap,
by DAVID MUHLBAUM
54 EMERGENCY FUNDS 101 You should really
have two of them—one for surprise expenses
and another in case you become unemployed. IN EVERY ISSUE
6 FROM THE EDITOR A level playing field.
REWARDS
7 READER FEEDBACK Health plan options.
56 TIMELY REASONS TO BUY A VACATION
HOME The ability to get away from the crowd has 64 MAKING IT WORK A bridge over the racial
obvious appeal these days. And with mortgage divide.
interest rates falling to record lows, now might be
a great time take the plunge. PLUS: Five locales
to consider for your home away from home.

CHECK YOUR
INSURANCE
COVERAGE.
PAGE 47
DEREK ISRAELSEN

09/2020 KIPLINGER’S PERSONAL FINANCE 3

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4 KIPLINGER’S PERSONAL FINANCE 09/2020

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Mark Solheim

A Level Playing Field

which his parents chose as a place to live be-
cause it voluntarily desegregated in the ’60s.
His mother, a math teacher, grew up in the Jim
Crow South and emerged with a strong sense
of activism; his dad, a psychiatrist and poet,
was from Trinidad. His dad in particular gave

T
he back page of a magazine is a posi-
tion of high interest. For the most part,
what’s featured there is meant to re-
ward readers, a sort of cherry to top off the
contents of the issue. And for some readers
it’s the place they start reading. Some maga-
zines feature a cartoon, some a crossword
puzzle, some an essay. Our new back page
feature, which we call “Making It Work,” is
an interview with someone in a profession
that has been rocked by the pandemic or
the recession, or both. It debuted in the
August issue, when we featured a
nurse anesthetist and professor
who foresees a nurse shortage
because her students are not
getting their bedside clinicals
during COVID.
Promoting diversity. For
this issue, I interviewed Doug
Glanville, a baseball commen-
tator and ex-player, who
also teaches a course at
the University of Con-
necticut about sports
and society. Doug has
been using his “plat-
form,” as he calls it,
to help promote
understanding and
advocate for change
in the U.S.
Doug and I have
been carrying on an
e-mail conversation
for two years. He
first contacted me
nonconfrontational approach and his re- him a view of life without barriers. “He would
search: He had found the percentage of the say, ‘Hey, everybody in my country looks like
nonwhite population in each of our destina- me,’ so he didn’t have the burden of what you
tions, and the numbers did not tell a story of can and can’t do,” Doug says.
diversity. “As an African American,” he wrote, Growing up, Doug played baseball on a
“there are priorities on my list that would team coached by members of the Teaneck
differ…because of the indelible dynamic of police department. He cites that as a big
race in our country.” influence, how he experienced the positive
Doug challenged us to broaden our consid- side of police engaged with their community.
eration of diversity and equity in all our con- He has also experienced the other side of
tent. “I contend that this sensitivity would policing: One winter, he was shoveling snow
benefit not just readers of color but all people in his West Hartford driveway when a police
officer who did not know him
and had crossed town lines
stopped to harass him. In Con-
DOUG GLANVILLE SAYS BASEBALL necticut, thanks to the efforts
CAN PROVIDE A GREAT EXAMPLE of Doug and a team of his sup-
OF TEAMWORK, FAIRNESS AND porters, it is now illegal for police
officers to cross jurisdictional
COMMUNICATION FOR THE U.S. lines to enforce municipal laws
from their own jurisdictions.
Doug is a member of the Con-
who care about a necticut police council, where he is an advo-
welcoming and more cate of community policing. And, of course,
equitable financial his baseball background is paramount. He
landscape.” was the first African American Ivy Leaguer to
Over the past two play in the majors. During a 15-year career as
years, we checked an outfielder in the majors, he played for the
in occasionally and Chicago Cubs, Philadelphia Phillies and Texas
discussed possible Rangers. He says baseball can provide a great
guest columns, example for the U.S. as a whole—of team-
but nothing work, fairness and communication.
gelled until The video essay Doug wrote and narrated,
we launched sparked by the death of George Floyd, is a
“Making It Work.” culmination of his work so far. It’s called
Our conversation “Enough,” and I highly recommend it. You can
was wide-ranging, find it by searching “Glanville video enough.” Q
and I regret that space
POON WATCHARA-AMPHAIWAN

to dissect some of our limitations prevent us

choices for our 2018 from including more of it
edition of the “Best in the interview highlights
Places to Retire” cover on page 64.
MARK SOLHEIM, EDITOR
story. I was impressed Doug talked about his MARK _ SOLHEIM@KIPLINGER.COM
with his thoughtful, childhood in Teaneck, N.J., TWITTER: @MARKSOLHEIM

6 KIPLINGER’S PERSONAL FINANCE

READER FEEDBACK

be in Las Vegas under the ferently, and 30 to 40 years

Health Plan Options heading of Gambling.
JOHN BISCHOFF
later, they ended up better
off for it. The answer to
One alternative that I wish you would have mentioned is health care WARNER, N.H. narrowing any gap is more
sharing (“Rx for Your Health Insurance,” July). Health care sharing education at a young age.
is technically not insurance, but it works very similarly, and the cost Retirement wage gap. Your THOMAS WARD
item about the wage gap CUMBERLAND, R.I.
is usually half of a typical health insurance plan. Members pay a
persisting into retirement
monthly sharing amount. To enroll, applicants are subject to medi-
seems to have neglected one Credit card perks. You men-
cal underwriting and preexisting-condition limitations. My wife thing: Women outlive men tion that Chase Sapphire
and I joined Medi-Share about two years ago. We are saving almost (“Briefing,” July). So there Reserve and Chase Freedom
$800 a month compared with an ACA plan with similar out-of- may be actuarial reasons cardholders are eligible for
pocket amounts. that partly explain the $60 in annual credits for
BARRY BRIDGES gender retirement income food-delivery service Door-
LOUISVILLE, KY. gap. But let me be clear: Our Dash, plus a free DashPass
society definitely unfairly (“Deals, Deals, Deals,” July).
Editor’s note: Health care sharing the past 10 years using op- favors men over women. However, this offer only ap-
programs are faith-based alterna- tions. Since March 2020, EARL RAMSEY plies to those with the Chase
tives to traditional health plans. he is up 100%. He does work LITTLE ROCK, ARK. Sapphire Reserve card.
Medi-Share, for example, has a at it about four hours per ADAM MCTISH
community of about 400,000 day, but he has always had Having founded and run a CHARLOTTE, N.C.
Christian members who agree great results. Your article small company, I was struck
to share each other’s medical gave me the push to learn by the high number of Editor’s note: Our reader is
expenses. But note that the pay- more about it and try some women who invested their correct. With the Chase Sapphire
ment of medical bills is not guar- options trades. 401(k) funds in “guaranteed” Reserve, besides the statement
anteed. For more information, STEPHEN LEE investments earning next to credits, you get a free DashPass
see kiplinger.com/kpf/share. LOS ANGELES nothing. Our company pro- membership for at least a year.
vided professional investing Chase Freedom offers DashPass
As informative as your It didn’t take me long to help, but for many women, free for three months, with a 50%
article was, there was one get lost understanding the security and fear of loss discount for another nine months.
glaring error. The use of a options article, but I know were their main concerns.
short rod, entwined by two enough to say that it should Most men invested very dif- CORRECTIONS
snakes, topped with double In “10 Stocks to Invest in the
wings is the wrong symbol Health Care Revolution” (July),
to use for medicine. This READER POLL we misspelled the name of Julia
symbol, the caduceus, is Angeles, an investment manager
actually the magic wand Which issue are you most concerned about as with Baillie Gifford. And analyst
of the Greek god Hermes. you decide who to vote for in 2020 election? Madhu Kumar is with Robert W.
It was eventually linked to Baird, not William Blair.
alchemy and the occult. The
Social
correct symbol is the staff Security and
Apologies to Michigan. We left
of Aesculapius, which is a Medicare the “e” out of Petoskey (“From
single serpent encircling a 16% the Editor,” Aug.).
staff. Aesculapius was an Health
ancient Greek physician de- care CONTACT US
The
ified as the god of medicine.
economy 15% Reader Feedback may be edited
DAVID LUBIN, M.D. for clarity and space, and initials
TAMPA 59% will be used on request only if
you include your name. Send to
Taxes 5% Kiplinger’s Personal Finance,
Options trading. Thanks very
1100 13th St., N.W., Suite 1000,
much for the summary of Foreign trade 3%
For a snapshot of Washington, DC 20005, or e-mail
how to trade with options. Energy policy 1%
what the candidates to feedback@kiplinger.com. Please
A good friend of mine has College affordability 1% include your name, address and
plan to do, see page 34.
averaged a 45% return for daytime telephone number.

09/2020 KIPLINGER’S PERSONAL FINANCE 7

“ Knowledge
is power.
Understanding what cancer
clinical trial options
EDITOR
EXECUTIVE EDITOR
MANAGING EDITOR
EDITORIAL
Mark K. Solheim
Anne Kates Smith
Frederic Fane Wolfer
SENIOR EDITOR Sandra Block
are available to
you and your EDITOR AT LARGE
SENIOR ASSOCIATE EDITOR
Janet Bodnar
Nellie S. Huang
loved ones

”
ASSOCIATE EDITOR Ryan Ermey
can make all CONTRIBUTING EDITORS Lisa Gerstner, James K. Glassman, Jeffrey R. Kosnett
the difference. STAFF WRITER Emma Patch
CEDRIC THE ENTERTAINER
Stand Up To Cancer Ambassador
ART
DESIGN DIRECTOR Stacie A. Harrison
ASSISTANT ART DIRECTOR Natalie F. Kress

SALES
PUBLISHER Paul Vizza (202-887-6558; Paul_Vizza@kiplinger.com)
ASSOCIATE PUBLISHER Stevie Lee (Stevie_Lee@kiplinger.com)
REGIONAL ACCOUNT DIRECTOR Maggie Kinsky (Maggie_Kinsky@kiplinger.com)
DIRECT RESPONSE Anthony Smyth (914-409-4202; anthony@smythmedia.com)

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KIPLINGER.COM
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Photo By ONLINE EDITORS Lisa Kiplinger, Robert Niedt, Rivan V. Stinson, Andrea Browne Taylor
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WATCHING MY MOTHER AUDIENCE ENGAGEMENT MANAGER Ben Demers
GO THROUGH HER SENIOR WEB DEVELOPER David Kuchler
CANCER DIAGNOSIS TAUGHT
ME THE IMPORTANCE OF CIRCULATION
CLINICAL TRIALS. SENIOR CIRCULATION MANAGER Roseann Ciccarello
DIRECTOR, COMMERCIAL ART Lori Smedley
When my mom was diagnosed with
uterine cancer, I knew that I wanted
CUSTOM CONTENT
her to have access to the best
CUSTOM CONTENT DIRECTOR Barbara Baker Clark
treatments available. The journey SENIOR EDITOR Eileen Ambrose
taught me about the importance of PROJECT MANAGER Michelle Menner
learning all that you can about the
options available to you. I want all THE KIPLINGER WASHINGTON EDITORS INC.
people diagnosed with cancer to have 1100 13th St., N.W., Suite 1000, Washington, DC 20005 (202-887-6400)
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Knight A. Kiplinger, Editor Emeritus
Cancer clinical trials may be the right CHIEF EXECUTIVE OFFICER Denise M. Elliott
option for you or a loved one. The SENIOR VICE PRESIDENT AND CHIEF CONTENT OFFICER Sarah Stevens
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AHEAD

TOPIC A
ACROSS THE U.S., COMPANIES

NOT READY TO that sent their workers home in

March to protect them from the
coronavirus pandemic are gradu-

RETURN TO WORK? ally reopening. Most are imple-

Even if you don’t have legal protections, you may be able
to negotiate with your boss. BY SANDRA BLOCK
menting a long list of precautions,
from requiring workers to wear
masks to limiting capacity on ele-
vators. But with coronavirus cases
still rising in some parts of the

ILLUSTRATION BY VANESSA BRANCHI 09/2020 KIPLINGER’S PERSONAL FINANCE 9

AHEAD
country—and a vaccine months away—
some workers are reluctant to go back
to the office.
Which raises the question: If you
don’t feel safe, can your employer re-
quire you to return to work? The an-
swer depends on a number of factors,
but your individual circumstances are
most important, says Alison Green,
founder of the Ask a Manager website
(www.askamanager.org) and author of
Ask a Manager: How to Navigate Clue-
less Colleagues, Lunch-Stealing Bosses
and Other Tricky Situations at Work.
If you have a medical condition that
puts you at high risk should you get
COVID-19 (such as diabetes, heart
disease or COPD), you have some pro-
tections under the American with
Disabilities Act, which prohibits em-
ployers from discriminating against
employees who are disabled. Accord-
ing to the Equal Employment Oppor-
tunity Commission, employees with
disabilities that put them at high risk
for complications from the pandemic
can request telework as a “reasonable
accommodation” to reduce their
chances of infection.
That doesn’t mean your employer
is required to allow you to work from
home, Green says. Your supervisor
could suggest an alternative, such as
putting you in an isolated part of your
office. Your employer can also reject
telework if you can’t perform your
duties at home—if you’re a waiter at
a restaurant, for example. But at the
very least, the ADA requires your
employer to consider alternatives that
will reduce your risk of becoming ill.
Working parents whose kids’
schools remain closed are also facing
challenges this fall. Your employer
isn’t required to allow you to work
from home to take care of your chil-
dren, Green says. You have a couple
of options, although they’re not ideal:
The Coronavirus Aid, Relief, and Eco-
nomic Security (CARES) Act stimulus
package signed into law in March
requires employers with fewer than
500 employees to give workers an
additional 10 weeks of time off at two-
10 KIPLINGER’S PERSONAL FINANCE 09/2020
thirds of their regular pay if they need
to stay home to care for a child whose
school is closed due to the pandemic.
If you’re forced to quit to take care of
a child (or children) whose school was
closed due to the pandemic, you’re eli-
gible for unemployment benefits.
Making your case. If you’re asking to
work from home because you have an
underlying medical condition, send an
e-mail to your boss or human-resources
department and put in the subject line
“official request for accommodation
under the Americans with Disabilities
Act.” Note in the e-mail that the Equal
Employment Opportunity Commission
has specifically said that employees
Nearly one-third of remote
workers would not return to
an office until a vaccine is
available.
31%
I would
not return
48%
to work I would
return
to work
22%
Don’t
know/No
opinion
SOURCE: Morning Consult
with disabilities that put them at high
risk for complications of COVID-19
may request telework as a reasonable
accommodation to reduce their chances
of infection.
The ADA doesn’t protect you if you
want to work from home because some-
one in your household has an under-
lying medical condition, Green says.
But that doesn’t mean you can’t ask to
telework. “Try to negotiate with your
employer to see if there’s something
you can work out,” she says.
You might be reluctant to return to
the office even if you don’t have an un-
derlying medical condition, child care
responsibilities or a vulnerable mem-
ber of your household. A survey by
Morning Consult, a market research
firm, found that nearly one-third of
workers would prefer to work at home
until a COVID-19 vaccine is available.
(The survey also found that three-
fourths of workers would like to con-
tinue working from home at least a
couple of days a week even after the
pandemic is under control.)
If you fall into that category, speak
up, Green says. Ideally, get together
with other coworkers who share your
concerns, she says, because there’s
strength in numbers.
If you’ve been working from home
for several months, you’ve got a track
record you can point to in making your
case, Green says. Show your employer
what you’ve accomplished while work-
ing from home to prove that your pro-
ductivity won’t suffer. Although many
workers now say they’d like to work
from home permanently for at least a
few days a week, you’ll probably have
better luck suggesting a temporary
telework arrangement.
Worried workers can take some con-
solation in the knowledge that many
employers, both large and small, are
in no hurry to require employees to re-
turn to the office. Companies ranging
from Twitter to Zillow have announced
policies allowing employees to work
from home permanently. In a recent
e-mail to the 118 employees of Kiwanis
International and the Kiwanis Chil-
dren’s Fund, executive director Stan
Soderstrom said working from home
would be the global volunteer organi-
zation’s primary work arrangement
“for the foreseeable future.” In partic-
ular, Soderstrom says, employees who
believe they or someone in their
household is at risk, or need to stay
home to care for their children, have
been encouraged to continue working
from home.
“We have people who have worked
for us for more than a decade,” he says.
“They’ve demonstrated their loyalty to
us, and I’m going to return that same
loyalty.”
 H1924_2020KPF07-1_M

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AHEAD
INTERVIEW
THIS OLYMPIAN HAS A NEW GOAL:
CLOSING THE WEALTH GAP
She encourages advisers to introduce students to financial planning.
Lauryn Williams is a certi-
fied financial planner with
Worth Winning, in Dallas,
and an adviser for Student
Loan Planner, which provides
consulting and refinancing
services for borrowers. She
is a three-time Olympic med-
alist in track and field and
the two-woman bobsled,
and the first U.S. woman to
medal in both the Summer
and Winter Games.
What led you to become a
certified financial planner?
I didn’t get the kind of ser-
vice I wanted from either
one of the two financial ad-
visers I had during my time
as an Olympian. They didn’t
help me with my budget.
We didn’t have conversa-
tions about my short- or
long-term goals or savings.
I was earning more than
$200,000 in sponsorships
before I was old enough to
drink. I knew I needed
more information to be bet-
ter equipped to handle my
finances. As I started edu-
cating myself, I thought I
could help other people.
What got you interested in
finance? I was always in-
terested in math and very
entrepreneurial. And I was
always looking for a way to
earn money. I raked leaves,
sold candy in sixth grade,
worked at a catering com-
pany on the weekends when
12 KIPLINGER’S PERSONAL FINANCE
discussions with their par-
ents about the most cost-
effective way to receive an
education before making a
decision about where to go
to school. If student loans
are a part of the decision,
they need to discuss how
they’ll pay them back.
I was 8, and started work- continue to move forward What can the financial industry
ing at Wendy’s on my 16th in the future. Technical do to bridge the racial wealth
birthday. When I got to col- schools that prey upon low- divide? We’re in a unique
lege and browsed through income students shut down time in history right now
majors, I asked someone and leave the bor- in which the conversation
about finance. They said rower high on race, racism and the
that it dealt with math and and dry. racial wealth divide is
money, and I love both of High happening at a level
those things. So it was easy school that has never hap-
from there. stu- pened before. And
dents we’ve started having
African Americans take out need to conversations about
student loans at higher rates have diversity in the fi-
and have higher default rates nancial industry.
than their peers. What can be The financial
done to close the wealth gap, planning indus-
not just for borrowers but for try right now
African Americans in general? is only made up
A lot of African American of 3.5% people
students are the first of color, of
in their family to go which 2.2%
to college. Their are African
parents may American.
not be famil- Financial ad-
iar with all visers should
of the options consider going
available to into diverse
fund higher high schools
education. to get students
Students interested in fi-
are signing nancial planning.
on the dot- Mentoring people
ted line for of color currently in
loans be- the financial industry
cause they is important, too. If
don’t know you’re an employer hiring
the differ- African Americans, create
ence between an environment where
loans, grants they can flourish and feel
COURTESY LAURYN WILLIAMS
and scholar- welcome. You can’t just
ships, but hire a minority planner to
they know check a diversity box. You
education is need a plan and strategy to
important to retain them. RIVAN STINSON
09/2020
STAYCATION
TRAVEL REWARDS CARDS
OFFER NEW PERKS
Credit card issuers expand benefits to justify
the annual fees.
SOME OF THE LARGEST
issuers of travel rewards
cards are adding new
benefits to accommodate
cardholders who have put
travel plans on hold be-
cause of the coronavirus
pandemic.
Rewards card providers
“have really leaned in to
where people are spend-
ing these days,” says Ted
Rossman, industry analyst
at CreditCards.com. The
coronavirus crisis has
compelled many Ameri-
cans to use their credit
cards for groceries, ac-
cording to a new survey
from Bankrate.com. In
April, 46% of grocery
shoppers paid with a
credit card, versus 27%
in December.
In response, credit card
issuers are offering more-
generous rewards for
groceries and restaurant
meals, including takeout
and delivery. Chase Sap-
phire Reserve, for example,
will allow grocery store
and gas station purchases
to qualify for the $300 an-
nual travel credit through
December 31. Through
September 30, Chase Sap-
phire Reserve cardholders’
rewards points will be
worth 50% more on eligi-
ble grocery, dining and
home improvement pur-
chases; points for Chase
Sapphire Preferred card-
holders will get a 25%
boost.
Existing Citi Premier
cardholders, meanwhile,
will earn three points for
each $1 spent—triple the
usual reward—for spend-
ing at supermarkets and
restaurants. Citi Prestige
cardholders can use their
$250 travel credit toward
supermarket and restau-
rant purchases through
December 31.
American Express Green
Card members can get up
to $80 in credits each year
(limited to $10 per month)
toward wireless phone
services from U.S. pro-
viders. Amex Platinum
cardholders, who pay an
annual fee of $550 a year,
can get up to $320 in
Most popular features of rewards cards with fees
Travel rewards/perks
Cash back
Accepted at most places
Low interest rate
10%
Merchandise/gift cards
8%
Customer service
7%
No favorite benefit
statement credits ($20
per service type per
month) toward streaming
and wireless phone ser-
vices. Through Septem-
ber 30, Capital One Savor
cardholders will receive
4% cash back on select
streaming services, in-
cluding Netflix, Hulu and
Disney+.
The strategy to appease
cardholders who pay an
annual fee appears to have
worked. More than 80%
believe they’re getting at
least as much value now
as they were before the
pandemic, according to a
recent survey by Credit
Cards.com.
If you don’t think you’re
getting value for your an-
nual fee, contact your
credit card issuer. About
70% of people who re-
quested a lower fee or
waiver got some relief,
according to CreditCards
.com research conducted
in 2018. Your chances of
getting a break on your
fees are even higher now,
Rossman says. EMMA PATCH
23%
23%
15%
14% SOURCE: Creditcards.com
09/2020
RMD RELIEF
MORE
RETIREES
CAN SKIP IRA
PAYOUTS
The CARES Act allows retirees who
are 72 or older to skip required min-
imum distributions. Initially, the
IRS said retirees who took a re-
quired distribution between Feb-
ruary 1 and May 15 could roll the
money back into their accounts,
which excluded many seniors who
took a distribution in January.
Now the IRS has welcome news
for seniors who took an RMD from
their IRA or other tax-deferred
plan in January and would like to
put the money back. In recently
released guidance, the agency
said that anyone who took an
RMD from an IRA or 401(k) plan
in 2020 can repay the withdrawn
funds—even if the withdrawal was
in January. The IRS also extended
the deadline for you to roll funds
back into a retirement account
from July 15 to August 31.
Ordinarily, you can make only
one rollover every 12 months, but
that requirement won’t apply in
2020. In addition, the IRS said indi-
viduals who took RMDs from in-
herited IRAs or other tax-deferred
accounts can also roll the money
back into their accounts, as long
as they do it by August 31.
An RMD is particularly painful
during market downturns be-
cause retirees may have to sell
their investments at a loss.
Waiving the requirement means
they have more time to recover
their investments’ lost value.
Skipping an RMD will also reduce
taxable income for 2020, which
can translate into lower taxes
on Social Security benefits and
lower Medicare premiums.
ROCKY MENGLE
KIPLINGER’S PERSONAL FINANCE 13
AHEAD

