July 16, 2008

Wednesday MySpace Comments


Welcome to the middle of our work week and another day in my life as a long term survivor of HIV and AIDS.

I hope you are having a great day and enjoying your life. It was another typical day for me. As you know if you read my blog often, my doctor has ordered me on bed rest at home after having a mini-stroke a couple of weeks ago. So I haven't been going out a whole lot except for doctor appointments and necessary medical testing. The upside to that is getting to spend a ton of time with my four legged children. There's nothing better than unconditional love.

I was watching CNBC and the New York Stock Exchange for most of the day and it ended up being very positive news for a change. the financial sector soared the most in its 19-year history after Wells Fargo reported better-than-expected earnings, sparking a rally that was compounded by short-covering. As a result, the stock market posted a large 2.5% gain, as a steep drop in crude prices helped overshadow a disappointingly high inflation reading. Wells Fargo reported second quarter earnings of $0.53 per share, topping Wall Street's expectation by $0.03. In addition, the San Francisco-based bank raised its dividend by 10%, indicating it is in a solid financial position despite the current environment. The stock spiked 32% on the news. This, along with better-than-expected earnings from Charles Schwab, Northern Trust and Marshall & Ilsley sent the financial sector soaring to a 12.3% gain which is the largest advance since it was created in 1989. It was a solid session outside of financials as well, with eight of the ten economic sectors posting an advance, aided by the second straight day of tumbling oil prices, bargain hunting and short-covering. With regard to crude oil, prices fell 3.1% after a government report showed an unexpected crude and gasoline inventory build, sparking a rally in energy-price sensitive areas. So while I don't know if this trend will continue at least today's gains let investors get a momentary breath of relief from their losses.

Now I know like investors, the rest of us are having our budgets complicated with higher energy, fuel and grocery costs. But the biggest mistake you can make it withdrawing funds from your 401K plan if you still have one. Now this news is important for everyone not just people with HIV and AIDS or those on disability. Americans are raiding their already fragile retirement piggy banks to weather financial hardships such as unemployment, medical emergencies and buying a home. They're doing it even though borrowing a modest $5,000 can dramatically erode savings over time, according to a study released Wednesday by the Center for American Progress. The study found workers in 2004 had $31 billion in outstanding 401(k) loans, a fivefold increase from $6 billion in 1989. Between 1998 and 2004, an average of 12 percent of families with 401(k) plans borrowed from them. As economic conditions grow bleaker, the number of people dipping into retirement money will only rise. A $5,000 loan, for example, could cut retirement savings by 22 percent even if the loan is repaid without penalty, according to the study. That's assuming the person has a $40,000 salary and is five years into a 35-year career. One reason people are increasingly using 401(k) plans as a crutch is because they're so easy to access compared to pensions and individual retirement accounts, or IRAs. Typically, borrowers can repay loans within five years without penalty. Loans for first-time homes must be repaid within 15 years to avoid penalties.That doesn't mean people are raiding savings to go on shopping sprees. Middle-class families in particular are turning to retirement money to get through financial crises such as unemployment and medical emergencies. People can typically borrow $50,000 or half the vested balance of their 401(k) accounts with extremely favorable interest rates. Failing to repay loans on time typically incurs a 10 percent excise tax and borrowers must also pay income tax. Dipping into retirement money wouldn't be a problem if other sources of retirement income such as Social Security and pensions weren't drying up. More people today are counting on 401(k) accounts to be their primary income source in retirement. So if you can avoid touching your 401K plan, it is best for your future.

The other big news today was the overturning of the presidential veto on the propsed Medicare Act changes. Congress has rejected President Bush's veto of a bill protecting doctors from Medicare rate cut. President Bush vetoed the bill earlier Tuesday. He says he supports rescinding the pay cut but objects to financing the plan largely by reducing spending on private health plans serving the elderly and disabled. First the House voted to override the veto, 383-41. Later, the Senate voted 70-26 to override. It takes a two-thirds majority of both houses of Congress to override a presidential veto. So let's keep our fingers crossed that dangerous changes to Medicare payment are not allowed to harm American men, women and children.

Well not much else happened today in my world. What about for you? I hope you're living your life to the fullest.

Wishing you health, hope and happiness.

big bear hug,

Daddy Dab