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    This Is a Terrible Time for Savers

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    In an upside-down world of financial markets, expected returns after inflation are at record lows.The Bank of England in London earlier this year. Worldwide demographic trends tied to the aging of the baby boom generation have contributed to a glut in savings.Matt Dunham/Associated PressIf you are saving money for the future, one way or another you had best be prepared to lose some of it.That is the implication of today’s upside-down world in the financial markets. The combination of high inflation, strong economic growth and very low interest rates has meant that “real” interest rates — what you can earn on your money after accounting for inflation — are lower than they have been in modern times.This outcome is a result of a glut of global savings and the Federal Reserve’s extraordinary efforts to bring the economy back to health. And it means the choice for a saver is stark. You can invest in safe assets and accept a high likelihood that you will get back less, in terms of purchasing power, than you put in. Or you can invest in risky assets in which you have a shot at positive returns but also a substantial risk of losing money should market sentiment turn negative.“For people who are risk averse, they have to get used to the worst of all possible worlds, which is watching their little pool of capital go down in real terms year after year after year,” said Sonal Desai, the chief investment officer of Franklin Templeton Fixed Income.Inflation outpacing interest rates is good news in certain circumstances: if you are able to borrow money at a fixed rate, for example, and use it to make an investment that will provide something of value over time, whether a house, farmland or equipment for a business.But consider the options if you are not in that position, and instead are saving money that you expect to need five years down the road — for the down payment on a house, or a child’s college expenses.You could keep the money in cash, such as through a bank deposit or money market mutual fund. Short-term interest rates are at zero or very close to it, depending on the specific place the money is parked, and Federal Reserve officials expect to keep rates there for perhaps another couple of years. Inflation has been at 4 percent to 5 percent over the last year, and many forecasters expect it to come down slowly.Or, you could buy a safe Treasury bond that matures in five years. The annual yield on that bond, as of Friday, was 0.77 percent. That means that if annual inflation is above that, the buying power of your savings will diminish over time. The highest-yielding federally insured bank certificates of deposit over that span offer only a little bit more, just over 1 percent.If you’re particularly nervous about rising prices, you could buy a Treasury Inflation Protected Security, a government-issued bond that is indexed to inflation. The five-year yield on TIPS? A negative 1.83 percent. That means that if inflation were 3 percent annually, your holding would return only 3 percent minus 1.83 percent, or 1.17 percent. In exchange for protection against the risk of high inflation, you must tolerate losing nearly 2 percent in purchasing power each year.Then again, you could take on a little more risk and buy, say, corporate bonds. But that adds the risk that the companies that issued the bonds will default — and it’s still only enough to roughly keep up with anticipated inflation. (An index of BBB-rated corporate bonds yielded only 2.19 percent late last week.)The stock market and other risky assets offer potentially higher returns, with some degree of protection from inflation. The corporate profits that are the basis for stock valuations are soaring, one reason major indexes hit record highs in recent days. But this comes with the omnipresent risk of a sell-off — tolerable for people investing for the long run but potentially problematic for those with shorter horizons.This extreme negative real interest rate environment leaves people whose job is to analyze and recommend bond investing strategies with few good options to advise.“It’s hard to even make an argument for fixed income at these levels,” said Rob Daly, the director of fixed income for Glenmede Investment Management. “It’s the old ‘pennies in front of a steamroller trade.’”That is to say: Someone who buys bonds with ultralow yields is collecting puny interest in exchange for taking the substantial risk that higher inflation or a surge in rates could more than wipe out gains (when interest rates rise, existing bonds fall in value).For those reasons, Mr. Daly recommends investors allocate more of their portfolios to cash. Yes, it will pay almost no interest, and so the saver will lose money in inflation-adjusted terms. But that money will be ready to invest in riskier, longer-term investments whenever conditions become more favorable.Similarly, Rick Rieder, the chief investment officer of global fixed income at BlackRock, the huge asset manager, recommends that investors focused on the medium term build a portfolio that combines stocks, which offer upside from rising corporate earnings, with cash, which offers safety even at the cost of negative real returns.“It’s surreal,” Mr. Rieder said. “This is one of those periods of time when the fundamentals are completely detached from reality. Where real rates are today makes no sense relative to the reality we live in.”The Fed, besides keeping its short-term interest rate target near zero, is buying $120 billion in securities every month through its quantitative easing program, and is only now starting to talk about plans to taper those purchases. That has the effect of putting an enormous buyer in the market that is bidding up the price of bonds, and thus pushing rates down.Fed officials believe the strategy of keeping easy monetary policy in place even as the economy is well into its recovery will help bring the American job market back to full health quickly. The aim is also to establish credibility that its 2 percent inflation target is symmetric, meaning that it will not panic when prices temporarily overshoot that target.Many of the people involved in market strategy are less than thrilled with this approach, and the consequences for would-be investors.“Nominal yields are low because of how much the Fed is buying,” said Ms. Desai of Franklin Templeton. “It’s ludicrous given where we are” with growth and inflation.At the same time, Americans have accumulated trillions in extra savings during the pandemic, money they are parking in all sorts of investments, which has been pushing asset prices upward and expected returns down. Arguably, the flip side of low expected returns on safe assets is stratospheric prices for real estate, meme stocks and cryptocurrencies.Globally, demographic trends tied to the aging of the enormous baby boom generation are causing a surge in savings. Gertjan Vlieghe, a top official with the Bank of England, has shown that the pattern of retirement savings evident in Britain and across advanced nations points to continued low interest rates.“We are only about two-thirds of the way through a multidecade demographic transition that is affecting interest rates,” Mr. Vlieghe said in a speech last month. “The key mechanism is not that older people have lower savings rates, but rather that, as people age, they hold higher levels of assets, in particular safe assets,” then spend those savings down slowly when they hit retirement years.That helps explain why interest rates have been persistently low across major economies — in Europe, the United States and Japan in particular — for years, even at times when those economies have been performing relatively well.In other words, Fed policy and the unique economics of the pandemic are major factors in the extremely low rates of summer 2021. But it doesn’t help that these come in an era when so much of the world is eager to save — and that part won’t change anytime soon. More