SOCIAL SECURITY QUIRK

TURNING 60 IN
2020? EXPECT
LOWER BENEFITS
IF YOU ARE TURNING 60 IN 2020, THE PANDEMIC
could do more than interrupt your party
plans. It could also lower the amount you’ll
receive when you file for Social Security.
Social Security benefits are based on a
worker’s 35 highest years of earnings, which
are then indexed to the growth in average
wages until the year the worker turns 60.
That’s a problem for people who turn 60
this year—even if their own earnings were
unaffected by the pandemic—because the
economic downturn is expected to sharply
reduce average wages, dragging down the
index. Based on Congressional Budget Office
projections, benefits for people who turn
60 in 2020 will be permanently reduced
by about 9%, says Andrew Biggs, resident
scholar at the American Enterprise Institute
and former deputy commissioner of the Social
Security Administration. For an average
wage earner who claims Social Security
benefits at age 67—full retirement age for
people born in 1960—that works out to a
reduction of about $2,500 a year, Biggs says.
Retirees can offset some of the damage
by delaying benefits. For every year you
delay benefits past full retirement age until
age 70, you’ll receive a credit of about 8%.
SANDRA BLOCK
CALENDAR
09/2020
▲ TUESDAY, SEPTEMBER 1
September is National Preparedness
Month. Review what your home-
owners insurance will cover in the
event of a natural disaster and talk
with your family about emergency
planning. (See page 47 for more tips
on reviewing your coverage in light
of COVID-19.)
TUESDAY, SEPTEMBER 8
If you’re in a Medicare plan, be on
the lookout for your Annual Notice
of Change. The document lists any
changes in plan coverage, service
area or cost that will go into effect
in 2021, and it can help you decide
whether your current coverage still
meets your needs.
TUESDAY, SEPTEMBER 22
It’s National Voter Registration
Day. As states shift policies to
respond to COVID-19, make sure
you’re registered so your vote will
WEDNESDAY, SEPTEMBER 30
Don’t leave credit card rewards
money on the table. From July 1
through today, you can get 5%
cash back on restaurant and Pay-
Pal purchases with the Discover It
credit card and 5% cash back on
all Amazon and Whole Foods
Market purchases with the Chase
Freedom card. Both cards limit the
5% payback to $1,500 in combined
purchases each quarter.
* DEAL OF THE MONTH
If you’re not interested in the
newest iPhone and want to
save some money, September
is a great time to buy older
models, according to DealNews
.com. Apple usually announces
the latest iPhones in early-to-
mid September, triggering
price drops for older models.
Last year, Verizon offered the
ISTOCKPHOTO.COM (2)

be counted in November. To learn iPhone 7 free with some of its

where the presidential candidates cell-phone plans, but models
stand on pocketbook issues, see sold outside of plans dropped
our story on page 34. in price, too. EMMA PATCH

14 KIPLINGER’S PERSONAL FINANCE 09/2020

 RETIRE
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 INVESTING

FIND THE BEST ETFS

FOR YOUR GOALS
You can build a solid core for your portfolio and explore new opportunities
with our favorite exchange-traded funds. BY NELLIE S. HUANG

ILLUSTRATIONS BY CHARLOTTE FU

16 KIPLINGER’S PERSONAL FINANCE 09/2020

09/2020 KIPLINGER’S PERSONAL FINANCE 17
INVESTING
T
he pandemic is still top of
mind. But the bear-market
sell-off that it sparked is now
a distant memory, thanks to
one of the fastest rebounds in history.
Yet volatility remains. Market senti-
ment shifts with the trendline in new
COVID-19 cases and any news, good
or bad, of a vaccine. It’s a crucial elec-
tion year, too, which can move markets
in unexpected ways. Even so, investors
now realize a true market resurgence
hinges on an economic recovery and
a revival of corporate profits.
Despite a market buffeted by big
moves and clouded by uncertainty, the
past year has been huge for exchange-
traded funds, those increasingly popu-
lar low-cost securities that hold bas-
kets of assets and trade like stocks.
Assets in ETFs topped $4 trillion last
year, ahead of the $3.8 trillion in index
mutual funds. In October, most bro-
kerage firms eliminated commissions
to trade shares in ETFs (and stocks),
too, which fueled asset flows. The fi-
nal stamp of approval came from the
federal government itself.
The Federal Reserve invested bil-
lions of dollars in 16 investment-grade
and high-yield corporate bond ETFs
between May and June as part of a
program to prop up the bond market.
“It’s an interesting moment for ETFs,”
says Rich Powers, head of Vanguard’s
ETF product management. The Fed
chose ETFs as a way to support the
bond market for the same reasons in-
dividual investors favor these securi-
ties. “They’re efficient, low-cost and
cover the breadth of the market they
invest in,” says Powers.
Against this backdrop, we reviewed
the Kiplinger ETF 20, the list of our
favorite exchange-traded funds. Our
group of 20 ETFs performed as ex-
pected, for the most part, but there
were a few exceptions. Accordingly,
we made a few adjustments to the ros-
ter, as well as two swaps for strategic
reasons. To learn more about why we
made certain changes, see the box on
page 20. For details on our new funds
and the rest of our ETF 20 collection,
18 KIPLINGER’S PERSONAL FINANCE 09/2020
see below. ETFs new to the roster are
marked with an asterisk.
The list is organized by category as
the funds appear in the table on page
22. The core stock funds are ETFs you
can buy and hold; dividend stock funds
provide extra income and stability;
and strategic stock ETFs can spice up
returns. On the bond side, the core
bond ETFs should serve as the bed-
rock of a fixed-income portfolio. Add
small doses of opportunistic ETFs de-
pending on your goals—to generate
more income, preserve capital or di-
versify your portfolio. See suggestions
for how to put our favorites together
in the model portfolios on page 24. Re-
turns are through July 10.
CORE STOCK FUNDS
ISHARES CORE S&P 500 (SYMBOL IVV, PRICE
$319, EXPENSE RATIO 0.03%). This ETF
tracks the S&P 500 index, which has
been hard to beat. Even with the 2020
bear-market drop, the fund boasts an
11.1% annualized five-year return,
nearly the same as the return in the
S&P 500. The S&P 500 covers 80% of
the U.S. market, as measured by mar-
ket value. The 506 stocks in the fund
are mostly giant-size companies, with
an average market value of $145 bil-
lion, a tad higher than the $139 billion
average market cap of the index.
ISHARES CORE S&P MID-CAP (IJH, $177, 0.05%)
and *ISHARES CORE S&P SMALL-CAP (IJR, $67,
0.06%). Smaller firms have lagged their
bigger brethren, which is why the five-
year returns of these funds pale next
to the return of the large-cap Core
S&P 500 ETF. Over the past five years,
Core S&P Small-Cap has returned
4.1% annualized; the Mid-Cap fund,
5.0%. But investors who want to beef
up their exposure to smaller compa-
nies should consider these ETFs, espe-
cially if they hold Core S&P 500. The
trio work well in combination because
there’s little overlap in holdings
among funds. Core S&P Small-Cap
holds 600 stocks with an average mar-
ket value of $1.5 billion. The 400
stocks in Core S&P Mid-Cap have an
average market value of $5.0 billion.
VANGUARD TOTAL INTERNATIONAL STOCK
(VSUX, $51, 0.08%). Foreign stocks have
lagged U.S. stocks for a decade, but
they are a vital piece of any well-diver-
sified portfolio. This one-and-done
ETF makes foreign investing easy. It
holds nearly all publicly traded over-
seas stocks (close to 7,400) in burgeon-
ing Asian and African economies, as
well as the oldest nations of Europe.
The fund’s five-year annualized re-
turn is a ho-hum 3.3%, but since the
market hit bottom in late March, it
has rallied 39.4%.
VANGUARD TOTAL STOCK MARKET (VTI, $161,
0.03%). Focus on this fund if you want
a single set-it-and-forget-it U.S. stock
fund. It holds nearly all U.S. publicly
traded companies—nearly 3,500 large,
medium and small stocks. Small-com-
pany stocks have lagged their larger
counterparts in recent years, which is
why Total Stock Market lags the large-
cap-heavy S&P 500 index by a smidge
over the past five years.
DIVIDEND STOCK FUNDS
SCHWAB US DIVIDEND EQUITY (SCHD, $51,
0.06%). This fund zeroes in on the
highest-yielding financially strong
firms. Potential stocks must have a
history of paying annual dividends
over the past 10 years (at least) and
meet the ETF’s prescribed measures
of cash flow to debt, dividend yield,
dividend growth and profitability, too.
That distills its holdings to 100 big
firms, such as United Parcel Service
and investment firm BlackRock. But
the ETF’s formula tilts toward com-
panies whose fortunes rise and fall
with the economy, which hurt the
fund during the sell-off earlier this
year, relative to other dividend-stock
peers. Even so, US Dividend Equity’s
five-year annualized record of 9.2%
is solid.
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INVESTING

VANGUARD DIVIDEND APPRECIATION (VIG, $119,

0.06%). A high yield matters less to this
fund than whether a company has
boosted its annual dividend consis-
tently—a trait that typically points to
well-run firms with rising profits and
stock prices. This ETF tracks an index
of 225 companies with at least 10 years
of annual dividend hikes; established
firms such as Walmart, Microsoft and
PepsiCo dominate. The fund’s five-
year annualized return: 10.6%.

WISDOMTREE GLOBAL EX-US QUALITY DIVI-

DEND GROWTH (DNL, $65, 0.58%). This fund
focuses on high-quality foreign divi-
dend payers with dependable profits.
Qualifying stocks are ranked by pay-
out: The bigger the dividend, the
bigger the stock’s share of the fund’s
assets. Novo Nordisk and British
American Tobacco are top holdings.
The fund has been a rewarding way
to invest overseas. Its 7.4% five-year
annualized return beat the 3.1% gain
in the MSCI ACWI ex USA index.

STRATEGIC STOCK FUNDS

WHAT’S
ARK INNOVATION (ARKK, $81, 0.75%). Inven- which suffered during the downturn.
tion and originality are at the heart of Low-volatility strategies are steadier
this actively managed fund. The ETF than the broad market about 85% of the
holds 34 stocks in firms leading the time, says Nick Kalivas, senior equity ETF

OUT AND
way in genomics, automation, next- strategist at Invesco. “This time was one
gen internet and financial technology. of the periods in which low volatility failed
Some, such as Tesla, are well known. to provide downside protection,” he says.
But most, such as genetic-editing com- A low-volatility investment strategy can

pany CRISPR Therapeutics, are less
so. Expect a bumpy ride, but rich re-
turns for patient investors—32.7%
annualized over five years.
FIDELITY MSCI INDUSTRIALS INDEX (FIDU, $35,
0.08%). Industrial stocks got walloped
earlier this year, but they have come
roaring back. These companies, which
typically include construction equip-
ment businesses, factory machinery
makers, and aerospace and transpor-
tation firms, tend to benefit during
economic recoveries. Union Pacific,
Honeywell International (an industrial
conglomerate) and Boeing top the
WHY
This year, we made four changes to the ETF
20. Low-volatility strategies disappointed.
Invesco S&P SmallCap Low Volatility is de-
signed to offer a smooth ride in a typically
rocky asset class. But during the COVID
sell-off, it tumbled 44%—more than the
41% loss in the Russell 2000 small-com-
pany index. The fund was loaded with real
estate, utility and financial stocks, all of
work well over the long term. But it requires
monitoring—more than we like for a pri-
mary holding. So we replaced it with a
back-to-basics small-company index fund,
iShares Core S&P Small-Cap.
For similar reasons, we’re cutting
iShares Edge MSCI Min Vol USA. Over the
past year, the fund lost 1.1%, compared
with an 8.5% gain in the S&P 500. It held
up better than the broad index during the
March sell-off, but only by one percentage
point. We took the opportunity to add In-
vesco WilderHill Clean Energy in its stead.
Low interest rates crimp bank profits,
but financial firms tend to do well during

20 KIPLINGER’S PERSONAL FINANCE 09/2020


economic recoveries. To balance the
risks and opportunities, we’re ousting
Financial Select Sector SPDR in favor of
a financial preferred-stock fund, Invesco
Financial Preferred. Preferred stocks
pay fixed dividends and are called “pre-
ferred” because a company must pay
dividends on preferred shares before
it pays common-stock dividends. This
move allows us to maintain a foothold
in the financial sector, but in a fund with
more stability and a higher yield.
With interest rates expected to stay
low for a lot longer, Pimco Enhanced
Low Duration Active is out, too. It does
well when rates rise, and we’ve got that
possibility covered elsewhere in our
roster with Invesco Senior Loan ETF,
which holds floating-rate notes that
adjust higher along with market rates.
The cut makes room for a promising
intermediate core bond fund, Vanguard
Intermediate-Term Bond.
portfolio. Although troubles at Boeing
and General Electric have been a drag
on returns over the past 12 months,
the fund’s 6.8% annualized return
over the past five years is decent.
*INVESCO FINANCIAL PREFERRED (PGF, $18,
0.62%). Preferred stocks issued by big
banks fill this fund. These securities
pay fixed dividends like bonds but
have the potential to appreciate like
stocks. The payouts are typically
higher than the dividends of common
shares. The result: more bang for the
buck. The fund’s 5.5% five-year annu-
alized return matches the return of
the S&P 500 Financials index over the
same period, with one-third the vola-
tility. Top holdings include JPMorgan
Chase, PNC Financial Services Group
and Wells Fargo preferred shares. The
fund yields 5.1%.
INVESCO S&P 500 EQUAL WEIGHT HEALTH
CARE (RYH, $223, 0.40%). What you see in
the name of this ETF is what you get:
The fund holds a diversified mix of
stocks—the 62 health care firms in the
S&P 500—in equal portions. The set-
up means midsize companies, such as
Dentsply Sirona, with a $9 billion mar-
ket value, get as much play as biotech
behemoth Amgen, with a $146 billion
market cap. The fund’s five-year annu-
alized return: 7.3%.
*INVESCO WILDERHILL CLEAN ENERGY (PBW,
$46, 0.70%). Alternative energy is gaining
ground. Renewable energy generated
more power in the U.S. than coal for
the first time ever in 2019. WilderHill
Clean Energy invests in firms working
with a variety of renewable sources—
wind, solar, hydro, geothermal and
biofuel—and clean-energy technolo-
gies. The diversity is a plus: “You don’t
need to make a bet on which clean en-
ergy will win with this ETF,” says Ja-
son Bloom, global macro ETF strate-
gist at Invesco. The fund has gained
53.6% over the past 12 months, but
that outsized return came with a lot of
volatility. During the coronavirus sell-
off, the ETF surrendered 46.7%.
ISHARES MSCI USA ESG SELECT (SUSA, $137,
0.25%). COVID-19 put a spotlight on
environmental, social and governance
characteristics because stocks that ex-
emplify these traits held up well in the
sell-off. MSCI USA ESG Select’s one-
year return of 12.9% beat 95% of its
peers and the S&P 500. Its three- and
five-year returns beat peers and the
index, too. Large and midsize compa-
nies fill the fund; Apple and Microsoft
are top holdings.
CORE BOND FUNDS
PIMCO ACTIVE BOND (BOND, $112, 0.73%).
After the bond market got slaughtered
in March, the managers behind this
fund hunkered down with high-
quality, government-guaranteed
mortgage-backed securities and top-
grade corporate debt. Though it trails
the Bloomberg Barclays U.S. Aggre-
gate Bond index over the past 12
months, the fund’s five-year annual-
ized return is in line with the bench-
mark’s. The fund yields 1.9%.
SPDR DOUBLELINE TOTAL RETURN TACTICAL
(TOTL, $50, 0.55%). Bond gurus from fund
firm DoubleLine have positioned this
intermediate-term bond ETF with a
70% tilt toward triple-A-rated bonds—
namely government-guaranteed
mortgage-backed securities and
Treasuries. The fund doesn’t hold
much in corporate debt, which hurt
returns in 2019. But it held up better
than the Agg index when bonds plum-
meted in March. It yields 2.1%.
*VANGUARD INTERMEDIATE-TERM BOND (BIV,
$93, 0.05%). Studies show that active
bond pickers have outperformed the
Agg over long stretches. But this index
fund has beaten the Agg in eight out
of the past 10 calendar years (and so
far in 2020, too). It holds mostly Trea-
suries and U.S. corporate bonds, with
a smattering of international invest-
ment-grade, dollar-denominated
debt—all with five- to 10-year maturi-
ties. The fund yields 1.2%.
09/2020 KIPLINGER’S PERSONAL FINANCE 21
INVESTING

Vital Stats

THE KIPLINGER ETF 20 AT A GLANCE

Share Annualized total return Expense
CORE STOCK FUNDS Symbol price 1 yr. 3 yrs. 5 yrs. Yield ratio Comment

iShares Core S&P 500 IVV $319 –8.5% 11.6% 11.1% 1.9% 0.03% Classic core holding of 500-plus large-company stocks.

iShares Core S&P Mid-Cap IJH 177 –7.3 2.2 5.0 1.9 0.05 Midsize U.S. firms in a diverse mix of sectors.

iShares Core S&P Small-Cap IJR 67 –12.4 0.2 4.1 2.0 0.06 Back-to-basics small-company index fund.

Vanguard Total International Stock VXUS 51 –0.8 2.3 3.3 2.6* 0.08 Foreign firms in developed and emerging markets.

Vanguard Total Stock Market VTI 161 7.5 11.0 10.5 1.7 0.03 More than 3,600 stocks in U.S. firms of all sizes.

DIVIDEND STOCK FUNDS

Schwab US Dividend Equity SCHD $51 –0.1% 7.9% 9.2% 3.7% 0.06% High-quality firms with a record of paying big dividends.

Vanguard Dividend Appreciation VIG 119 3.8 10.9 10.6 1.9 0.06 Shares in companies that consistently increase payouts.

WisdomTree Glbl ex-US Qual Div Gro DNL 65 14.5 9.3 7.4 1.9 * 0.58 Foreign dividend stocks with good growth prospects.

STRATEGIC STOCK FUNDS

Ark Innovation ARKK $81 67.7% 44.0% 32.7% — 0.75% Firms in the epicenter of innovation and change.

Fidelity MSCI Industrials Index FIDU 35 –7.9 2.4 6.8 1.9%* 0.08 U.S. industrial giants are top holdings in this fund.

Invesco Financial Preferred PGF 18 3.0 3.7 5.5 5.1 0.62 High-yielding preferred shares in financial firms.

Invesco S&P 500 Eq Wt Health Care RYH 223 10.2 9.5 7.3 0.6 0.40 Holds 60-odd health care stocks in equal proportions.

Invesco WilderHill Clean Energy PBW 46 53.6 30.8 14.4 — 0.70 Invests in renewable energy firms.

iShares MSCI USA ESG Select SUSA 137 12.9 12.1 11.7 1.6 0.25 Firms that meet socially conscious and governance tests.

CORE BOND FUNDS

Pimco Active Bond BOND $112 7.5% 5.3% 4.4% 1.9% 0.73% High-grade mortgage and corporate debt anchor this ETF.

SPDR DoubleLine Total Ret Tactical TOTL 50 4.4 3.7 3.3 2.1 0.55 This active ETF holds a variety of high-quality bonds.

Vanguard Intermediate-Term Bond BIV 93 11.0 6.4 5.1 1.2 0.05 Mostly Treasuries and corporate debt fill this fund.

OPPORTUNISTIC BOND FUNDS

Invesco Senior Loan BKLN $21 –1.3% 1.8% 2.2% 4.0% 0.65% Loans issued to firms with junk credit ratings.

iShares Ultra Short-Term Bond ICSH 51 2.6 2.5 1.9 0.7 0.08 Super-short-term corporate bonds and cash in an active ETF.

Vanguard Total International Bond BNDX 58 4.0 5.2 4.5 0.5 0.08 High-quality foreign debt, hedged for currency risk.

INDEXES

S&P 500-STOCK INDEX (LARGE U.S. STOCKS) 8.5% 11.7% 11.2% 1.8%

MSCI EAFE INDEX (FOREIGN STOCKS) –3.1 1.5 2.3 2.8

BLOOMBERG BARCLAYS US AGGREGATE BOND INDEX 9.5 5.6 4.5 1.2

As of July 10. *12-month yield. —Not available. SOURCES: Dow Jones, fund companies, Morningstar, MSCI, YCharts.

22 KIPLINGER’S PERSONAL FINANCE 09/2020

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INVESTED

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INVESTING

OPPORTUNISTIC
Winning Combinations BOND FUNDS

Four Portfolios to Reach Your Goals INVESCO SENIOR LOAN (BKLN, $21, 0.65%).
The fund holds short-term loans
Use these portfolios as a starting point, depending on your time horizon and your made by banks to firms with poor
tolerance for risk. We consider the funds below to be core holdings. You can spice up credit ratings, hence the generous
your portfolio with our strategic stock ETFs, listed on page 20. 4.0% yield. But this fund isn’t holding
the junkiest bonds. In fact, 18% of its
holdings are rated investment grade
70% Stock (albeit triple-B, the lowest investment-
grade tier). Most of the ETF’s holdings
50% Vanguard Total Stock Market are in double- and single-B-rated bank
20% Vanguard Total International Stock loans. Though default rates are rising,
Simple 30% Vanguard Intermediate-Term Bond this fund has just 1.6% of assets in-
vested in the troubled energy sector,
according to Invesco, where defaults
have been concentrated.
30% Bond
ISHARES ULTRA SHORT-TERM BOND (ICSH,
$51, 0.08%). Don’t look for income here.
80% Stock This actively managed fund yields just
15% Ark Innovation
0.7% and holds a mix of cash and cor-
15% iShares Core S&P 500
porate debt with one- to three-year
10% Invesco S&P 500 Equal Weight Health Care
maturities. But the fund provides
10% iShares Core S&P Small-Cap
Growth defense in rocky markets. It held up
10% Vanguard Dividend Appreciation
superbly during the market’s March
10% WisdomTree Global ex-US Qual Dividend Gro
sell-off in bonds, with a loss of less
10% iShares MSCI USA ESG Select
than 1% (the Agg index ceded 5.7%).
20% Pimco Active Bond
20% Bond Plus, the fund’s 2.5% three-year return
beat most money market fund yields.

VANGUARD TOTAL INTERNATIONAL BOND

60% Stock
25% Vanguard Total Stock Market (BNDX, $58, 0.08%). Negative interest
20% Vanguard Dividend Appreciation rates in key foreign nations weigh on
10% WisdomTree Global ex-US Qual Dividend Gro this fund’s paltry 0.5% yield. But this
5% Vanguard Total International Stock ETF offers diversification benefits.
Balanced 15% Vanguard Intermediate-Term Bond It invests in high-grade foreign gov-
15% SPDR DoubleLine Total Return Tactical ernment and corporate debt. Pros-
5% Vanguard Total International Bond pects are improving, too: After the
5% iShares Ultra Short-Term Bond pandemic, foreign economies are
40% Bond
expected to rebound faster than the
U.S. In the meantime, the fund’s five-
25% Vanguard Total Stock Market year 4.5% annualized return is re-
40% Stock
5% Vanguard Dividend Appreciation spectable. Because the fund holds
5% Vanguard Total International Stock foreign bonds issued in local curren-
5% WisdomTree Global ex-US Qual Dividend Gro cies, not U.S. dollars, Total Interna-
15% Pimco Active Bond tional Bond provides a hedge against
Conservative
15% SPDR DoubleLine Total Return Tactical currency risk to smooth out the ride
15% iShares Ultra Short-Term Bond for investors. Currency fluctuations
5% Invesco Senior Loan can double the volatility of a global
60% Bond 5% Vanguard Intermediate-Term Bond bond fund. ■
5% Vanguard Total International Bond
YOU CAN CONTACT THE AUTHOR AT NELLIE_HUANG@
KIPLINGER.COM.

24 KIPLINGER’S PERSONAL FINANCE 09/2020

SPENDING POWER
Protect Your Portfolio
From Inflation
It’s not an immediate threat, but some warning signs
say to set up some defenses now. BY RYAN ERMEY
INVESTORS LIKE INFLATION ABOUT AS
much as everyone on Dallas liked TV
villain J.R. Ewing. The animosity is
understandable: Rising prices eat into
investment returns and erode the
value of retirement savings. And if
you’re old enough to have watched the
prime-time drama that dominated the
1980s, you likely remember periods of
runaway inflation—such as from 1970
through 1980, when it averaged an an-
nualized 7.8%, cresting at more than
13% in 1980. These days, the prospects
for inflation are less intimidating.
Even so, investors should consider
protecting their portfolios now.
Younger investors may not remem-
ber a time of high inflation. Over the
past 15 years, annual inflation has
averaged 1.9%, well below the 3.4%
average annual increase since 1950.
Factors keeping inflation low include
an aging population (older folks are
less likely than their younger cohorts
to pump money into the economy) and
advances in technology, which have
made businesses more productive
while keeping a lid on labor costs.
At the same time, e-commerce puts
pressure on businesses to sell goods
at competitive (read: low) prices, says
Russ Koesterich, comanager of Black-
Rock Global Allocation fund.
In the wake of the COVID-19 pan-
demic, which brought with it record
unemployment, recession and massive
destruction of consumer demand, a
near-term acceleration in inflation
seems highly unlikely, says Koesterich.
June saw a year-over-year increase of
just 0.6% in the consumer price index,
the government’s main measure of in-
flation. Kiplinger expects the inflation
rate to end the year at 0.7%—well be-
low the 2.3% posted in 2019.
What’s the threat? Even if inflation isn’t
a worry right now, you should still fac-
tor it into your investing strategy, says
Kristina Hooper, Invesco’s chief global
market strategist. “Historically, infla-
tion has reared its ugly head at surpris-
ing times. Inflation-hedging strategies
Price Check
IS RUNAWAY INFLATION OVER?
Inflation has been tame in recent years, but it’s wise not to bank on it staying that way.
12%
AVERAGE ANNUAL CHANGE IN CONSUMER PRICE INDEX
10
8
6
4
2
0
1970 1980
SOURCE: U.S. Bureau of Labor Statistics
should be a long-term component of
your portfolio, not something you do
only when you think inflation is going
to rise,” she says. And after years of
inflation hovering below its 2% tar-
get, the Federal Reserve would likely
tolerate a sustained period above that
benchmark, says Michael Crook, head
of Americas investing strategy at in-
vestment firm UBS.
There are signs of accelerating in-
flation lurking in the distance. A po-
tential catalyst is the unprecedented
amount of stimulus money flowing
into the U.S. economy in the wake
of the COVID shutdown. The goal is
to maintain or even drive up demand,
which could be inflationary if it rises
faster than the supply of goods and
services. This scenario failed to play
out in the years following the recent
global financial crisis, with banks
reluctant to lend and consumers and
businesses reluctant to spend. What
plays out this time remains to be seen.
A potential rollback in business glo-
balization, including a trade war with
escalating tariffs between the U.S. and
China, is a potential driver of inflation
in the coming years, says Fidelity Stra-
tegic Real Return fund comanager Ford
O’Neil. So is a push for all-domestic
supply chains. “Globalization was a
1990 2000 2010 2019
09/2020 KIPLINGER’S PERSONAL FINANCE 25
INVESTING

huge headwind for inflation over the
past 20 years,” he says.
How to hedge. Protect your portfolio
with Treasury inflation-protected se-
curities (TIPS). The principal value of
these notes rises in step with the CPI.
Because the market is currently pric-
ing in very low inflation expectations,
TIPS are cheap. The difference in
yield between the 10-year Treasury
and 10-year TIPS was recently 1.41
percentage points, implying that in-
vestors expect 1.41% annual inflation
over the next decade. Should inflation
trend higher than that, TIPS would
come out ahead of Treasuries. Buy TIPS
directly from Uncle Sam at Treasury
Direct.gov, or use a fund, such as VAN-
GUARD INFLATION-PROTECTED SECURITIES
(SYMBOL VIPSX). The actively managed
fund charges 0.20% in expenses and
Cost of Living
has outpaced its average peer in nine
of the past 11 years. (Returns and other
data are through July 10.)
Or consider floating-rate debt. In-
flation and rising interest rates often
go hand-in-hand, so floating-rate
loans—whose rates are pegged to
short-term benchmarks and rise along
with interest rates—can pay off when
inflation ticks higher. A caveat: Firms
that take out these loans typically sport
sub-investment-grade credit ratings,
and therefore carry a higher risk of
default. A fund worth exploring is
INVESCO SENIOR LOAN ETF (BKLN, $21), one
of the Kiplinger ETF 20 (for more on
our favorite exchange-traded funds,
see page 16). The ETF yields 4.0%.
Stocks have historically outper-
formed inflation over long periods.
Hooper recommends high-quality
firms whose competitive advantages
allow them to raise prices to keep up
with inflation without losing custom-
ers. Don’t ignore international stocks,
says Crook. Rising inflation in the U.S.
typically results in a weaker dollar—a
boon for U.S. investors in international
firms, whose foreign-currency profits
get converted into more greenbacks.
FIDELITY INTERNATIONAL GROWTH (FIGFX),
a member of the Kiplinger 25 (the list
of our favorite no-load mutual funds),
kills two birds with one stone, invest-
ing in international firms with market-
leading positions in hard-to-enter
industries. It has beaten 86% of its
peers over the past decade.
Real estate is a classic inflation hedge,
as landlords typically hike rents to
match an uptick in inflation. But the
potential for a drop in demand for
rental, office or living space amid the
COVID-fueled downturn has hurt real
estate investment trusts. Select data
center and warehouse REITs should
be okay, however (see “5 Great REITs
to Buy Now,” Aug.).

Groceries Are Up, Gas Is Down Gold is often touted as an inflation

play. It’s been on a tear as investors
seek safe havens amid mar-
Following three months of declines, ket volatility. But its record
the consumer price index, the gov- against inflation is only so-
ernment’s main gauge of inflation, so, says BlackRock’s Koest-
rose 0.6% in June compared with erich. In successive
the same month a year earlier, and 12-month periods from De-
is up the same amount overall for cember 1973 through May
the year that ended in June. If you 2020, gold beat the CPI only
do your family’s grocery shopping, 51% of the time. Still, he
that figure seems low, and for good says, for long-term investors,
reason. The cost of food has risen by a touch of gold—say, 3% to
4.5% over the same 12-month pe- 5% of your portfolio—makes
riod, driven by rising costs of meats, sense. Consider ISHARES GOLD
poultry, fish and eggs. Meanwhile, TRUST (IAU, $17), an ETF that
if you do a lot of driving, a modest tracks the price of gold and
inflation rate might seem comically charges expenses of 0.25%.
high: Gas prices are down 23.4%. FIDELITY STRATEGIC REAL RE-
Food and energy prices are notoriously volatile, so many economists prefer TURN (FSRRX) is a one-stop inflation
to track so-called core inflation numbers, which exclude food and energy prices. hedge, investing in a mix of TIPS,
Stripping the volatile stuff out, core inflation is expected to run higher than the floating-rate loans, commodities and
CPI rate you read about in headlines, finishing the year at about 1.2%, compared real estate. Back-testing shows the
with the 0.7% Kiplinger expects for inflation overall. For consumers, however, ig- fund’s standard allocations would
noring the very real costs of fuel and food when measuring inflation might seem have beaten inflation in 80% of the
ISTOCKPHOTO.COM

ludicrous. Energy prices have been on the rebound lately, and Kiplinger expects 12-month periods going back to 1973. Q
food prices to finish the year up 5.6% from last year.
CONTACT THE AUTHOR AT RYAN_ERMEY@KIPLINGER.COM.

26 KIPLINGER’S PERSONAL FINANCE 09/2020

 KEY DATA FOR OUR MUTUAL FUND PICKS
Kiplinger 25 funds are no-load; you can buy them without sales
charges. For more about the funds, visit kiplinger.com/links/kip25.
THE KIPLINGER 25 UPDATE
Annualized

Testing Our
total return Expense
U.S. Stock Funds Symbol 1 yr. 5 yrs. 10 yrs. Yield ratio

DF Dent Midcap Growth DFDMX 15.0% 14.6% — 0.5% 0.98%

Patience
Dodge & Cox Stock DODGX –6.6 6.0 11.3% 3.8 0.52

Mairs & Power Growth MPGFX 6.0 9.2 12.3 2.5 0.65

Parnassus Mid-Cap PARMX –3.2 8.3 11.9 1.7 0.99

T. Rowe Price Blue Chip Growth TRBCX 23.9 17.4 18.4 0.6 0.69

T. Rowe Price Dividend Growth PRDGX 3.5 10.7 13.2 2.5 0.62
DUMPING A FUND WHEN IT IS est growing earnings in
down defies a basic invest- foreign developed coun- T. Rowe Price QM US Sm-Cp Gro PRDSX 1.5 8.3 14.3 0.9 0.79

ing rule: Buy low and sell tries, has returned 5.9% T. Rowe Price Small-Cap Value PRSVX –12.1 5.1 9.3 2.3 0.83
high. It’s one reason we’ve annualized. The MSCI Primecap Odyssey Growth POGRX 5.6 10.8 14.1 1.7 0.65
stuck by OAKMARK INTERNA- EAFE Value index has
Vanguard Equity-Income VEIPX –6.3 6.9 11.5 4.2 0.27
TIONAL , despite a turbulent sunk 0.8% on average per
run recently. When this year. “Today, our portfo- Wasatch Small Cap Value WMCVX –12.7 3.7 10.3 3.2 1.20

fund is good, it is awesome lios trade at near all-time Annualized

International total return Expense
relative to peers, but when discounts to their histori- Stock Funds Symbol 1 yr. 5 yrs. 10 yrs. Yield ratio
it is bad, it fares far worse. cal averages,” lead man-
AMG TimesSquare Intl Sm-Cap TCMPX 1.3% 5.0% — 2.6% 1.23%
In 2012, 2013, 2016 and ager David Herro wrote
2017, Oakmark Interna- in a semiannual report, Baron Emerging Markets BEXFX 7.3 5.7 — 2.1 1.35

tional delivered returns “trading at around 40 Fidelity International Growth FIGFX 12.4 7.6 9.5% 1.8 0.99
that ranked among the top cents on the dollar.” Two Oakmark International OAKIX –12.1 -0.9 4.8 6.0 0.98
9% of its peers (funds that holdings, BNP Paribas and
Annualized
invest in a mix of bargain- Credit Suisse Group, Specialized/ total return Expense
priced and fast-growing traded at discounts last Go-Anywhere Funds Symbol 1 yr. 5 yrs. 10 yrs. Yield ratio

foreign stocks in devel- seen during the 2007–08 Fidelity Select Health Care FSPHX 27.2% 9.8% 19.4% 0.9% 0.70%
oped countries). But those financial crisis, despite Vanguard Wellington‡ VWELX 5.8 8.0 9.8 3.1 0.25
outstanding years failed to stronger balance sheets.
Annualized
offset the bad years. In For now, we’re putting total return Expense
2018, the fund lost 23%, Oakmark International Bond Funds Symbol 1 yr. 5 yrs. 10 yrs. Yield ratio

lagging its peers by nearly on watch as we consider DoubleLine Total Return Bond DLTNX 4.1% 3.3% 4.8% 2.9% 0.73%
nine percentage points. other foreign value funds. Fidelity Adv Strategic Income FADMX 2.2 — — 3.3 0.68
Things got measurably That said, we’re still confi-
Fidelity Intermed Muni Income FLTMX 3.5 3.3 3.3 1.2 0.35
worse for the fund in dent that value investing
2020. All told, between will come back and, even- Fidelity New Markets Income FNMIX –1.6 4.2 5.3 4.8 0.82

February 2018 and March tually, Oakmark Interna- Met West Total Return Bond M MWTRX 9.7 4.3 4.7 1.2 0.67
2020, the fund lost 45%. tional will, too. TIAA-CREF Core Impact Bond TSBRX 7.4 4.2 — 1.4 0.65
That lags both its peers Finding a worthy re-
Vanguard High-Yield Corporate VWEHX 1.7 4.8 6.4 4.9 0.23
and the MSCI EAFE in- placement will be tough.
Vanguard Sh-Tm Inv-Grade VFSTX 5.1 2.9 2.7 1.4 0.20
dex, which tracks foreign Herro is a hard act to fol-
stocks in developed coun- low. During his 28-year Annualized
total return
tries, by more than 20 per- tenure, he was named Indexes 1 yr. 5 yrs. 10 yrs. Yield
centage points. Morningstar’s interna-
S&P 500-STOCK INDEX 8.5% 11.2% 13.8% 1.8%
To be fair, value-oriented tional fund manager of
foreign stocks, this fund’s the year in 2006 and 2016. RUSSELL 2000 INDEX* –7.7 4.0 10.0 1.7

focus, have lagged growth-
oriented shares. The per-
formance gap is expansive.
Over the past five years,
the MSCI EAFE Growth
index, which tracks for-
eign stocks with the fast-
In 2010, he was Morning- MSCI EAFE INDEX† –3.1 2.3 5.4 2.8
star’s international stock MSCI EMERGING MARKETS INDEX 4.5 5.3 3.7 2.6
fund manager of the BLOOMBERG BARCLAYS AGG BND IDX# 9.5 4.5 3.9 1.2
decade. Herro now runs
As of July 10. ‡Open to new investors if purchased directly through the fund company.
the fund with Michael *Small-company U.S. stocks. †Foreign stocks. #High-grade U.S. bonds. —Fund not in existence for
Manelli. NELLIE S. HUANG the entire period. SOURCES: Fund companies, FTSE Russell, Morningstar Inc., MSCI, S&P Dow Jones
Indices. Yields listed are SEC yields for bond funds; weighted average portfolio yields for stock funds.
Nellie_Huang@kiplinger.com

09/2020 KIPLINGER’S PERSONAL FINANCE 27

INVESTING Commentary
STREET SMART James K. Glassman
Cash In on a Housing Revolution
T
he Dow Jones industrial average
posted its best quarter in 33
years on June 30, rising 17.8%. Big
deal. Over the same period, the S&P
Homebuilders Select Industry index
was up 47.6%. The sector was devas-
tated by COVID-19, and it is almost
certain that builders’ revenues and
profits will decline in this year of high
unemployment and stay-at-home or-
ders. But stock prices reflect expected,
not current, earnings. Investors are
looking to the future, and they like
what they see. In fact, we may be on
the brink of a housing revolution.
COVID will change the home-buying
landscape for the better, in part by cre-
ating more homebodies. During the
epidemic, homes became the center of
nearly all family activity—recreation,
entertainment, dining, education
and work. Equity in a family home
is the number-one asset for house-
holds, accounting for about one-
third of net worth, collectively. If
I’m right, it will represent a
larger proportion in the
years ahead.
By a three-to-two
margin, Americans
told Gallup in April
that they prefer
to keep working
from home
after the
pandemic is
over rather
than going
back to the of-
fice. If you telecom-
mute, you can live any-
where, so you can afford
a bigger place, beyond
the city and close-in
suburbs. A Harris Poll
found that one-third of
respondents said they
28 KIPLINGER’S PERSONAL FINANCE 09/2020
were considering a move to a place less double digits and the economy’s future
densely populated. uncertain, it is understandable that
home sales have taken a tumble. But
Exodus to the country. According to the an index of pending sales of previously
National Association of Realtors, buyers owned homes jumped 44.3% in May
want to move farther out so they won’t compared with April, a sign that resi-
be so close to neighbors who might dential real estate is bouncing back.
be infected, now or in the future (see The fundamentals are certainly in
“Timely Reasons to Buy a Vacation place. Interest rates are among the
Home,” on page 56). The mayhem that lowest ever. In mid July, the average
followed police violence this spring rate on a 30-year fixed-rate mortgage
has also led to some disenchantment was just 2.98%; on a 15-year, 2.48%,
with urban living, but the nation’s three according to Freddie Mac.
largest metropolitan areas—New York, Another reason that I believe the
Los Angeles and Chicago—were already stocks of U.S. homebuilders are worthy
losing population. Moving to the exurbs of consideration now is that shares
and buying a bigger house of these companies are relatively
with entertainment cheap. Despite the price jump in the
second quarter,
the S&P Home-
COVID-19 WILL CHANGE HOME builders index
BUYING FOR THE BETTER, IN PART over the five
years through
BY CREATING MORE HOMEBODIES. June 30 has re-
turned an annual
average of more
rooms, giant than five percentage points less than
kitchens, the S&P 500 over the same period.
pools and A house may be Americans’ biggest
separate asset, but the firms that build houses
home of- are smallish. The 10 largest publicly
fices for traded builders had combined sales
spouses last year of about $80 billion, roughly
are the same as big-box retailer Target.
trends The market cap of the largest home-
that builder, Lennar, is just $18 billion.
builders Most builders are regional, and
have to economies of scale from production or
love. marketing are minimal. Homebuilders
Of course, have to build houses one by one and sell
you probably them, either individually or in rela-
POON WATCHARA-AMPHAIWAN
can’t move to tively small communities. Profitability
a bigger house often depends on how savvy a com-
if you are out pany has been in its purchases of land
of work, and or building lots, how wisely a firm
with unemploy- borrows, and how well it times con-
ment running in struction to meet demand. Those are
“ INVESTING IN TODAY’S MARKETS?
I’LL NEED SOME GOOD PEOPLE
WORKING ON THAT!”
GUIDANCE ON MUNICIPAL BONDS FROM HENNION & WALSH
You’ve worked hard for your money. And, in today’s unstable economy,
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municipal bonds, which offer historically low risk, is likely to be just
what you need right now. In August of 2019, Moody’s Investor’s Service
found that rated investment-grade municipal bonds had an average
cumulative 10-year default rate of just 0.10% between 1970 and 2018.
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© 2020 Hennion & Walsh Inc. Securities offered through Hennion & Walsh Inc.
Member of FINRA, SIPC. Investing in bonds involves risk including possible loss
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INVESTING Commentary
factors that the average investor can’t
really analyze. As a result, I believe
the best strategy is to invest in home-
builders that are doing business in
booming parts of the country and have
long-term records of rising revenues,
good balance sheets and shares trading
at attractive prices—at a time when
the economy is beginning a growth
spurt (as it might be now).
What to buy. Homebuilder NVR (SYMBOL
NVR, $3,271) meets all these criteria. NVR
builds in hot pockets of the mid Atlan-
tic, South and Midwest. It’s managed
in a prudent way, acquiring lots that
are already finished and ready for
building (rather than speculating in
raw land) and then constructing a new
house only when it has been sold in
advance. Revenues and net income
have risen steadily over the past five
years. COVID-19 will almost certainly
cause sales and earnings to fall in 2020,
but NVR should get back on track again
in 2021. (Prices and other data, unless
otherwise noted, are through July 10;
stocks and funds I like are in bold.)
NVR stock took a big hit earlier this
year, falling by nearly half within a
month; it has bounced back but re-
mains well off its February high. This
is one of those classy companies that
Constructive Advice
STICKS AND BRICKS STOCKS
These homebuilders should prosper in a more home-centered era.
Share
Company Symbol price
LGI Homes LGIH $102
Meritage Homes MTH 79
NVR NVR 3,271
Taylor Morrison Home TMHC 22
TRI Pointe Group TPH 15
Share
ETF Symbol price
iShares U.S. Home Con ITB $45
S&P 500 INDEX
As of July 10. SOURCE: Morningstar
30 KIPLINGER’S PERSONAL FINANCE 09/2020
THE BEST STRATEGY IS TO INVEST IN HOMEBUILDERS THAT
ARE DOING BUSINESS IN BOOMING PARTS OF THE COUNTRY AND
HAVE RISING REVENUES AND GOOD BALANCE SHEETS.
always seem too expensive to buy. The stock trades at a P/E of 9.
Now is a good time. NVR trades at 17 TAYLOR MORRISON HOME (TMHC, $22),
times estimated earnings for the year another fast-growing Arizona-based
ahead—high for the sector but reason- builder, has a riskier profile. Analysts
able for such a stellar performer. The expect earnings to fall sharply this
firm has an impressive balance sheet, year, then rebound in 2021. The com-
with $1.1 billion in cash and $682 mil- pany, founded in 1936, has a shakier
lion in debt at the end of the most re- balance sheet than Meritage’s and TRI
cently reported quarter. (Compare Pointe’s, but shares, down 24% from
that with Lennar, which has $1.4 bil- their high, are modestly priced. Simi-
lion in cash and $7.5 billion in debt.) larly, LGI HOMES (LGIH, $102), which builds
In addition to NVR, with its mar- a range of houses running from starter
ket capitalization (stock price times to luxury homes in regions including
shares outstanding) of $12 billion, the Northwest and South, has heavy
I like four stocks with market caps debt in relation to cash but powerful
of about $2 billion to $3 billion. earnings and revenue growth.
MERITAGE HOMES (MTH, $79) is a Sun Belt Most of the exchange-traded funds
builder based in Phoenix with a re- in the sector are unsatisfying. Despite
cord of sparkling earnings and reve- its name, SPDR S&P Homebuilders
nues, though both will probably fall has only a smattering of builders in its
in this pandemic year; the price- top holdings and is instead populated
earnings multiple is 11. TRI POINTE with building suppliers and makers of
GROUP (TPH, $15), which builds mainly carpets and appliances. A fund called
in the West, lost two-thirds of its value iShares Residential Real Estate has
in the COVID crash, then recovered no builders at all among its 25 largest
most—but not all—of the lost ground. holdings; its portfolio favors health
care, apartment and storage real estate
investment trusts. By contrast, build-
ers make up the majority of the asset
value of ISHARES U.S. HOME CONSTRUCTION
(ITB, $45). Although the fund also owns
shares of companies such as Sherwin-
Market Price- Williams and Home Depot, it is the
cap earnings Annualized total return best of the ETFs—and worth a look if
(billions) ratio 1 yr. 3 yrs. 5 yrs.
you prefer funds to individual stocks.
$2.5 12 40.4% 33.8% 39.8%
The truth is, when it comes to resi-
3.0 11 48.3 22.6 10.3 dential real estate, your best bet is your
12.0 17 –5.7 9.0 18.7 own home. You can’t beat the leverage,
2.8 19 0.9 –4.2 1.0 the tax breaks and the consistent re-
2.0 9 23.3 3.8 –0.2 turns. But a strong second-best is the
stock of homebuilders—especially
Assets Expense Annualized total return now, on the brink of what could be
(billions) ratio 1 yr. 3 yrs. 5 yrs. a housing revolution. ■
$1.6 0.42% 17.7% 9.9% 10.6%
8.5% 11.7% 11.2% JAMES K. GLASSMAN CHAIRS GLASSMAN ADVISORY, A PUB-
LIC-AFFAIRS CONSULTING FIRM. HE DOES NOT WRITE ABOUT
HIS CLIENTS. HE OWNS NONE OF THE STOCKS MENTIONED.
HIS MOST RECENT BOOK IS SAFETY NET: THE STRATEGY FOR
DE-RISKING YOUR INVESTMENTS IN A TIME OF TURBULENCE.
MUTUAL FUND SPOTLIGHT bonds climbed from late
February to late March,

A Fund With a Bright Future the managers positioned

the fund more aggressively,
adding to corporate debt on
This new-ish corporate bond fund is comanaged by familiar faces. the lower-quality end of in-
vestment grade. The differ-
ence between corporate and
WHEN A NEW MUTUAL FUND Treasury yields has since
gets off to a hot start, it BOND MUTUAL FUNDS shrunk, and the portfolio
can be tempting to buy Ranked by one-year returns Annualized Max.
has once again grown more
in. But investing in a fund total return sales Exp. conservative.
Rank/Name Symbol 1 yr. 5 yrs. charge ratio
with a short track record The fund seeks to invest
1. Virtus Seix Corporate Bond A SAINX 15.5% 6.6% 3.75% 0.95%
is a dicey proposition. You in debt issued by firms with
2. American Funds Corporate Bond A BFCAX 14.5 6.9 3.75 0.86
may not know much about easy-to-understand cash
3. Metropolitan W. Corporate Bond M MWCSX 13.2 — none 0.75
the managers. And without flows and plenty of assets
4. Voya Investment Grade Credit A VACFX 12.8 — 2.50 0.90
historical return data, you on hand to cover liabilities,
5. Ivy ProShares S&P 500 Bond Index A IAPRX 11.9 — 2.50 0.65
may be getting only part of as well as IOUs that trade
6. Ivy Crossover Credit A ICKAX 11.8 — 5.75 0.90
the picture when it comes to cheaply compared with
7. MFS Corporate Bond A MFBFX 11.7 5.9 4.25 0.78
how the fund will perform similar bonds. Lately, the
8. Columbia Corporate Income A LIIAX 11.5 5.8 4.75 0.90
over different stages of the managers have found value
market cycle. 9. Fidelity Corporate Bond FCBFX 11.4 6.2 none 0.45 in bonds issued by health
METROPOLITAN WEST CORPO- 10. Morgan Stanley Inst Corp. Bond A MIGAX 10.9 7.3 3.25 1.05 care, cable media, banking
RATE BOND has gotten off to CATEGORY AVERAGE 9.8% 5.4% and industrial firms, says
a very hot start: Since the Cudzil. They have avoided
fund’s mid-2018 inception, it Bryan Whalen, who also co- the extreme volatility in debt from industrial-com-
has returned an annualized manage Metropolitan West the bond market earlier this modities companies and
13.0%, which is 2.6 percent- Total Return, a member of year, “we basically experi- retailers.
age points ahead of the the Kiplinger 25 (the list of enced a full cycle in a quar- The fund recently yielded
benchmark for corporate our favorite no-load mutual ter,” Cudzil says. 5.6%, compared with a
bonds and better than any funds) that boasts a sterling The market chaos has 2.1% yield for the Bloom-
other fund in its category. long-term track record. And forced the fund, which berg Barclays U.S. Corpo-
But familiar faces run the in Metropolitan West Cor- invests predominantly in rate Bond index and a
show. Comanager Jerry porate Bond’s short history, investment-grade debt, to 0.7% yield for the 10-year
Cudzil shares responsibili- the fund has seen both up be more nimble than usual. Treasury. RYAN ERMEY
ties with Tad Rivelle and and down markets. Given As yields on corporate Ryan_Ermey@kiplinger.com

20 LARGEST STOCK AND BOND MUTUAL FUNDS Ranked by size. See returns for top funds in 12 categories at kiplinger.com/kpf/funds.
Annualized Max. 1-year Max.
STOCK MUTUAL FUNDS Assets† total return sales BOND MUTUAL FUNDS Assets† total Current sales
Rank/Name Symbol (billions) 1 yr. 5 yrs. charge Rank/Name Symbol (billions) return yield charge
1. Vanguard Total Stock Market Idx Adm VTSAX $728.9 7.5% 10.5% none 1. Vanguard Total Bond Market Index Adm
VBTLX $220.6 9.6% 1.3% none
2. Vanguard 500 Index Adm VFIAX 385.7 8.5 11.1 none 2. Pimco Income A PONAX 120.4 0.5 2.5 3.75%
3. Vanguard Total Intl Stock Idx Adm VTIAX 378.9 –0.8 3.2 none 3. Vanguard Total Intl Bd Idx Adm VTABX 117.1 4.0 0.4 none
4. Fidelity 500 Index@ FXAIX 229.0 8.5 11.2 none 4. Metropolitan West Total Return Bd M
MWTRX 86.2 9.7 1.2 none
5. American Growth Fund of America A AGTHX 217.8 21.1 14.1 5.75% 5. Vanguard Interm-Term Tax-Ex Inv VWITX 75.0 4.3 1.2 none
6. American Balanced A ABALX 163.6 7.0 8.0 5.75 6. Pimco Total Return A PTTAX 68.9 8.8 1.3 3.75
7. American EuroPacific Growth A AEPGX 160.3 7.5 5.6 5.75 7. Dodge & Cox Income@ DODIX 64.2 9.1 2.9 none
8. Fidelity Contrafund FCNTX 121.4 21.3 15.2 none 8. Vanguard Short-Term Inv-Grade Inv VFSTX 62.6 5.1 1.4 none
9. American Washington Mutual A AWSHX 119.2 –0.3 8.8 5.75 9. American Bond Fund of America A ABNDX 59.9 11.0 0.9 3.75
10. American Income Fund of America A AMECX 105.6 –0.8 5.3 5.75 10. PGIM Total Return Bond A PDBAX 57.0 7.5 2.1 3.25
S&P 500 8.5% 11.2% BLOOMBERG BARCLAYS US AGGREGATE BOND INDEX 9.5% 1.2%
MSCI EAFE INDEX –3.1% 2.3% B OF A MERRILL LYNCH MUNICIPAL MASTER INDEX 4.5% 1.7%
As of July 10. †For all share classes combined. @ Only share class. Unless otherwise indicated, funds come in multiple share classes; we list the share class that is best suited for individual
investors. MSCI EAFE tracks stocks in developed foreign markets. SOURCES: Bank of America Merrill Lynch, Morningstar Inc., Vanguard.

09/2020 KIPLINGER’S PERSONAL FINANCE 31

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MONEY
The
Election
and Your
Money
We’ve assessed how the
presidential candidates’
stances on financial issues
will affect your wallet.

W
hether the upcoming presi-
dential election is a battle for
the soul of the nation or the
way to keep America great is
a question we will leave to you
to answer. But the election will have impor-
tant ramifications for your financial well-
being, and we’re all over that agenda. How
will each of the candidates help steer the
economy? What might your tax bill be? Is
your portfolio headed for gains or losses?

34 KIPLINGER’S PERSONAL FINANCE 09/2020

ILLUSTRATIONS BY NEIL WEBB 09/2020 KIPLINGER’S PERSONAL FINANCE 35
MONEY
For those questions, the person living
at 1600 Pennsylvania Avenue for the
next four years matters.
At the start of the year, a sound
economy, rock-bottom unemployment
rates and a roaring bull market made
it Donald Trump’s election to lose.
Then came the coronavirus pandemic,
exacting a vast and tragic human toll,
putting a dramatic end to the longest
economic expansion and bull market
on record, and robbing tens of millions
of Americans of their livelihood.
It remains to be seen whether voters
will renew President Trump’s lease
on the White House in November, but
former Vice President Joe Biden be-
came a more formidable contender
over the summer, if you believe the
polls and the betting markets. In early
July, policy analysts at investment
firm Raymond James gave Biden a
55% chance of winning the presidency.
But it bears repeating that the cir-
cumstances surrounding the 2020
election are unique, and for insights
into who will ultimately claim vic-
tory, you might be better off asking
an epidemiologist than a political con-
sultant. Each of the presidential can-
didates faces “significant challenges,”
The Market Reaction
A
s we head into election day,
investors are understandably
wondering—and even anxious—
about how the U.S. presidential
election will affect the financial mar-
kets. It’s important to remember that
this year, especially, the election isn’t
the only market driver, or even the
main one. “Clearly there’s going to
be a market impact from this election,
but some of what impacts the market
will be decided by a slew of other
36 KIPLINGER’S PERSONAL FINANCE 09/2020
according to analysts at Wells Fargo
Investment Institute. “Voter percep-
tion of how President Trump man-
ages the pandemic and economic re-
opening is key to his reelection bid.”
What is clear is that the country has
rarely been more polarized. “The U.S.
presidential election [is] set to take
place against the most tumultuous
domestic backdrop since 1968,” write
analysts at BlackRock Investment In-
stitute in their 2020 Midyear Outlook.
“The two parties are as far apart on
policy as they have ever been, making
the result consequential for markets.”
Taxing matters. Taxes will be front and
center. A Biden administration would
target the 2017 corporate tax cuts for
a partial rollback and float the possi-
bility of higher rates on capital gains
and dividends, as well as an expansion
of payroll taxes for wealthy Ameri-
cans. That would nick corporate prof-
its and possibly dampen the animal
spirits of investors, especially high-
net-worth taxpayers, but would be at
least partially offset by aggressive eco-
nomic stimulus, says Solita Marcelli,
chief investment officer, Americas, at
UBS Global Wealth Management. A
things beyond who’s at the top of the
ticket,” says Ed Mills, a Washington
policy analyst with investment firm
Raymond James. “Where are we
with the virus? Where are we on the
economy?”
As the answers to those questions
unfold, investors can at least look to
history for some clues about the stock
market. The four-year presidential
market cycle is well known on Wall
Street. During a presidential term,
Trump 2.0 administration would be
incrementally positive for economic
growth and the stock market, Marcelli
says, counterbalanced by the risk of a
re-escalation of trade wars.
Although the presidential candi-
dates loom large during election sea-
son, Congress holds the key to big
policy shifts. “A clean sweep, whether
red or blue, makes a big difference,”
says Marcelli. “In a divided govern-
ment, enacting tax and spending leg-
islation becomes more difficult. As
a result, regulatory and trade policy
become the main policy drivers.”
The chances of a blue sweep were
rising midsummer, with Raymond
James giving Democrats a 50% chance
of taking back the Senate and a 95%
chance of keeping the House. Repub-
licans are defending 23 seats in the
Senate; Democrats, 12. Democrats
need to net four seats (or three seats
plus the presidency) to flip the Senate.
The toss-up Senate races as of July in-
cluded Arizona, Colorado, Maine and
North Carolina.
Expect some heated rhetoric and
volatile markets in the run-up to Elec-
tion Day. Read on to get a sense of how
your finances will fare afterward.
markets do best in the third and
fourth years—election year and the
year preceding it. Politicians tackle
unpleasant tasks—a rate or tax hike,
say—early on but prime the pump as
the election approaches.
Donald Trump’s term has been
anything but average. Trump years
one and three (2017 and 2019) far
outstripped the average price gain
in the S&P 500 index for comparable
years, going back to Franklin Roos-
evelt’s term beginning in 1941 through
Barack Obama’s presidency, ending in
2016. Trump years two and four have
underperformed the average. The
question is whether the market’s re-
cent upward trajectory will continue

long enough to bring this election year
up to average or beyond.
Beware of conventional wisdom
that says Wall Street favors business-
friendly Republicans at the helm. Since
1928, annualized total returns for the
S&P 500 have averaged 13.3% under
Democrats, compared with 7.7% under
Republicans, according to InvesTech
Research. For a hint about who will
win the election, keep a close eye on
market indexes. If they’re up in the
three months preceding the election,
the incumbent wins 87% of the time.
Whoever wins will fill top positions
at the Securities and Exchange Com-
mission and the Federal Reserve, im-
portant decisions for financial mar-
kets. As for the candidates’ policies,
both party platforms remain sketchy
on details in parts. A win by either side
could mean different things for differ-
ent portions of the market. Here are
the issues that are likely to have the
biggest impact.
Corporate taxes. In 2017, Trump (and
a Republican-controlled Congress) cut
corporate tax rates from 35% to 21%,
spurring profits. If he wins a second
term, corporate tax rates will stay the
same and S&P 500 earnings could
jump 30% in 2021 from 2020, say
Credit Suisse analysts.
Biden would seek to raise the corpo-
rate tax rate to 28%, which could re-
duce earnings per share in the S&P
500 by 8% to 12% in 2021, according
to estimates from Northern Trust.
“Any tax increase is a negative for the
markets, but it’s part of a complicated
ecosystem,” says Northern Trust’s
chief investment officer, Katie Nixon.
Biden might spur growth in certain
sectors by spending the extra tax dol-
lars on climate, health care and infra-
structure initiatives, among others,
which could offset the one-time hit
of a higher corporate tax rate. And a
Democratic administration would be
more robust in fiscal stimulus spend-
ing to support the economy, says Mills
at Raymond James.
Even so, the impact of any tax hike
would vary across sectors and even
within them. The biggest winners of
Trump’s tax cut in 2017—financials,
consumer-oriented stocks and shares
of communication services firms,
which surged as earnings expecta-
tions rose—stand to get dinged if tax
rates rise. At the other end, utilities
and real estate firms benefited less
from Trump’s cuts, which bodes well
for these sectors should Biden get his
increase to 28%.
Biden has other tax changes on his
wish list that could disproportionately
hit information technology and health
care stocks, says Ron Graziano, head
of global accounting and tax research
at Credit Suisse. Those changes in-
cluding a doubling of tax rates, from
10.5% to 21%, that multinational com-
panies pay on earnings from intellec-
tual property held or used by foreign
subsidiaries.
Altogether, Biden’s tax proposals
could weigh heavily on the stock
market, given the hit to corporate
profits. Firms with strong balance
sheets that generate steady cash and
profits “have a proven ability to man-
age, absorb and sidestep potential neg-
ative tax issues,” says Graziano. High-
quality companies such as Home
Depot, JPMorgan Chase and Nike are
examples. But Biden may have to wait
on tax hikes. “With a soft economy,
a big initiative on higher taxes is not
how I anticipate things starting off,”
says Jonathan Golub, chief stock strat-
egist at Credit Suisse.
Trade with China. Everyone wants to
level the playing field with China,
safeguarding the intellectual property
of U.S. companies and boosting com-
petition between nations on manufac-
turing and trade. Trump has taken an
us-against-them approach, levying
tariffs, but Biden would likely use dip-
lomatic and political pressure to take
on China by forming a united front
with Europe and Japan.
09/2020 KIPLINGER’S PERSONAL FINANCE 37
MONEY

No matter the approach, the cold Financials. A Trump win would mean a on health care stock prices.
war is here to stay. “China wants to rally in financial stocks. His campaign One area of agreement: lowering
dominate global technology and we website catalogs dozens of regulations drug prices. Trump proposed a rule
don’t want them to,” says Nixon. eased or removed across sectors, in- last year to allow Americans to import
“There’s no answer to that dilemma.” cluding financials, since taking office. some prescription drugs at lower
Navigate the divide by making sure Some moves weakened large parts of prices from Canada. Biden supports
your portfolio has exposure to both the Dodd-Frank Wall Street reform lowering drug prices to match those of
China and U.S. stocks (see “Street law, enacted after the 2008 financial other nations, among other proposals.
Smart,” Aug.). crisis. Trump, for instance, with bi- Innovative drug and medical device
partisan support, raised the asset stocks are less vulnerable to battles
Infrastructure. Both sides agree that threshold for banks that are exempt over the ACA and drug prices. You’ll
infrastructure spending is needed, from some federal oversight—such as find examples in exchange-traded
and the passage of any plan would be stress tests that can help determine funds such as iShares US Medical De-
a big win for industrials and materials whether a bank has the capital to vices and SPDR S&P Biotech. Hospi-
companies, including Caterpillar, Vul- withstand an economic or financial tals, big winners under the ACA, face
can Materials and US the most risk with any
Concrete. uncertainty about the
History Lesson
But the parties dis- health care law.
agree on how to pay How Stocks Have Performed Under 6 Scenarios
for it. Trump’s 2018 Energy and climate.
plan called for mostly If reelected, Trump
Average annual 14%
private-sector funding. would continue to
13% returns in the S&P 500, 13%
(He has a $1 trillion strip away energy reg-
since 1933, when
plan in the works, but ulations and encourage
different parties
funding details are are in power. fossil-fuel production.
still unclear.) Biden’s That would lift the
9%
$2 trillion plan would energy industry, hob-
be federally funded, bled this year after a
in part by higher cor- dispute between Saudi
porate taxes.
6% Arabia and Russia
Although repairing
5% over limiting oil sup-
crumbling roads and ply coincided with a
bridges and investing pandemic-related fall
in 5G wireless and ru- in demand.
ral broadband are on A Biden adminis-
Republican Rep. President/ Rep. President/ Democratic Dem. President/ Dem. President/
the to-do list of both sweep Split Congress Dem. Congress sweep Split Congress Rep. Congress tration would focus
sides, some of Biden’s on clean energy and
SOURCE: RBC CAPITAL MARKETS
initiatives—increased lower emissions stan-
mass transit and a dards, among other
high-speed rail network—tilt toward crisis—from $50 billion to $250 billion. things, in the name of combating
lowering our reliance on fossil fuels. A Biden presidency would shore climate change. His $2 trillion clean-
Trump’s first-term initiatives, on the up the Dodd-Frank regulations again. energy and infrastructure plan hopes
other hand, have encouraged fossil- But re-regulation isn’t new regulation. to achieve an emissions-free power
fuel production. Financial services firms have the archi- sector by 2035 and invest in game-
The biggest hurdle for infrastruc- tecture to adapt. They’re “not starting changing clean-energy technologies.
ture initiatives is timing, given the from a dead stop,” says Nixon. That bodes well for green investing
struggling economy. The impact on strategies, particularly in renewable
growth tends to be watered down Health care. Biden wants to expand energy. Although our motives weren’t
if a program takes years to play out, coverage of the Affordable Care Act; political, we just added Invesco
says Wells Fargo Investment Institute Trump wants to abolish the health WilderHill Clean Energy (symbol
market strategist Gary Schlossberg. care law (see “The Health Care Debate” PBW) to the Kiplinger ETF 20, the list
Lawmakers may decide to focus on on the next page and “Retirement of our favorite exchange-traded funds
initiatives that produce instant eco- Security” on page 41). Both positions (see “Find the Best ETFs for Your
nomic results. create uncertainty that could weigh Goals,” on page 16).

38 KIPLINGER’S PERSONAL FINANCE 09/2020


The Health Care Debate
H
ealth care is high on the minds
of Americans as November ap-
proaches. According to a Kaiser
Family Foundation poll, 23%
of registered voters said health care is
the most important issue in determin-
ing their vote for president. Only the
economy ranked higher, at 25%. Tens
of millions of people lost their jobs and
health insurance because of the pan-
demic. The presidential candidates’
stances on health care could hardly
be more divergent.
Trump’s priorities. Donald Trump and
the Republican party are focused on
reducing the federal government’s
hand in health care, and dismantling
the Affordable Care Act is central to
that approach. In late June, the Trump
administration submitted a brief to the
Supreme Court in support of the claim
by a coalition of 18 states that the
ACA—widely known as Obamacare—is
unconstitutional following Congress’s
2017 move to reduce to zero the tax
penalty on Americans who don’t have
health insurance. The court will likely
hear arguments on the case this fall.
Details are vague on what a replace-
ment for the ACA would look like.
In past efforts to repeal the law,
Republicans proposed pulling
back on tax credits for
health plan premiums
in the individual
marketplace and on
Medicaid expansion,
which makes all low-
income adults in
participating states
eligible for Medic-
aid. Instead, more
money would be di-
rected to state gov-
ernments, allowing
them to set up their own
Medicaid expansion, the public option
would be available premium-free to
adults who would otherwise qualify
for Medicaid.
Biden supports lowering the age of
Medicare eligibility from 65 to 60 (see
page 41), and he would expand tax
plans. But Republicans may tread
subsidies for those buying coverage in
carefully around certain ACA provi-
the individual marketplace. Currently,
sions that have proved popular with
families with incomes higher than
the public. A Kaiser poll shows that al-
400% of the federal poverty level are
though 79% of Republicans support
ineligible for a premium tax credit;
eliminating the ACA, that figure falls
Biden would remove that cap and re-
to 45% if overturning the law would
quire that policyholders at all income
mean the loss of protections for those
levels spend no more than 8.5% of in-
with preexisting conditions.
come on insurance. Subsidies would
In a second term, Trump may con-
be calculated based on the cost of a
tinue initiatives involving patients’
gold-level plan, which provides more-
rights. A court ruling recently upheld
generous coverage than silver ones,
a Trump administration requirement
the current basis for subsidies.
that hospitals disclose rates that they
Biden also hopes to prohibit surprise
currently negotiate in secret with in-
medical billing, in which patients may
surers for services. The administra-
receive high bills for health services
tion also created rules last spring ex-
they were unaware were out of net-
panding patients’ access to medical
work—such as when you visit an in-net-
records.
work hospital but see a specialist there
who is out of network. Biden’s plan
Biden’s plan. Joe Biden wants to build
includes measures to lower the cost
on Obamacare. His proposals in-
of prescription drugs, and Trump
clude offering a public insurance op-
has also shown interest in
tion, similar to Medicare, that would
reducing drug prices—for
be available to Americans along-
more, see the retire-
side employer-based cov-
ment section on
erage and private
page 41.
plans. In states
If Biden is
that have not
elected and Dem-
taken on the
ocrats win majori-
ties in the Senate and
House of Representatives,
progressives will push for
a “Medicare for All” pro-
gram, a universal govern-
ment insurance plan. But
moderate Democrats,
including Biden, are un-
likely to go along with it.
Expanded tax subsidies have a
stronger chance of becoming reality.
Lowering the Medicare minimum age
and establishing a public option are in
the realm of possibility, too. If Trump
wins the presidency or if Republicans
maintain control of the Senate, signifi-
cant reform is unlikely.
09/2020 KIPLINGER’S PERSONAL FINANCE 39
MONEY
A Redo on Taxes?
J
oe Biden says his tax plan would
increase taxes on the wealthy and
offer breaks for the middle class,
but at least one of his proposals
could boost taxes farther down the
income ladder.
A key component of Biden’s plan is
that tax hikes will be limited to people
who make more than $400,000. He
wants to raise the highest individual
income tax rate to 39.6% from 37%, re-
storing the top rate that was in place
before the 2017 Tax Cuts and Jobs Act.
(In 2020, the 37% top rate kicks in for
single taxpayers with taxable income
of more than $518,400, or for married
couples with taxable income of more
than $622,050.) Biden also wants to
cap itemized deductions for the
wealthiest Americans at 28% and end
favorable capital gains rates for any-
one with income of more than $1 mil-
lion. Those taxpayers would pay their
ordinary income rate of 39.7% on capi-
tal gains and dividends. Currently,
investments and other
assets held for more
than a year are
taxed at a rate of
0% to 23.8%, de-
pending on income.
A plan to change
the way inherited
assets are taxed could
have a broader impact.
Now, when someone in-
herits stock, mutual funds
or other assets, the cost basis
of those assets is stepped up
to their value on the date of the
original owner’s death. For ex-
ample, if the original owner pur-
chased shares of stock for $10 and
its value was $50 a share when he
died, his heirs would only owe taxes
on any increase in value over $50
when they sell the shares. Critics of
the “step up” say it discourages indi-
40 KIPLINGER’S PERSONAL FINANCE 09/2020
viduals from selling investments that
have increased in value because they
can leave them to their heirs, tax-free.
But in addition to eliminating a valu-
able tax break for heirs, eliminating
the step-up could create compliance
headaches, because heirs would have
to track down the original cost of as-
sets that may have been owned for
many years.
Biden has also proposed a suite of
tax breaks for low- and middle-income
families, including:
➜ An $8,000 tax credit to help offset
the costs of child care.
➜ A tax exclusion for student loans
that have been forgiven. Currently, if
a borrower’s loans are forgiven, the
amount is treated as taxable income
(there are exceptions for borrowers
who are eligible for certain public
service loan programs).
➜ A refundable tax credit for low- and
middle-income workers who contrib-
ute to IRAs and employer-provided
retirement savings plans. Biden says
the current system, which allows all
workers to deduct their contributions,
primarily benefits wealthier workers.
➜ Catch-up contributions to retire-
ment plans for caregivers of any age
who leave the workforce for at least
a year. Currently, catch-up contribu-
tions are limited to workers age 50 or
older. Biden also proposes a $5,000
tax credit for family caregivers.
Trump’s tax plan. The Trump adminis-
tration’s plan to release a package of
tax proposals was put on hold as other
developments—the coronavirus pan-
demic in particular—have taken cen-
ter stage. But based on Trump’s public
statements, one of his top tax priori-
ties in his second term would be to
make provisions in the Tax Cuts and
Jobs Act permanent. Unless Congress
acts, most of the individual tax cuts
included in the act will expire in 2025.
Trump has also expressed an inter-
est in providing more tax relief for
middle-class workers. Earlier this
year, National Economic Council
Director Larry Kudlow said Trump
was considering a “Tax Cuts 2.0” that
would provide a second round of tax
cuts focused on the middle class.
In the short term, though, most of
Trump’s tax proposals are focused on
stimulating the economy, which has
been devastated by the pandemic. He
has proposed stimulating the economy
by cutting payroll taxes, which would
increase the size of workers’ pay-
checks. He has also suggested
he would support a $4,000 tax
credit for Americans who
travel domestically. The
travel industry, which has
been hard hit by the pan-
demic, says such a
credit would encour-
age people to take
vacations, but it’s un-
likely to gain much
support in Congress.

Retirement Security
U
nless Congress acts, Social Se-
curity will deplete its $2.9 tril-
lion reserve fund by 2035, which
means the program would be
able to pay only about 79% of promised
benefits. Medicare’s finances are even
more precarious. Given that seniors
are a large voting constituency, both
Trump and Biden have resolved to
protect Medicare and Social Security.
Social Security. Biden proposes shoring
up the program by increasing payroll
taxes on high-income taxpayers. He
would keep the current cap on payroll
taxes, which is indexed to wage
growth (in 2020, workers pay payroll
taxes on earnings up to $137,700), but
would also apply the 12.4% tax on
wages exceeding $400,000.
But Biden wants to expand benefits,
which could put more pressure on
the program’s finances. He wants to
increase survivor benefits for low-
income beneficiaries and gradually
increase benefits for seniors starting
at age 78. Seniors who are 82 would re-
ceive a 5% increase over their basic re-
tirement payout.
Biden has also proposed changing
the way the annual cost-of-living ad-
justment is calculated. He wants to
use an index that places greater weight
on items that account for a larger per-
centage of seniors’ budgets, such as
housing and health care.
Trump hasn’t issued specific pro-
posals to shore up Social Security,
and critics say his proposed payroll
tax cut to bolster the economy would
further hurt the program. In the
past, he has opposed proposals from
fiscally conservative Republicans to
curb spending on the programs. But
as the budget deficit has grown to
more than $1.8 trillion, he has indi-
cated that changes to Social Security
and Medicare could be on the table
during a second term.
Medicare. Biden supports lowering the
age of Medicare eligibility from 65 to
60. He has also called for repealing
legislation that bars Medicare from
negotiating drug prices with pharma-
ceutical manufacturers, which he says
would lower drug prices. In addition,
pharmaceuticals would be required to
limit price increases for most prescrip-
tion drugs to the rate of inflation in
order to be eligible for coverage by
Medicare. Biden also wants to allow
U.S. citizens to purchase prescription
drugs from other countries—where
they’re often cheaper—as long as the
Department of Health and Human
Services has determined they’re safe.
If reelected, Trump is likely to con-
tinue to promote Medicare Advantage
plans, which are offered by private
companies. The plans often offer lower
premiums than traditional Medicare
and cover dental, vision and other ser-
vices. However, they usually have a
more limited network of providers
than traditional Medicare, which can
be a problem when beneficiaries de-
velop serious illnesses, critics say. In
an executive order issued last October,
Trump directed the Department of
Health and Human Services to take
steps to ensure that traditional Medi-
care isn’t “advantaged or promoted”
over Medicare Advantage.
Trump has supported proposed leg-
islation that would limit increases in
Medicare prescription drug benefits to
the rate of inflation and limit seniors’
out-of-pocket drug costs to $3,100 a
year. He also wants to allow U.S. citi-
zens to buy prescription drugs from
outside the country. In December, his
administration issued a proposed rule
that would allow states and other enti-
ties to import prescription drugs from
Canada, provided certain conditions
are met.
Trump’s 2021 budget proposes about
$500 billion in net spending cuts. Most
of those would come from reducing
payments to health care providers, not
to beneficiaries. ■
BY SANDRA BLOCK, LISA GERSTNER,
NELLIE S. HUANG AND ANNE SMITH
FOR QUESTIONS OR COMMENTS, PLEASE E-MAIL
FEEDBACK@KIPLINGER.COM.
09/2020 KIPLINGER’S PERSONAL FINANCE 41
MONEY

EDUCATION

College During COVID

Students and their families must be ready to adapt to the changes in the way they attend—
and possibly pay for—college. BY STACY RAPACON

AT KIPLINGER, THE NAME OF THE GAME there, where he has no place to stay Emerson College, in Boston—a move
is value. For more than 20 years, our and I don’t know if I’m going to be able he and his family see as a silver lining
annual college rankings have been to get to him.” to this gray cloud of a year. “I am quite
no exception. Over the years, we ana- Merritt’s return was safe and honestly very happy that he’s going to
lyzed data on hundreds of public and smooth, but he’s decided not to return be on soil where I can drive to him,”
private colleges and universities across to Paris. “Given the pandemic, I really says his father.
the nation seeking institutions that just want to be closer to everyone.” Happily, Garcia’s softball scholar-
deliver a high-quality education at This fall, Merritt is set to transfer to ship remains intact—part of the agree-
an affordable price.
But this year, as the coronavirus
forced schools to shutter in mid March
and transformed the higher-education
system practically overnight, we put
our rankings on pause. Instead, we de-
cided to focus on strategies for getting
the most value out of a reeling higher-
education system, including transfers,
gap years and increased financial aid.
For Mika Garcia, a 21-year-old rising
senior at the University of West Flor-
ida (UWF), the pandemic shutdown
meant a softball season cut short. “It
was extremely heartbreaking,” she
says. “Everything was shut down—
no weights, no practice, no games,
no visiting one another. It was a weird
and confusing and sad time, for sure.”
Samuel Merritt, 20, who was attend-
ing the American University of Paris,
had to quickly find a flight home. Al-
though he says doing so was “pretty
easy,” his father, Dan, recounts the
situation differently, noting inflated
prices for last-minute tickets to airports
near their home in West Caldwell,
N.J., and a layover in Düsseldorf, Ger-
many: “I was completely freaked out
about his getting home from Paris,”
he says. “My biggest concern was that
he’d get to Düsseldorf and get stuck

42 KIPLINGER’S PERSONAL FINANCE 09/2020 PHOTOGRAPH BY MATTHEW COUGHLIN

ment when she signed on with UWF
was that her scholarship would carry
over all four years of her college career.
And certain sports scholarships may
remain safe in general.
“For many schools, the athletic pro-
gram is an important part of their
community, enrollment strategy and
outreach to their alumni base,” says
Kevin Walker, publisher of College
Finance.com.
Garcia is looking forward to getting
back to school and on the softball field
for her senior year, even if classes are
conducted online (before the pan-
demic, she tended to go with online
course options to accommodate her
rigorous sports schedule) and new re-
strictions are in place. “As long as we
are all staying safe and our health is
being taken into account, that’s all that
matters,” she says.
■ THE CORONAVIRUS
PANDEMIC DISRUPTED
MIKA GARCIA’S
CLASSES AND
SOFTBALL SEASON.
BACK TO SCHOOL
More than one-third (37%) of high
school students report altering their
path for higher education, according
to a June survey by the College Sav-
ings Foundation. Among those who
are setting a new course, 40% plan to
attend community college to save on
costs (see the box on page 46), and
25% are taking a gap year.
The vast majority (84%) of colleges
are planning to reopen for the new
academic year with at least some form
of in-person classes, according to the
Chronicle of Higher Education. But
pandemic plans vary greatly, depend-
ing in part on each school’s geographic
location and campus layout.
The California State University
System, the nation’s largest four-year
public university system, announced
in May that the fall semester would
focus on virtual learning, with mini-
mal in-person activity. At the other
end of the spectrum, Emerson is plan-
ning for a mainly in-person return.
The University of West Florida is tak-
ing a hybrid approach, allowing stu-
dents to choose among classes in four
categories: full distance learning, pri-
marily distance learning, hybrid (with
50% to 79% of the course delivered re-
motely) and primarily classroom. Both
Emerson and UWF plan to close cam-
pus for Thanksgiving and finish the
remainder of the term virtually.
With so much variety and uncer-
tainty, the college decision is under-
standably harder these days. “There
has been a lot more hand-wringing and
consideration around whether to go
to college this fall,” Walker says. “But
it might still be the best alternative,
even if the mode that college of choice
is using is not the optimal one.”
MORE AID, PLEASE
Most schools were quick to issue
prorated refunds for room and board,
which became unavailable once schools
closed in March. But many students
and their families think they deserve
more. They argue that losing access
to in-person classes and on-campus
amenities lowers the value of their
education—and that change should
be reflected in the price. Some fami-
lies have even filed lawsuits against
several schools, including Arizona,
Cornell, George Washington, Michi-
gan State and Rutgers universities.
Such appeals have so far been unsuc-
cessful, so if schools are forced to close
campuses again and shift classes to
Zoom, don’t count on reimbursements.
Even if you’ve already settled on a
school and been awarded financial aid,
you should ask for more, especially if
your financial situation has changed
due to the pandemic. When you fill out
the Free Application for Federal Stu-
dent Aid (FAFSA), you use financial
records from two years prior. Aid
awarded for the 2020–21 school year
was based on your family’s 2018 tax
filing, so the FAFSA may not reflect
your 2020 financial needs.
Mark Kantrowitz, publisher and
vice president of research for Saving
forcollege.com, says the appeal pro-
cess is pretty straightforward, with
schools either providing a standard
form or requesting that you write a
letter. In the letter, he suggests using
bullet points to note each special cir-
cumstance—which might include
medical issues, job losses, job insecu-
rity and wage cuts—and its financial
impact on the family. Attach copies of
documentation to support your claims,
such as medical bills, layoff notices
and bank account statements.
Facts and figures will matter more
than your powers of persuasion. “The
amount of the adjustment will be based
on the financial impact on the family in
a very formulaic manner,” Kantrowitz
says. But manners count, too. “There is
no appeal beyond the financial admin-
istrator, so it pays to be polite and to
do things the way they expect,” Kan-
trowitz says. For additional guidance
on appealing for more financial aid,
see www.kantrowitz.com/books/
appeal. Merit-based financial aid is
likely to be less generous in order to
make more room in the budget for
need-based awards.
09/2020 KIPLINGER’S PERSONAL FINANCE 43
MONEY

TAKE A BREAK
Deferring enrollment or taking a gap The Pandemic
year can help alleviate worries about
returning to campus amid the pan-
demic and delay students’ entry into
5 WAYS COLLEGE IS CHANGING
a rickety labor market—all while paus-
1. Lower enrollment. As families struggle through the pandemic recession, fewer stu-
ing tuition payments. Still, the move
dents are likely to be able to afford the high cost of college. About half of college presi-
has its obstacles. Understand deferral
dents expect fall enrollment to be lower in 2020 compared with 2019, according to a June
policies, which vary by school. You
survey by the American Council on Education. (Optimistic note: That’s down from 62%
especially need to check on whether
in May.)
financial aid that has already been
However, past economic downturns have typically seen an increase in college enroll-
awarded will carry over.
ment. Following past patterns, Moody’s Investor Service estimates that higher education
For returning students who already
enrollment could actually rise 2% to 4% for the fall, according to a June report.
have certain types of student loans,
Either way, enrollment levels are at risk among international students, who tend to
a semester- or year-long break may
pay full price, making them more-lucrative enrollees. While the Trump administration re-
trigger the repayment grace period.
scinded plans to strip visas from international students if their schools went entirely online,
Depending on the type of loan, if a
travel restrictions could still deter some from attending school in the U.S. The Trump ad-
student is no longer enrolled at least
ministration’s suspension of work visas for foreigners is also expected to shrink this cohort
half-time, repayments will start com-
of students.
ing due in six to nine months. Taking
the summer and fall semesters off may
2. Tighter budgets. Revenue per student is expected to drop by 5% to 13%, according
count as a six-month grace period—
to Moody’s. Market turmoil is threatening endowment funds. Federal and state funding
and you only get one. “Once you ulti-
is likely to be cut, as government budgets get squeezed themselves. All that means
mately graduate, your loans are going
tighter budgets, so schools will have to cut spending, delay campus construction, freeze
to go into repayment immediately,”
salaries and lay off staff. Ultimately, fewer schools will remain. Kevin Walker, publisher
Kantrowitz says. (If you reenroll be-
of CollegeFinance.com, estimates that 100 to 200 schools may close or merge within the
fore the grace period ends, it resets
next three years. “Many of them will close because they were barely making it prior to the
the clock.)
coronavirus crisis,” he says. “[This] just pushed them over the edge when it came to their
Structuring a gap year can help
ability to bring in the tuition dollars and the enrollment they need to keep their business
make the most of your time away from
model working.”
school and keep you on track to return
and graduate on time. But such oppor-
3. More education technology. Look for an explosion of online learning options to gener-
tunities may be derailed by the virus.
ate new revenue. Traditional schools still lag leading online educators, such as for-profit
That’s the issue for Kevin Walker’s
colleges. That spells more sales to colleges by leading software vendors, such as Black-
middle daughter. She had planned to
board, Canvas and Moodle.
take a gap year after graduating high
Innovation in education technology will accelerate. Look for more virtual experiences
school this past spring. But after the
that feel like a real classroom, as well as artificial intelligence tools to automate grading.
virus halted travel opportunities in
her intended gap-year program, she
4. Smaller staffs. In an effort to balance budgets bleeding red ink, 224 colleges and uni-
changed plans and applied for college
versities had laid off, furloughed or opted to not renew contracts for nearly 51,800 employ-
in April. As of early July, she was still
ees as of July, according to the Chronicle of Higher Education. Cuts included professors from
deciding between two schools, waiting
programs that have shrunk or been shuttered; all types of administrative positions; dining
to hear how they would be handling
and other service staff; and sports coaches and assistants. The fallout could lead to worse
the fall.
student-faculty ratios and fewer student activities, among other things.

MANAGING THE COSTS

5. No parties? To update policies and procedures in accordance with coronavirus restrictions,
Paying for college—already a challenge
schools are cobbling together solutions, from COVID quarantine dorms to Plexiglas-divided
for many families—may be increas-
lecture halls. And whether mandated or recommended, social-distancing etiquette—wearing
ingly difficult. Nearly 70% of parents
a mask, staying 6 feet apart and limiting gatherings, especially indoors—is certain to
with college-bound kids say they are
change the college experience. “It’s not going to be back to normal until there is a safe
worried about paying for their child’s
and effective vaccine,” says Mark Kantrowitz, publisher and vice president of research for
college education, up from 64% before
Savingforcollege.com.
the pandemic outbreak, according to
a survey by Discover Student Loans.

44 KIPLINGER’S PERSONAL FINANCE 09/2020

 The quality of a private campus
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Offering 62 distinct programs Some 55,000 graduates are taking Salisbury University is the
within four endowed schools, SU the lead in the boardroom, the right — and affordable — fit
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MONEY
Even before the coronavirus pan-
demic triggered a sharp spike in the
unemployment rate, many families
were struggling to pay for college. In
the 1979–80 academic year, tuition
and fees at a public four-year college
averaged $2,600 (in 2019 dollars), ac-
cording to the College Board. By 2019–
20, those costs increased fourfold to
$10,440, on average. “College wasn’t
affordable to begin with, and there
were lots of reasons that was happen-
ing,” says Sara Goldrick-Rab, professor
of sociology and medicine at Temple
University.
One reason she notes is stagnant
wages not keeping up with rising
costs. The pandemic is making those
matters worse. While Black and
Latinx workers make up just 11% and
17% of the workforce in the U.S., re-
spectively, they suffered 15% and 24%
of recent record job losses, according
to the Georgetown University Center
on Education and the Workforce.
Students, too, are suffering job in-
security, with one-third reporting job
losses due to the pandemic, according
to a report from the Hope Center for
College, Community, and Justice, a re-
search group founded by Goldrick-Rab
at Temple University. That has deep-
ened students’ concerns about their
ability to afford basic needs, including
food and shelter, let alone tuition.
About half of white students report
experiencing basic-needs insecurity,
compared with 65% of Latinx students
and 71% of Black students. (Indigenous
students were worst off, with 74%
suffering basic-needs insecurity.)
Several schools, including the Uni-
versity of Chicago, Ohio Wesleyan
University and William & Mary, have
announced tuition freezes, and a
handful of colleges are lowering tu-
ition rates: Southern New Hampshire
University moved up existing plans
to cut tuition by 61%, to $10,000 a year.
Williams College is cutting tuition
rates by 15%.
But other colleges are forging ahead
with rate increases. For example, at
New York University, full-time tuition
46 KIPLINGER’S PERSONAL FINANCE 09/2020
(for 12 to 18 credits) for undergrads at
the College of Arts and Science rose
about 3%, from $25,342 in fall 2019 to
$26,102 this fall.
Despite the financial challenges
college poses, the pandemic has em-
phasized the advantages of having
a college education. Workers with a
bachelor’s degree or higher account
for only 19% of recent job losses, ac-
cording to the Georgetown Center on
Education and the Workforce. By com-
parison, workers with a high school
diploma or less suffered 46% of job
losses. Also, white-collar workers are
more likely to have the option of work-
ing from home, a privilege that has al-
lowed them to continue earning the
same income while sheltering in place.
To ensure your family can afford
college, whether your prospective stu-
dent is in diapers or donning a cap and
gown, you need to get your financial
KipTip
The Case for
Community College
Enrolling in your local community college
can be a great way to pursue an afford-
able education while minimizing the risk
of coronavirus exposure and spread. “It’s
not just a smart financial move; it is a
smart move,” says Sara Goldrick-Rab,
professor of sociology and medicine at
Temple University. “Community college
is great, and it always has been,” she
says. “All the community colleges have
needed is for the public to start acting
like it.”
If you plan to transfer your credits
to a four-year college later, though, note
a potential drawback to this strategy:
Transfer students tend to get less finan-
cial aid than first-year students, so you
have to plan accordingly. “It can mean
several thousand dollars less in grants,”
says Mark Kantrowitz, publisher and
vice president of research for Saving
forcollege.com.
plan in order. “The sooner families
start planning, the better,” says Der-
enda King, a certified financial plan-
ner in El Segundo, Calif.
“What is often misunderstood is
that paying for college is not just about
saving,” King says. “To save on college
costs, families need an integrated and
strategic approach that entails having
a proper understanding of how the
financial-aid process, savings and in-
vestments, tax strategies, borrowing,
and loan-repayment options all work
together to lower the cost of college.”
Still, saving is important—and you
may need to do more of it. Kantrowitz
expects tuition rates at public colleges
to rise faster than usual in a couple
of years. As state and federal budgets
suffer, public colleges can expect to
see less funding, which may lead to
higher costs and less financial aid.
In the short term, though, families
have some bargaining power to score
big discounts and additional aid.
“Schools don’t want to lose students
in terms of enrollment,” Walker says.
“Every incremental dollar that comes
in is important to them, so they’re go-
ing to be very motivated to work with
the family.”
How much a school is able to give
depends on its own financial security,
an important point to consider if
you’re still undecided on where to
enroll or willing to transfer. Check
into prospective schools’ endowment
funds, enrollment levels (years of
declining enrollment is a “leading in-
dicator of a deep financial problem,”
Walker says) and discount rate (the
average share of tuition and fees that
a school covers with aid and grants).
“Knowing which schools have a
great track record of meeting a fami-
ly’s demonstrated financial need or
which schools provide generous merit
aid can help inform your funding
strategy,” King says. A good place to
start is Kiplinger’s best-value college
rankings for 2019 at kiplinger.com/
links/colleges. ■
FOR QUESTIONS OR COMMENTS ABOUT THIS ARTICLE,
PLEASE E-MAIL FEEDBACK@KIPLINGER.COM.
 ■ THE HENDERSONS
SLASHED THEIR AUTO
INSURANCE PREMIUM BY
$60 A MONTH WHEN THEY
STOPPED DRIVING THEIR
SECOND CAR.
FAMILY FINANCES
Time for an Insurance Review
You may need to update your policies in light of COVID-19. BY DANIEL BORTZ
THE CORONAVIRUS HAS MADE
one thing abundantly clear:
We all need to be prepared
for an emergency. Which
prompts the question:
When did you last review
your insurance policies?
You may want to make
some changes to your auto,
homeowners and life in-
surance policies in light of
COVID-19. “You could be
paying for coverage that you
don’t need anymore, or you
could be lacking coverage
in some areas because of
the pandemic,” says Carmen
Balber, executive director at
Consumer Watchdog, a non-
profit consumer-advocacy
organization.
PHOTOGRAPH BY DEREK ISRAELSEN
Auto insurance. Chances are
you received a discount from
your auto insurer automati-
cally. In April, a number
of large insurance carriers
offered their customers dis-
counts of, typically, 15%.
Many drivers realized they
were barely using their cars
and asked their insurers for
even bigger premium adjust-
ments. Scott and McKenzie
Henderson of Lehi, Utah,
started driving a lot less
when they began working
from home in March. The
couple, who own two cars,
decided to stop using their
Dodge Stratus and share
McKenzie’s Kia Optima.
When they informed their
insurance company, USAA,
it lowered their insurance
premiums to $25 a month,
down from $85. “It made
sense for us to start using
only one car, since neither
of us was commuting to
work,” says Scott.
Dino Selita of Staten Is-
land, N.Y., also saved money
by asking Geico, his insurer,
to adjust his auto premium.
Selita says he hardly drove
his car in March, April or
May. “I was basically leaving
my house once a week to buy
groceries,” he says. Selita’s
insurer gave him a $500
credit. “It only took a 10-
minute phone call [to my
insurance agent],” he says.
“If your car is basically
parked in your driveway,
you may not need the same
level of collision coverage
that you currently have,”
says Balber. Moreover, driv-
ers who change their car’s
status from “business” to
“pleasure” save an average
of $172 a year, according to
the State of Auto Insurance
2020 report from The Zebra,
an insurance brokerage.
Shopping around for
a lower rate now is also
a good idea, Balber says.
Given the stiff competition
among carriers, you may
have even more negotiating
power when threatening to
leave your insurer.
09/2020 KIPLINGER’S PERSONAL FINANCE 47
MONEY
Another tip: If you’re not
driving because you have
a compromised immune
system or because you’re
recovering from COVID-19,
let your insurance company
know—you may qualify
for a discount or financial
relief.
Home insurance. If your home
is now your office or you’re
running a business from
home, make sure you don’t
skimp on your home and
liability insurance. “If you
have colleagues or vendors
coming to your house, you
want to protect yourself in
case someone gets injured
on your property,” says Dan
Karr, the founder and CEO
of insurance rating site
ValChoice. Standard policy
liability limits may not be
enough, especially if you
have a pool or an expensive
home or a lot of valuables.
Umbrella coverage picks
up where the liability limits
of your homeowners and
auto policies leave off. It’s
usually sold in increments
of $1 million. Umbrella in-
surance costs roughly $150
to $350 a year for the first
$1 million of coverage and
about $100 per $1 million of
coverage above that. Rates
vary by state and the insur-
er’s experience there, plus
how many homes, cars and
boats you’re insuring. (For
a worksheet to calculate
how much you need, see
kiplinger.com/kpf/umbrella.)
You may also need to beef
up coverage for office equip-
ment. A typical home insur-
ance policy provides only
$2,500 in coverage for busi-
ness equipment. You can
add a homeowners policy
endorsement—an add-on
48 KIPLINGER’S PERSONAL FINANCE
that will increase your busi-
ness property coverage limit
and might provide some
liability coverage, too.
Bundling your home
insurance with your auto
policy can give you a break
of 5% to 20% off your pre-
mium. Farmers and State
Farm offer some of the
most generous discounts
for bundling home and
car insurance, according
to ValuePenguin data.
As you review your policy,
assess whether you have
enough insurance to cover
a total loss. If your home’s
value has increased signif-
icantly, you may need to
raise your coverage level.
(Even if your policy protects
against inflation, the value
of your home may outpace
it.) And if you’ve accumu-
lated more possessions over
the years, you may discover
KipTip
If You’re
Driving Less
If you’re logging substan-
tially fewer miles, look into
a pay-per-mile insurance
plan, says Nicole Beck, a
licensed insurance agent at
The Zebra, an online insur-
ance brokerage. “That’s
something that can be really
appealing in the time of
COVID-19,” she says. Metro-
mile, for example, says its
rates start at $29 per month
for base coverage plus “a
few cents for each mile you
drive.” The caveat: Only a few
insurers—including Allstate
and Nationwide—offer pay-
per-mile policies, so it may
not be an option depending
on where you live.
09/2020
your personal property
limit needs a boost.
Life insurance. As a young
entrepreneur with no
kids, Jesse Silkoff hadn’t
purchased life insurance
before the coronavirus
crisis. “I just didn’t think
I needed it yet, and I’ve
committed most of my
financial resources to my
business,” says Silkoff, 31,
the president and cofounder
of MyRoofingPal.com, an
online marketplace that
connects property owners
with roofing contractors.
COVID-19, though,
forced Silkoff to consider
his mortality. “I don’t want
to leave my wife in debt
should something happen
to me,” he says. “Also, dur-
ing the slowdown, I had
more time to do the re-
search.” So Silkoff pur-
chased a 10-year term life
policy with $500,000 of
coverage for about $30
a month.
Nicholas Mancuso, life
insurance expert at Policy-
genius, an insurance com-
parison website, says the
site is seeing an “uptick”
in life insurance searches.
“Pandemics and major cata-
strophic events can serve as
a catalyst for people to reas-
sess their financial security,
including life insurance.”
Mancuso says most people
should get term life insur-
ance over whole life insur-
ance because, dollar for dol-
lar, term gives you the most
protection for your money.
How much coverage you
need, though, depends on
your age, the size of your
family, your health and your
income. When you’re young,
your life insurance needs
are greatest, because you’re
supporting a young family.
“We generally recommend
people insure up to 10 to 15
times their take-home pay,”
says Mancuso.
If you haven’t purchased
life insurance yet, you can
use an online calculator
(such as the one at www
.lifehappens.org) to get an
idea of what your needs are
and how much a policy will
cost before you start shop-
ping. Mancuso advises using
an independent agent to
shop around (visit Trusted
Choice.com to find an inde-
pendent agent). The cost for
the same plan could vary by
up to 40% among different
providers, Mancuso says.
You can get preliminary
quotes from multiple insur-
ers using websites such as
AccuQuote.com, LifeQuotes
.com and Policygenius.com.
If you don’t feel com-
fortable getting a medical
exam right now because
you fear being exposed
to COVID-19, Mancuso
recommends opting for a
life insurance policy with
accelerated underwriting
(also called “express under-
writing”), which allows
you to purchase term life
insurance of up to $1 million
without an exam. “Acceler-
ated life insurance is also a
good option if you’re young
and healthy,” Mancuso
adds.
Already have a life insur-
ance policy? Talk to your
insurance agent—you may
need more coverage than
you did when you pur-
chased the policy, espe-
cially if your household
expenses have increased. ■
FOR QUESTIONS ABOUT THIS ARTICLE,
E-MAIL FEEDBACK@KIPLINGER.COM.
 TOP-YIELDING SAVINGS
30-day
Taxable Money Market yield as of Minimum Website
Mutual Funds June 30 investment (www.)
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gabelli.com
meederinvestment.com

Phone Customers Mutual Funds June 29

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30-day Tax eq. yield
Tax-Free Money Market yield as of 24%/35% Minimum
bracket investment
0.22% 0.29%/0.34% $3,000
Website
(www.)
vanguard.com
M Stanley T-F Daily Inc (DSTXX)* 0.03 0.04/0.05 5,000 morganstanley.com

WHEN YOU’RE SEARCHING make automatic payments. Fidelity Muni MMF (FTEXX) 0.01 0.01/0.02 1 fidelity.com

for a new bank account or If you use any other credit Fidelity Tax-Exempt (FMOXX) 0.01 0.01/0.02 1 fidelity.com

credit card, your wireless card, you won’t get the auto- Annual
Savings and Money Market yield as of Minimum Website
carrier probably isn’t the pay discount, but you are Deposit Accounts July 10 amount (www.)
first place you’d check. But eligible if you use a debit SFGI Direct (W.V.)† 1.16% $500 sfgidirect.com
a couple of major cell-phone card or bank account instead.
CFG Bank (Md.)†# 1.16 25,000 thecfgbank.com
companies offer options
CIBC Bank (Ill.)† 1.15 1,000 cibc.com/us
that are worth a look. High-yield checking for
Vio Bank (Okla.)† 1.11 100 viobank.com
The VERIZON VISA CARD de- T-Mobile customers. The
buted over the summer, and T-MOBILE MONEY online Annual
Certificates of Deposit yield as of Minimum Website
Verizon Wireless customers checking account is avail- 1-Year July 10 amount (www.)
may find good value in the able to those who are not Pen Air FCU (Fla.)& 1.25% $500 penair.org
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you get 4% back on grocery company. But customers get BankDirect (Texas)† 1.11 1,000 bankdirect.com
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ances of up to $3,000 and
RATE UPDATES 1% on the portion higher Certificates of Deposit
Annual
yield as of Minimum Website
For the latest savings yields than that threshold, com- 5-Year July 10 amount (www.)
and loan rates, visit kiplinger pared with 1% on all bal- Pen Air FCU (Fla.)& 1.60% $500 penair.org
.com/links/rates. For our top ances for noncustomers. To Connexus CU (Wis.)& 1.56 5,000 connexuscu.org
rewards cards, go to kiplinger earn the 4% rate, you must State Dept FCU (Va.)& 1.51 500 sdfcu.org
.com/links/rewards. deposit at least $200 in the United Educators CU (Minn.)& 1.51 500 uecu.coop
account monthly. If you meet
*Fund is waiving all or a portion of its expenses. †Internet only. #Money market deposit account.
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card that has no annual fee. account by up to $50 with

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spending. Rewards are in
the form of Verizon Dollars,
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and accessories. (Verizon
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years.)
Another perk: You qualify
to get up to $10 off per
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bill if you use the card to
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the balance positive within Must meet activity requirements* Annual
yield as of Balance Website
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in the Allpoint network.
*To earn the maximum rate, you must meet requirements such as using your debit card several times
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BankMobile, a division of
Customers Bank. Bank ser- Month- Year- As of July 10, 2020.
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May 1, 1995, earn a minimum
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0.30 0.33 1.82 rate from date of purchase.
can call customer service Five-year Treasury notes
● Bonds bought between
for help. LISA GERSTNER Ten-year Treasury notes 0.65 0.75 2.07
May 1, 1995, and May 1, 2005,
Lisa_Gerstner@kiplinger.com earn a market-based rate
SOURCE FOR TREASURIES: U.S. Treasury from date of purchase.

09/2020 KIPLINGER’S PERSONAL FINANCE 49

 RETIREMENT
Get Your Plan
Back on Track
Whether the damage to your savings was self-inflicted or
unavoidable, we’ll help you revive your retirement plan.
BY SANDRA BLOCK
INVESTORS ENGAGED IN A TEST OF WILLS
with the stock market during the sharp
declines in March—a test that some
failed. They panicked and sold their
stock holdings, only to see the market
bounce back. Fortunately, unless you’re
close to retirement, you should have
plenty of time to recover your losses.
“Consider it a lesson learned, reallocate
and move on,” says Steven Zakelj, a cer-
tified financial planner with Flatirons
Wealth Management, in Boulder, Colo.
TAKE EMOTION OUT OF THE EQUATION
Don’t compound the damage by trying
to figure out the optimal time to rebuild
your stock portfolio. “A lot of times people
say, ‘I’m going to wait until the dust set-
tles,’ ” says Vinicius Hiratuka, a CFP with
Elevated Retirement Financial Services,
in Madison, Miss. “The stock market is a
leading indicator. When the dust has set-
tled, you’ve missed it.” In fact, the stock
market indexes just finished one of the
best quarters they have had in years.
50 KIPLINGER’S PERSONAL FINANCE 09/2020
Still, reentering the market will re-
quire fortitude, because the stock mar-
ket will likely continue to be volatile.
Consider taking emotion out of the
equation by dollar-cost averaging your
way to your target allocation of stocks,
bonds and cash. If you sold $100,000 in
stock funds, you might reinvest $25,000
on a specific day each month for four
months. Over the long term, the day you
invest won’t matter much. What will
matter is that you invested.
In the meantime, use your reaction to
the recent market swings as a barometer
of your tolerance for risk, says Marcel
Winger, a CFP with Mutual Wealth, in
San Antonio. Keep in mind, though, that
if you decide to dial down your alloca-
tion to stocks, you’ll also give up long-
term returns. That’s particularly the
case now, when low interest rates have
depressed returns from bonds and cash.
The Federal Reserve has made it clear
that it intends to keep rates low for sev-
eral years (see “Ahead,” Aug.). Even with
ILLUSTRATION BY VANESSA BRANCHI
low inflation, you’ll need to invest in
stocks to stay ahead of increases in the
cost of living.
A financial planner can help you come
up with an asset allocation that matches
your risk tolerance but still provides suf-
ficient long-term returns. Help is avail-
able even if you lost your job or suffered
other financial setbacks because of the
pandemic. CFPs from XY Planning Net-
work, a fee-only network of planners,
are offering free emergency financial
advice to individuals who lost a job, had
their income reduced or were forced
to take unpaid sick leave as a result of
COVID-19. To learn more, go to www
.xyplanningnetwork.com and search
under the keyword “coronavirus relief.”

FILL THE HOLE IN YOUR PORTFOLIO

Selling stocks in a downturn may be a
temporary setback, but taking a with-
drawal from your retirement plan could
put a permanent dent in your portfolio.
If you’re younger than 59½, you’ll usu-
ally pay a 10% penalty, plus income taxes
on the amount you take out.
But if you’re among the millions of
people who were laid off or furloughed
in recent months, you may have had no
choice, and the Coronavirus Aid, Relief
and Economic Security (CARES) Act
signed into law in March provides an
opportunity to repair some of the dam-
age. If you or someone in your family
was diagnosed with COVID-19 or suf-
fered adverse financial consequences
because of the pandemic, you can with-
draw up to $100,000 from your 401(k)
(or other employer-sponsored retire-
ment plan) or IRA without triggering
an early-withdrawal penalty. You’ll have
up to three years to pay taxes on the
withdrawal. And as long as your em-
ployer allows it, you’ll have up to three

09/2020 KIPLINGER’S PERSONAL FINANCE 51

RETIREMENT

years to roll the money back into your
plan. More than two-thirds of large
employers will allow employees to re-
pay coronavirus-related distributions
over three years, according to the Plan
Sponsor Council of America.
If you took a 401(k) loan (or are con-
sidering one) instead of a withdrawal,
you also have new options. In addition
KipTip
to increasing the maximum you can
borrow from $50,000 to $100,000,
the CARES Act allows borrowers to
skip making payments in 2020—giving
you six years to pay it off instead of
five. More than 60% of large compa-
nies say they’ll allow workers to sus-
pend repayments in 2020, according
to the PSCA.
RESTART CONTRIBUTIONS
You’ve probably heard it a thousand
times: If you have a 401(k) plan,
contribute at least enough to get
any matching funds. But what if your
employer has scrapped the match?
In response to the economic down-
turn, about 12% of employers have
suspended their matching contribu-
tions to 401(k) plans, and nearly one-
fourth are either planning to cut their
401(k) match or considering it, accord-

How to Fix a Bad Plan ing to Willis Towers Watson, a con-

sulting firm. The hopeful news is that
match reductions or suspensions are
Like gauze on a camera lens, a bull market can hide a lot of blemishes in retirement savings usually temporary.
plans. But when the market heads in the other direction, the plan’s flaws become glaringly If you like your 401(k) plan (it offers
apparent. good, low-cost investment options),
That’s particularly the case with some 403(b) savings plans. Typically offered to public continue contributing, Winger says.
school teachers, 403(b)s have the same tax benefits and contribution thresholds as 401(k) If you can afford it, increase your
plans, but they’re often vastly inferior to their private-sector counterparts. Many school contributions to make up for the lost
districts turn the job of offering retirement plans over to sales agents who promote invest- match, he adds. If you’re not enamored
ments with high-cost equity-indexed and variable annuities. with your plan (see the box at left) and
If you find yourself stuck with a poor-performing 403(b) plan, you have a few options, your match has been suspended, con-
says Scott Dauenhauer, a certified financial planner with Meridian Wealth Management, sider redirecting some of your savings
in Murrieta, Calif., and founder of the Teacher’s Advocate blog (http://teachersadvocate to a Roth IRA. You can build a port-
.blogspot.com). First, get the name of the plan’s compliance administrator from your school folio of low-cost investments at any
district and ask the administrator for its approved provider list. You may be able to find a financial services firm. Contributions
low-cost provider, such as Fidelity, Vanguard or Aspire Financial Services. If you can find aren’t tax-deductible, but withdrawals
such a hidden gem, he says, add it to your plan and direct future contributions to its suite are tax-free as long as you’re at least
of funds, he says. If you already have equity-indexed or variable annuities in your 403(b), 59½ and have owned your Roth for at
transferring that money to a new provider could trigger surrender charges of 5% or more. least five years.
But if your new funds come with very low fees, you’ll probably recover those costs in a And a Roth offers other advantages.
couple of years, Dauenhauer says. You can always withdraw your con-
If your research reveals only bad options, consider lobbying your employer for better tributions, tax-free, if you need the
choices. You can find information about how to approach your employer at www.403bwise money. A Roth “doubles as an emer-
.org, a nonprofit organization that advocates for teachers. gency savings fund, but you’re also not
Finally, if your plan is unsalvageable and your employer unresponsive, you may be able missing out on not putting money in
to take advantage of a penalty-free withdrawal to switch to a better plan. The Coronavirus a retirement account,” says Hiratuka.
Aid, Relief and Economic Security (CARES) Act allows individuals who have been affected Not everyone can contribute to a Roth.
by the coronavirus to withdraw up to $100,000 from any retirement plan—including a In 2020, single taxpayers must have an
403(b)—without paying a 10% early-withdrawal penalty (see the accompanying article). adjusted gross income of less than
If you repay the money in three years, you won’t have to pay taxes on the withdrawal. The $124,000 to make the maximum con-
key here is that you can return the money to any eligible retirement plan—which means tribution of $6,000 ($7,000 if you’re
instead of putting it back in your 403(b), you could instead invest it in a low-cost IRA. over 50). Contributions phase out
For this strategy to work, your employer must permit coronavirus withdrawals and you for those with AGI of up to $139,000;
must be eligible to take one. You qualify for a coronavirus withdrawal if you, your spouse or above that amount, you can’t contrib-
one of your dependents has been diagnosed with COVID-19. You’re also eligible if you or your ute to a Roth. Married couples who
spouse have suffered adverse financial consequences as a result of the pandemic, which file jointly need to have AGI of less
include layoffs, a reduction in hours or inability to work because of child care obligations. than $196,000 to contribute the maxi-
As is the case with rolling your money into another provider’s funds, this strategy could mum; contributions phase out for AGI
trigger surrender charges. Your best bet: Find a financial adviser who is knowledgeable of up to $206,000. ■
about 403(b) plans to help you navigate the process.
YOU CAN CONTACT THE AUTHOR AT SANDRA_BLOCK@
KIPLINGER.COM.

52 KIPLINGER’S PERSONAL FINANCE 09/2020

 LIVING IN RETIREMENT Janet Bodnar
The Joys of Being Retired
S
everal months ago, I wrote that
one of my simple pleasures in re-
tirement is having the freedom
to run errands at noon on a Tuesday,
with little traffic, lots of parking and
’60s music playing on the car radio
(see “Living in Retirement,” Dec.
2019). That prompted an e-mail from
reader Bob Swahlen, who also experi-
ences “the joy of having freedom and
time,” with one exception: “I find Bo
Diddley to be a good companion on the
’50s channel.”
Musical preferences aside, enjoying
more freedom and time is a common
theme running through reader re-
sponses to the question I asked about
your greatest pleasures (or disap-
pointments) in retirement. Having
time on your hands takes some get-
ting used to. But after making
the transition, readers wax
eloquent about their new
circumstances.
For example, writes
Louis Pinneri, “I describe
this blissful state as a free-
dom from three stresses:
the stress of work, the
stress of commuting
and the stress of
squeezing everything
into a Saturday and
Sunday.”
For many of you,
flexibility means hav-
ing time to relax and
enjoy yourselves. “It’s
much easier and more
cost-efficient to schedule
vacation time,” writes
POON WATCHARA-AMPHAIWAN
Bob Whitney. “And if
the airline has over-
booked a flight and is
offering a perk for vol-
unteers who take an-
other flight, why not?”
Jack Meredith loves the freedom writes Phil Stillman, “the greatest
to chuck the to-do list “and just catchpleasure I’ve had is to spend time with
a movie in the afternoon, when the my wife.” Nancy Schmoyer feels the
theater is almost empty.” And for same way about “spending more time
Sandy Unger, “it’s like experiencing with my (still busy) retired husband.”
some of your youth again, with the And for many of you, grandchildren
wisdom of a life well lived.” top the list. “My greatest pleasure is
Having the luxury of time also interacting with our three grand-
means being able to give back. “My daughters, who live 10 minutes away,”
greatest pleasure has been the oppor- says Mark Snyder. “Grandchildren are
tunity to volunteer at a food bank, so important,” writes Cindy Gnech.
Habitat for Humanity and an animal “Our two live about two hours away,
shelter,” writes Ramin Hashemi. and we see them for two days every
When she was working, Julia other week.”
Brown set up a family foundation Unfortunately, not all relationships
to make charitable contributions. have survived retirement. “One un-
Now that she’s retired, Brown sits pleasant surprise was losing pretty
on the boards of several nonprofit much all of my work friends,” writes
organizations and donates “a substan- Lisa Scott-Ponce. So she was happy to
tial amount of time.” As a result, she discover that “seniors in my exercise
says, “I am a much better donor now classes are quite friendly and open,
and I have developed a whole
new group of friends for
MORE FREEDOM, BEING ABLE TO lunch dates.”
For many of you, time is
GIVE BACK AND TIME TO DEEPEN its own reward. “My great-
RELATIONSHIPS ARE COMMON est pleasures are not setting
THEMES IN YOUR E-MAILS. an alarm clock and enjoying
leisurely mornings with cof-
fee,” says Jo Bennett. For
because I am far better Nancy Sikes, a former middle-school
able to see the impact of English teacher, “My greatest pleasure
contributions.” (In ad- is being able to eat and use the bath-
dition to volunteering, room when I need to and not when
Kiplinger’s readers a schedule says I can.” On the other
participate in a mind- hand, says Sikes, “I no longer have the
boggling array of excitement of an early morning phone
activities, which call saying there’s a snow day. Now,
I plan to write snow is just snow.”
about in a fu- But for David Gelb, “One of my favor-
ture column.) ite things to do in the morning on a
rainy or snowy day is to turn on the
Closer relationships. Many radio at 6:30 a.m. and listen to the traf-
of you use your expanded fic reports, knowing it’s no longer my
time to deepen your rela- problem as I roll back to sleep.” ■
tionships. After three
JANET BODNAR IS EDITOR AT LARGE OF KIPLINGER’S PERSONAL
years of retirement, FINANCE. CONTACT HER AT JANET_BODNAR@KIPLINGER.COM.
09/2020 KIPLINGER’S PERSONAL FINANCE 53
FUNDAMENTALS
BASICS
Emergency Funds 101
There’s no one-size-fits-all formula for how much you’ll need. BY EMMA PATCH
EMERGENCY FUNDS TYPICALLY FALL
into one of two broad categories.
One is set up to handle unexpected
expenses—say, when your car breaks
down or your water heater springs
a leak. The other is there to provide
income if you lose your job. You should
have both types, but when it comes
to keeping a roof over your head, the
54 KIPLINGER’S PERSONAL FINANCE 09/2020
second is the most important.
Your personal circumstances will
dictate how much money you’ll need
if you lose your job. If you’re the sole
wage earner, you should have six
to 12 months’ worth of monthly ex-
penses set aside, whereas dual-income
households can normally get away
with three to six months of emergency
reserves, says Jamie Lima, a certified
financial planner in San Diego.
However, if one or both members
of a dual-income household work in
a sector sensitive to changes in the
economy, you may need to save more.
For example, if you’re employed in the
travel-and-leisure sector, which expe-
riences a lot of ups and downs (lately,
ILLUSTRATION BY CAT FINNIE
mostly downs), you may need to cover
more than six to nine months of ex-
penses. Conversely, if you work in an
industry that’s less sensitive to eco-
nomic swings, such as a public sector
job, two to four months of expenses
may be enough. But spouses who both
work in the same industry may need
to save at least six months of expenses
in an emergency fund because both
One drawback: Rates on high-yield
savings accounts could drop. One way
to lock in a rate for at least a few months
is to invest in a “ladder” of short-term
certificates of deposit. Stagger them
so that each month one matures with
enough to cover that month’s living
expenses. If you don’t need the cash
that month, reinvest it in another CD
that matures at the end of your current
series. The Marcus by Goldman Sachs
7-month No-Penalty CD (www.marcus
.com/us/en/savings/no-penalty-cds)
has a $500 minimum and yields 1%.
Limelight Bank offers a six-month CD
(www.limelightbank.com/certificates-
of-deposit) that yields 0.9% with a
minimum investment of $1,000. Q
YOU CAN CONTACT THE AUTHOR AT EMMA_PATCH@
KIPLINGER.COM.

could be laid off at the same time.

When calculating your monthly
expenses, focus on the basics, includ- KipTip
ing housing, transportation, food and
health insurance, along with any other
insurance you may need, such as home-
Plan B If You Need Cash Fast
owners and car insurance, says Eliot
If you don’t have an emergency fund and the bills are starting to pile up, you may be
Pepper, a CFP and cofounder of North-
tempted to start charging more expenses to your credit cards. But before you run up
brook Financial, in Baltimore.
a high-interest balance that could take years to pay off, explore these options.

Set your priorities. Paying off credit

Roth IRA. If you need the money, a Roth is a low-cost source of funds. You can always
card debt and building an emergency
withdraw the amount of your contributions tax- and penalty-free. That money comes
fund are both important, but if you
out of the account before earnings do; you won’t pay taxes until you’ve depleted your
must choose between the two, build-
contributions.
ing an emergency fund should come
first, says Brandon Renfro, a CFP in
A 401(k) loan. The economic stimulus package enacted in March doubles the amount
Hallsville, Texas. If you are faced with
you can borrow from your 401(k), from $50,000 to $100,000, or up to 100% of the vested
a situation in which you need money,
balance if less. This option is available to workers (or family members) who have been
you can’t tap the paid-off debt the way
diagnosed with COVID-19 or have suffered adverse financial consequences because of
you can an emergency fund. (If you’ve
the pandemic.
lost your job and don’t have an emer-
The interest rate on 401(k) loans is low—about 5%—and you usually have five years
gency fund—or the amount you’ve
to repay the loan. However, the law allows borrowers to skip payments for 2020, essen-
saved falls short of what you’ll need—
tially giving you another year to repay it.
see our suggestions for other ways to
raise cash in the box at right.)
Your health savings account. If you have an HSA, you can use money in the account
Because you don’t know when you’ll
for a variety of medical expenses, from dental work to co-payments. And if you lose your
need it, the money in your emergency
job, you can use money from your HSA to pay premiums under COBRA, the federal law
fund should be immediately accessi-
that lets you continue group coverage. You can also use money from your HSA to pay
ble. Pepper recommends a high-yield
health insurance premiums while you’re receiving unemployment benefits.
savings account that has no fees,
requires low (or no) minimums and
Your life insurance policy. A permanent life insurance policy has two components: a
is federally insured. You can link it
death benefit, which is the amount that will be paid to your beneficiaries when you die,
to your regular checking account so
and a cash value, a tax-advantaged savings account that’s funded by a portion of your
that you can transfer money easily.
premiums.
A couple of our favorites: The SFGI
You can withdraw your basis—the amount in the cash-value account you’ve paid in
Direct Savings Account (www.sfgi
premiums—tax-free. Just make sure you don’t take out more than the basis in your cash
direct.com), which has a 1.16% yield,
value account, because the excess will be taxable. The death benefit will be reduced by
no monthly fee, a $500 minimum
the total amount you withdraw.
to open and an ongoing $1 minimum
Alternatively, you can borrow against your policy. Interest charges range from about
to earn interest, and Live Oak Bank
6% to 8%, depending on market rates and whether the loan is fixed or variable. If you
High-Yield Online Savings (www
don’t repay the loan, or pay back only part of it, the balance will be deducted from your
.liveoakbank.com/personal-banking/
death benefit when you die.
personal-savings), which has a 1.15%
yield with no monthly fee or minimum.

09/2020 KIPLINGER’S PERSONAL FINANCE 55

REWARDS
TIMELY REASONS TO BUY A

Vacation
Home
With remote work on the rise, more people
are looking for a permanent getaway.
BY LISA GERSTNER

If you’ve been dreaming of buying

a cabin in the woods, a cottage on the beach
or some other retreat, you have compelling
reasons to pull the trigger. As coronavirus
cases surge in parts of the country, being
able to shelter away from crowded areas has
a lot of appeal. To keep employees healthy,
some companies continue to allow telework,
reducing the need for workers to be near their

56 KIPLINGER’S PERSONAL FINANCE 09/2020

 THE POCONO MOUNTAINS
COUNTIES: Monroe, Pike and
Wayne, Pa.
JUNE 2020 MEDIAN LISTING
PRICE: $209,050 to $229,550
2019 MEDIAN SALE PRICE:
$151,891 to $158,313

You can ski, hike, fish and boat

to your heart's content in the
Pocono Mountains, which are
convenient to New York City
and Philadelphia and drew
28 million visitors in 2018.
Skiers and snowboarders can
choose among more than 185
hills and trails, ranging from
bunny slopes to double black
diamonds. Or try out other
winter activities, such as snow
tubing, cross-country skiing
and snowmobiling. In warmer
months, tee up at any of the
region’s many golf courses,
which offer a variety of ter-
rains to challenge golfers.
To keep the kids happy, take
them to play mini golf or laser
tag, drive go karts, or splash
down water slides at one of
the area’s family entertain-
ment centers.
Skiers who want to be near
Camelback Mountain can find
a townhome for less than
$300,000. In the Northridge
community, a four-bedroom,
3.5-bathroom unit with 2,465
square feet of space and a
deck with mountain views
recently had a $289,900 price
tag. Is a lake retreat more
your style? In Pocono Pines,
a three-bedroom, 2.5-bath-
room, furnished 1,488-square-
foot townhome with views of
Pinecrest Lake had a $216,500
asking price. In a neighbor-
hood surrounding nearby Lake
Naomi, a newly constructed
four-bedroom, 2.5-bathroom
home had a $399,000 listing
price and 3,000 square feet
The Poconos of space.

09/2020 KIPLINGER’S PERSONAL FINANCE 57

REWARDS

offices. Why not plug in with a view
of the ocean or mountains?
What’s more, mortgage interest
rates have sunk to record lows. In
mid July, the average rate on a 30-year
fixed-rate mortgage dipped to 2.98%—
the first time the rate has fallen below
3% in the nearly 50 years that Freddie
Mac has been keeping records.
But be prepared to compete with
other buyers for the house you want.
Following spring shutdowns to slow
the spread of COVID-19, buyers
emerged hungry to live in locations
and houses with more space and other
features suited to spending a lot of
time at home. Sellers have been slower
to list their homes, however, causing a
shortage in many areas of the country.
In June, U.S. housing inventory fell by
27% from the same period a year be-
fore, according to Realtor.com.
Many popular vacation spots are no
exception to the trend of tight inven-
tory and pent-up buyer demand. In
late June, Nancy Reither, a real estate
agent with Coldwell Banker in Ocean
City, Md., said that the city had about
340 listings, compared with about
1,500 at the same time a year ago.
Since the pandemic-related shut-
downs eased and buyers were able to
look at homes again, “I have not been
able to take a day off,” says Bill Cullin,
a Long & Foster agent who focuses on
the Delaware beaches north of Ocean
City. The beaches are within a few
hours of major metropolitan areas in-
cluding New York City, Philadelphia
and Washington, D.C., and buyers are
driving there as air travel becomes less
desirable during the pandemic, says
coming months will depend largely on
the economy’s trajectory, says Danielle
Hale, chief economist for Realtor.com.
If the economy slowly improves, buy-
ers may continue to grab properties as
they come on the market. A weakening
economy, however, may mean more
owners putting their houses up for sale
out of financial necessity but fewer
buyers jumping in to purchase them.
The status of remote work and educa-
tion will affect the vacation-home
market, too. “If schools or colleges
resort to remote learning again in the
new school year, we would expect a
continued surge in interest and shop-
ping for vacation homes,” says Zillow
economist Jeff Tucker. That would be
unprecedented for the quieter fall and
winter seasons, he adds.
Home prices are stable. In June, the RUIDOSO, N.M.
median listing price was 5.1% higher COUNTY: Lincoln
than a year before, according to Realtor JUNE 2020 MEDIAN LISTING PRICE:
.com. Many homeowners who lost $349,550
income because of the pandemic have 2019 MEDIAN SALE PRICE: $217,372
had legally mandated access to mort-
gage forbearance, helping to avoid Nestled in southern New Mexico’s Sierra
distressed sales that can push down Blanca mountain range, Ruidoso is a haven
prices. And leading into the crisis, from stifling summer heat in the desert
the overall health of homeownership basin below and a wintertime getaway for
was stronger than with the previous skiers and snowboarders in the Southwest.
downturn, says Skylar Olsen, senior The Ski Apache resort has 55 runs and
principal economist for Zillow. trails. With more than a million acres of
To help you navigate the vacation- national forest and wilderness lands, the
home market, we’ve explored what region provides abundant trails for hiking,
to expect as you search, ways to make mountain biking and horseback riding. After
your offer stand out, and mortgage you’ve had your fill of outdoor activities,
and tax considerations. With data spend an afternoon exploring the shops
from Realtor.com, we’ve also high- and restaurants in Ruidoso’s charming and
lighted five vacation areas around
the country that are attractive in
terms of inventory and price. seasons, or that you don’t like being
DISCOVER RUIDOSO.COM; PREVIOUS PAGE: POCONOMOUNTAINS.COM

Cullin. Plus, many buyers expect to
work from home until sometime this
fall, and some are permanently per-
mitted to telework.
In northeastern Florida, buyers are
snapping up second homes—especially
oceanfront properties and those with
swimming pools, says Cara Ameer,
a Coldwell Banker agent based near
Jacksonville as well as in Orange
County, Calif.
How the housing market fares in
LAY THE GROUNDWORK
If you’re eyeing a place that you’ve vis-
ited only as a vacationer, keep in mind
that owning a home there comes with
a different set of concerns. Talk to lo-
cals about living in the area, and visit
it during the times of year you plan to
be there. You may realize that a com-
munity quiets down—with some res-
taurants and shops closed—more than
you may have expected during certain
there when it’s most active, says
Ameer. Find out whether the commu-
nity normally offers activities and en-
tertainment that you’ll enjoy during
extended visits—say, golf courses,
great restaurants or an arts scene.
Do you prefer a condominium, a de-
tached home or something in between,
such as a townhouse or duplex? A
house may offer more privacy—a cov-
eted trait during the era of social dis-
tancing—and you won’t have to worry

58 KIPLINGER’S PERSONAL FINANCE 09/2020


Ruidoso, NM
rustic downtown. If you have a penchant
for gambling, your best bets are the Inn of
the Mountain Gods Resort & Casino and
the Ruidoso Downs Race Track & Casino.
A budget of up to $400,000 will get you
a decent-size cabin or condo. Recently, a
three-bedroom, two-bathroom home with
1,921 square feet of space, vaulted ceilings
and a deck overlooking tall pine trees had
a $365,000 listing price. Within walking
distance to downtown, a fully furnished,
2,558-square-foot condo with three bed-
rooms, 3.5 bathrooms and an updated
kitchen recently had a $349,500 price tag.
Boosting the price a few notches, a newly
remodeled four-bedroom, 5.5-bathroom
home with views of the nearby Sierra
Blanca peak listed for $485,000, and it
offers a roomy 3,121 square feet.
about pet restrictions or other limita-
tions that sometimes come with com-
munal properties. But you’ll likely
have increased responsibilities that
may be tougher to manage when
you’re not there, such as snow re-
moval, lawn mowing and landscaping.
With a condo, the association typically
takes care of such tasks (although
you’ll likely pay a fee to cover them).
Plus, internet and cable may be in-
cluded. Especially if you’re interested
in an attached property, try to get a
sense of whether the neighbors fre-
quently rent out their properties.
“Nobody wants to find out that it’s
like a fraternity party every weekend
in the summer,” says Ameer.
If you live hours away from your
vacation-home destination, you may
have limited time to visit properties.
Look for 3-D virtual tours that let you
digitally walk through homes, giving
you a better idea of the layout than
regular photographs. Or your agent
may give you a live video tour through
FaceTime, Skype or a similar app. That
may help you narrow down your list.
Once you’re ready to tour houses, you
can expect to follow safety protocols
such as signing a form to verify that
you have no symptoms of COVID-19,
wearing a mask and wiping down sur-
faces that you touch.
DON’T BUST YOUR BUDGET
Snagging a bargain is tough in a seller’s
market, but you can use a few strate-
gies to help keep the sale price in your
range. One is to shift away from central
locations and extend your search to
outlying areas. Brenda Wild, a Remax
agent in Aspen, Colo., has seen a surge
of interest in towns such as Carbon-
dale and Basalt, where buyers can
get more for their money than in ski
towns Aspen and Snowmass. Ameer
says that buyers who go an hour and
a half south of Ponte Vedra Beach,
Fla., where she is based, may find less-
expensive properties in quiet coastal
towns—but they’re farther from the
activities and upscale amenities that
some buyers prefer.
You may be able to get a deal by buy-
ing during off-peak tourism seasons.
In the Ocean City area, September
through December is typically a good
time to buy, says Reither—and she ex-
pects that to hold true this year. Short-
term rentals were banned in the
spring because of the pandemic, and
some vacationers canceled their sum-
mer bookings to avoid risk of contract-
ing COVID-19. Owners who lost a por-
tion of their usual rental income may
decide the investment is no longer
worthwhile and put homes up for sale
when summer ends. “I’m working
with a couple of investors now who
have eight and 10 properties here.
They’ve already sold two, and they’re
talking to me about listing the rest of
them at the end of the rental season,”
says Reither.
If a turnkey home—that is, one
that requires no extensive repairs—is
fairly priced and in a prime location,
chances are high that multiple buyers
will put in bids. In a hot market, you’ll
have to act swiftly from the time it’s
listed to submit an offer. Work with an
experienced, full-time agent, who will
more likely have a deep knowledge of
the local market and be available to
move more quickly than someone who
works part-time, says Reither.
A few tactics may help make your
offer stand out. If you can swing a cash
offer, that’s often attractive. But find
out what’s important to the seller—not
all sellers prioritize cash bids or the
highest-price offer. Sellers often favor
“clean” contracts with as few contin-
gencies and extra requests as possi-
ble—so you may want to avoid asking
the seller to, say, pay for a home war-
ranty or let you keep the gas grill on
the patio. But it’s generally a bad idea
to skip the home inspection.
Ask about the seller’s preferred
timeline to complete the sale. If the
owner hopes to keep the home for a
few more months and you’re up
against other bidders who propose a
30-day window, you may win by offer-
ing flexibility to let the seller stay for
a while. If price seems to be the seller’s
main concern, one trick is to include
an escalation clause in your offer. You
may, for example, propose a $350,000
sale price but include a condition that
you’ll pay $1,000 more than the high-
est competing offer, up to $360,000.
If you’re getting a mortgage, include
a preapproval with your offer.
One other idea: Write a letter to
the seller describing yourself and the
reasons you love the home. Especially
if the owner occupied the home—
rather than renting it out to vacationers
09/2020 KIPLINGER’S PERSONAL FINANCE 59
REWARDS

full-time—“that can really touch their
heart,” says Sindy Ready, a Remax
agent in Scottsdale, Ariz.
PLAN FOR ROUTINE EXPENSES
Before you commit to a home, con-
sider all the ongoing costs that come
with it. For example, if you buy where
skiing is popular, the heating bill could
be substantial. The same goes for the
electricity bill for air-conditioning
in hot-weather locales. Be sure you
understand seasonal maintenance
and special fixtures you may need. In
coastal Florida, you’ll have to get hur-
ricane shutters—and have someone on
hand who can quickly apply them and
secure your property if you’re away
when a storm is approaching, says
Ameer. If you don’t frequently visit
the home yourself, someone should
regularly check it for leaks or other
problems, and you may need to hire
services for snow removal, pool and
lawn upkeep, or other maintenance.
Check into the type of insurance
coverage you’ll need and how much
it costs. Flood insurance is a must in
areas at high risk of flooding—and
your mortgage lender may require it
in certain areas. If the property is part
of a homeowners or condo association,
look up its fees.

Door County, WI As you create a budget, don’t over-

look kitchenware and furniture to put
both inside the home and on a patio or
poolside. You’ll want to estimate the
cost of travel to and from the property
each year. Some vacation-home owners
buy another car or truck to keep at the
new home, and if you’re near water,
chances are you’ll want a boat.

FINANCING AND TAXES

If you’re getting a mortgage, it’s often
smart to use a local lender. It may
move more quickly and efficiently
than a bigger institution, and it is
likely to send out an appraiser who is
familiar with the area and who may
provide a more accurate estimate of
the home’s value than someone from
outside the region. Ask your real estate
DOOR COUNTY, WIS. agent for recommendations.
JUNE 2020 MEDIAN LISTING PRICE: $374,950 Mortgages for second homes differ
2019 MEDIAN SALE PRICE: $166,958 from those for primary homes in a few
ways. Borrowers who encounter finan-
Door County covers the top of a peninsula bordered by Green Bay waters to the west and cial difficulties are more likely to de-
Lake Michigan to the east. With 300 miles of shoreline and more than 19 unique communi- fault on a second-home mortgage than
ties, this midwestern destination, just northeast of the city of Green Bay, has plenty of one for a primary residence, and lend-
attractions to satisfy visitors of all tastes. Foodies will be drawn to the region’s restaurants— ers take that risk into account. Interest
from fine-dining establishments to waterfront joints to wineries and breweries—and the rates are often about 0.25 to 0.5 per-
county is known for its abundant cherry orchards. Enjoy the gamut of water activities and centage point higher for second-home
sports: swimming and sunbathing on sandy beaches, boating and fishing, and even ship- mortgages than for primary-home
wreck diving. Or stroll among the galleries and boutiques throughout the county. loans, says Keith Gumbinger, vice
For less than $500,000, you can get a reasonably spacious property near the water. president of mortgage-information site
In Sturgeon Bay, a town of fewer than 10,000 people, a two-bedroom, two-bathroom HSH.com. You’ll have to make a down
cottage with 1,536 square feet of space and lake views recently listed for $449,000. payment of at least 10% (for a primary
Just south of Door County, in Algoma, a log cabin on the shore had a $399,000 price, three home, you may be able to put down as
bedrooms, 2.5 bathrooms and 2,040 square feet of living area. Willing to bump up the bud- little as 3% with a conventional mort-
get to about $600,000? In the village of Ephraim, near Sister Bay, an 1,800-square-foot gage), and some lenders require 20%.
DOORCOUNTY.COM

condo with three bedrooms, two bathrooms and a modern feel had a $579,000 asking Minimum credit-score requirements
price. Plus, you get access to a swimming pool and private beach. are a bit higher than those for primary
homes. With a loan-to-value ratio (the

60 KIPLINGER’S PERSONAL FINANCE 09/2020

 amount you owe on the loan as a per-
centage of the home value) higher
MYRTLE BEACH, S.C.
than 75%, you may need a minimum
COUNTY: Horry
FICO score of 680 to qualify (on a
JUNE 2020 MEDIAN LISTING PRICE: $239,950
scale of 300 to 850), compared with
2019 MEDIAN SALE PRICE: $198,642
about 620 to 640 for a primary-home
loan, says Gumbinger. You’ll likely be
If sand and ocean waves are on your must-have list, you can find them at Myrtle Beach
required to have cash reserves to cover
and other beaches on the 60-mile “Grand Strand” lining the South Carolina coast. Besides
at least a few months’ worth of mort-
relaxing and swimming at the shore, Myrtle Beach visitors can wander the boardwalk and
gage payments. You may expect to
promenade—which features shops and restaurants and stretches more than a mile along
earn some rental income (see below),
the beach—head to one of the area’s amusement or water parks, or check out one of the
but such potential earnings won’t help
many free festivals, parades and concerts held throughout the year. Golfers are drawn to
you qualify for a loan on a second
the area’s challenging and beautiful greens and have their pick of nearly 100 courses.
home. If you won’t occupy the home
Shoppers can browse flea markets, factory outlets and everything in between. When you
and plan to rent it out full-time, it’s
need a break from the beach scene, take a kayak or paddleboard to the Waccamaw River
considered an investment property,
or birdwatch at the surrounding 55,000-acre Waccamaw National Wildlife Refuge.
and rental income may be considered.
Recently, a furnished, $279,000 condo in North Myrtle Beach featured a balcony over-
Tapping equity in your primary
looking the ocean, modern upgrades, 951 square feet of space, two bedrooms and two
home is one way to raise cash for your
bathrooms, plus access to indoor and outdoor pools. Further south, closer to the heart
second-home purchase. Your options
of Myrtle Beach, a 711-square-foot, one-bedroom, one-bathroom unit with an oceanfront
include a home-equity loan or line of
balcony and pool access had a $269,000 listing price. If you’re willing to live a block or
credit or a cash-out refinance, in which
two in from the beach and bump up your budget, you may find a larger home for less than
you borrow more than you owe on
$500,000. In North Myrtle Beach, a furnished three-bedroom, three-bathroom house with
your primary home and take the extra
2,303 square feet of space recently had a $460,000 price tag.
money as cash. But with the economy
taking a hit, lenders are tightening up
on home-equity borrowing.
For mortgages obtained after De-
cember 15, 2017, homeowners who
itemize on their federal tax returns
can deduct interest on up to $750,000
in total loan balances ($375,000 if
married filing separately), including
both a primary and a second home;
for older mortgages, you can deduct
interest on up to $1 million of debt, or
$500,000 if married filing separately.
If one of your mortgages falls into the
first category and the other into the
second, consult a tax adviser for help,
suggests Mark Alaimo, a certified
public accountant and member of the
American Institute of CPAs Personal
Financial Specialist Committee. You
may also be able to deduct state and
local property taxes, up to a $10,000
combined limit ($5,000 if married
filing separately) on state and local
income, sales and property tax.
If you live in your vacation home Myrtle
VISITMYRTLEBEACH.COM

more than 14 days or more than 10%

of the total days you rent it out at a fair Beach, SC
rental price (whichever is greater)
during the tax year, the IRS considers

09/2020 KIPLINGER’S PERSONAL FINANCE 61

REWARDS

it your personal residence and not

exclusively a rental property. If you
rent out your vacation home fewer

Oregon’s than 15 days per year, the rental in-

come is tax-free. If you rent it out more
Central Coast than 14 days per year you must report
the rental income on your tax return,
and you can deduct rental expenses
such as for mortgage interest, real
estate taxes, maintenance and utilities.
But you can deduct only the portion
of those expenses incurred while rent-
ers are using the home.

RENT IT OUT?
You may plan to rent out your property
when you’re not visiting it yourself to
help defray costs, but that’s a shaky
prospect until the pandemic is in the
rearview mirror. Rental activity has
returned in many popular vacation
areas, but state and local governments
may once again bar short-term rentals
in areas where COVID-19 cases are
spiking. And even where rentals are
permitted, vacationers are concerned
about the risks of going into other
homes.
“Be very conservative” with your
expectations for rental income, says
Michael Slevin, president of Berkshire
Hathaway HomeServices Colorado
OREGON’S CENTRAL COAST Properties. “Make sure you can
COUNTY: Lincoln weather another shutdown.” Also read
JUNE 2020 MEDIAN LISTING PRICE: $399,050 up on the community’s rules when it
2019 MEDIAN SALE PRICE: $284,196 comes to rentals. Some homeowners
or condo associations disallow short-
Looking for a seaside getaway on the Pacific Ocean? The central portion of Oregon’s coast- term rentals at all times, and some may
line offers picturesque, rocky shores and towns, such as Lincoln City and Newport, where prohibit renters from using facilities
visitors shop and dine on fresh seafood. Numerous parks and recreation areas dotting such as the pool or gym.
the shoreline feature beach access and walking trails. Further inland, you can hike, camp, If you do rent out your home, hiring
kayak and fish in the forest or at Devil’s Lake. When you’re ready to head back to the beach, a good housekeeping service is impor-
pick a place to surf or watch for whales, birds and other wildlife. Water temperatures are tant. Guests seeking vacation rentals
chilly—the average on the Newport coast is 55 degrees in July—so don’t expect to do much are increasingly running web searches
swimming in the ocean, unless you bring a wetsuit. Portland and Salem are within a few with key words related to cleanliness,
hours’ drive. says Shaun Greer, senior director of
In many areas, you can get a small cottage or condominium within walking distance of the real estate for Vacasa, a vacation-
beach—sometimes with ocean views—for between $350,000 and $400,000. In Newport, rental booking site. Pandemic or not,
for example, a third-floor, 1,571-square-foot condo that recently listed for $389,000 fea- renters like comfortable, quality fur-
GETTY IMAGES/DEB SNELSON

tured three bedrooms, two bathrooms, an updated kitchen and a balcony facing the sea. nishings. “You can’t have mismatched
Increasing the budget to $600,000 gives you oceanfront options. In Lincoln City, a home glassware in the kitchen with a luxury
with two bedrooms, 2.5 bathrooms, 1,408 square feet of space and updated finishes—plus vacation rental,” says Ready. ■
access to a community pool and clubhouse—was recently listed at $595,000.
YOU CAN CONTACT THE AUTHOR AT LISA_GERSTNER@
KIPLINGER.COM.

62 KIPLINGER’S PERSONAL FINANCE 09/2020

 DRIVE TIME David Muhlbaum

Get Your Car on the Cheap

E
nough about new and nearly new social media discussion that followed. one you might buy. Consumer Reports
cars, some of you have told us. Lang writes about cars for a number is, of course, a well-known source for
Stop goading people to waste of outlets, and he counts among his reliability data, but you might also
money on fancy sheet metal. This ad- friends fellow commentators and car want to take a look at a site Lang built
vice is usually followed by a few lines industry people who largely endorse called Dashboard-Light.com, which
about how you’ve gotten 10 years and this strategy. rates cars based on repair data from
200,000-plus miles out of your Chrys- But he also got some pushback. wholesale auctions. (The site includes
ler Town & Country or Toyota Avalon. Safety (discussed above) was an issue. a lot of useful used-car shopping guid-
Your thrift is admirable. We’ll dis- So was reliability and repairs for an ance, too.) Dashboard-Light will also
cuss how people can emulate it to get older car. Even a “well-kept” car of reveal that while you could certainly
wheels for less. But first, a bit of defense that vintage is going to have greater buy a Toyota and call it a day, that’s
for those snapping up late-model cars: needs. not the only brand worth considering.
What might look like the profligate pur- Ivan Drury is senior manager of Once you’ve narrowed your choice
suit of flash might instead be putting insights for Edmunds.com, and while to one model, checking out the one
safety first. Although different models’ both a practitioner and advocate of the you’re looking at requires a history re-
safety-test results vary (and size still cheap-car approach, he notes it’s not port (such as one from Carfax); service
counts), newer is generally safer. for everyone. “It really depends on records; and an inspection by a me-
That said, spending less doesn’t how risk-averse the buyer is. chanic you trust. When it comes to
necessitate putting yourself in a death Are they comfortable buy- the first two, you need to know
trap. For one thing, all cars made since ing something that may a bit of what to look for in that
2012 have stability control and ABS need future repairs? If documentation. Carfax includes
as standard equipment. And you can they’re not, then auto- FAQs to help you decode its re-
check test results for many years back matically, it’s out of ports; for service records, you
at the Insurance Institute for Highway the question.” can look up any model’s factory
Safety (www.iihs.org). maintenance schedule online
On Facebook, I’m friends (to check that the work was done
with a guy named Steven on the example you’re consid-
Lang, who lives and
THE SWEET SPOT IS ering). Or, have your me-
breathes used cars of this BUYING A SEVEN- TO chanic help explain the
type. He buys and sells 11-YEAR-OLD CAR THAT records.
them, too. In a recent post, HAS AN EXCELLENT Where to find
I thought he nailed the go- a car like this?
cheap strategy: MAINTENANCE HISTORY. Private sellers
“I think the sweet spot are your best bet.
for the non-enthusiast is And Edmunds’
buying a seven- to 11-year-old car that So, it’s impor- Drury suggests
has been conservatively driven and tant to do your a “mechanic’s
has an excellent maintenance history. research on two special” at an in-
Get it inspected by a qualified mechanic things: the dependent repair
and that’s it.” Expect to pay less than reliability shop: a car bought
$7,000 and to keep it for about five to of the model from a customer
POON WATCHARA-AMPHAIWAN

seven years, he adds. “Sell it for $2,000 you’re con- to do a labor-

to $3,500 during tax season, and re- sidering and intensive repair
peat the cycle.” the repair on the mechanic’s
and mainte- own time. ■
Pushback. Well, bingo!—with real nance history
REACH THE AUTHOR AT DAVID_
savings spelled out. A bonus was the of the particular MUHLBAUM@KIPLINGER.COM.

KIPLINGER’S PERSONAL FINANCE 63

 MAKING IT WORK

A Bridge Over the Racial Divide

This ex-baseball player is using his background to bring understanding and advocate for change.

PROFILE
WHO: Doug Glanville, age 49
OCCUPATION: Baseball analyst and ex-MLB
player
WHERE: Bloomfield, Conn.
What was your path to becoming a baseball
analyst? When I was playing, I always had a
good relationship with the press and was fas-
cinated by their work—and I love writing. So
it made sense when my career ended in 2005
that I would explore commentary. I was writ-
ing a column in the New York Times called
“Heading Home” that explored life in base-
ball. Eventually, I got noticed by other na-
tional media, and ESPN hired me. I believed
I could have a voice on the social aspect of
sports. I saw a purpose behind it, driven by
change and advocacy and understanding.
about? In this rare moment after the death of
George Floyd, ESPN said, “Do you want to take
a crack at this?” Remember, there has been
a lot of pushback saying that you should stick
to sports when you’re covering sports. But I’ve
never stuck to sports, for multiple reasons—
one of which was that I grew up in Teaneck,
N.J., where I witnessed a commitment to an
inclusive society, one that voluntarily deseg-
regated in the ’60s. I saw too many examples
of the importance of dialogue and communi-
cation and actually using sports to figure out
a way to bring people together.
Do you think America has turned a corner?
I think we see a corner. I don’t know if we’ve
turned it. In the positive sense, I see sports
at its best as a great example for our country
to be a better team and better teammates.
Sports also has equity—it tries to fight for
rules that are equal for both teams and play-
ers, and that’s a good example for our country
as it thinks about fairness.
How do you see the baseball season playing
out? I’m skeptical that sports are going to
make it this year. I just don’t see how they
won’t have setbacks and outbreaks. I hope
I’m wrong. I guess my question is, When we
get back to sports, will we get comfortable
again? I’m trying to make sure we continue
to celebrate baseball, or sports in general,
as an avenue of constructive engagement
to address social issues. MARK SOLHEIM

You’re also teaching a college course on

sports? For a few years, I was working on this
content about sports and society. Three years
ago, I taught at the University of Pennsylva-
nia, my alma mater, and now I teach a sports
management/education course at the Univer-

PHOTOGRAPH BY CHRISTOPHER BEAUCHAMP. SHOT AT DUNKIN’ DONUTS PARK IN HARTFORD, CT

sity of Connecticut. It has helped me to see
the next generation and how they think and
talk, and to learn from them. But it has also
helped me see an expansion of the spaces
where sports play a significant role.
And now, at this moment, is the conver-
gence of everything I’ve worked on and have
been passionate about, because there are no
sports to cover and we’ve had to look at sports
in a different way. So it has given me a plat-
form. I have an academic background, I have
the media side, I was a player—and I grew up
in communities that were diverse and worked
toward solutions. With all of that coming to-
gether, as horrible as the pandemic is, it’s a
good time for me to amplify that voice.

You recently created and narrated a video

essay for ESPN about the death of George
Floyd, called “Enough.” How did that come

64 KIPLINGER’S PERSONAL FINANCE 09/2020

 F I R S
T C
H I L D R E N
:
C A R O L I N E A N D J O H N J R
. I N T H E
K E N N E D Y W H
I T E H O U
S E
see new sides 8DB>C<>C'%'&

to their story Ex pe rie n c e the Wh ite Hou s e th roug h a ch il d’s

eye s in this neve r-befo re
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seen exhibition
at the J oh n F. K e nn e dy Pre s iden tial Lib rar
y.

jfklibrary.org
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