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    Even Your Allergist Is Now Investing in Start-Ups

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    The once-clubby world of start-up deal making known as “angel investing” has had an influx of new participants. It’s part of a wider boom in ever-riskier investments.SAN FRANCISCO — On a recent Wednesday evening, 60 people gathered in a virtual conference room to discuss start-up investments. Among them were a professional poker player from Arizona, an allergist in California and a kombucha maker from Tennessee. All were members of Angel Squad, a six-month $2,500 program that aims to help people break into the clubby world of venture capital as individual investors, known as “angels.”The group listened as Eric Bahn, the instructor, rattled off anecdotes and advice from the front lines of start-up investing. “The most important question when you are an early stage investor is: What happens if things go right?” he said, stepping back from his desk and raising his hands for emphasis.Caroline Howard, 29, one of the founders of Walker Brothers Beverage, a kombucha company in Nashville, said the class taught her how to evaluate deals. “I think it’s so fun to see companies when they’re so young and have a germ of an idea and back them,” she said.Founded in January, Angel Squad is one of several ways that people from outside Silicon Valley’s investing elite are now joining the ranks of angel investors. The influx — which includes art curators, dentists, influencers and retirees — is transforming the way that start-ups raise money, upending the pecking order in venture capital and pushing a niche corner of the investing world toward mass adoption.“It is absolutely going mainstream,” said Kingsley Advani, founder of Allocations, a tech platform for angel investors. “It’s accelerating and it’s getting faster and faster.” He said even his mother, a retired schoolteacher in Australia, has invested in 41 start-ups over the last few years.More than 3,000 new angel investors are projected to make their first deal this year, up from 2,725 last year, according to the research firm PitchBook. And the amount of money that angels are pouring into start-ups has swelled, reaching $2.1 billion in the first six months of this year, compared with $2.6 billion for all of 2020, according to the National Venture Capital Association and PitchBook.Until recently, such investing was off-limits to most people. Securities rules restricted it to the wealthy because of the level of risk involved, since most start-ups fail. Even those who qualified often lacked the connections to find deals. And start-ups preferred to raise big slugs of cash from a handful of investors, rather than deal with the costs and headaches of processing dozens of tiny checks.But over the last year, many of those roadblocks have dissipated. Last year, the Securities and Exchange Commission loosened restrictions and began allowing people to become accredited investors — those allowed to back private start-ups — after passing a test. New tech tools are making the process of raising funds from many small investors cheaper and faster. And start-ups have become eager to add potentially helpful angels to their rosters of backers.The boom is part of a rush into ever-riskier forms of investment, driven by low interest rates, stimulus money and a little bit of “why not?” chutzpah. Nowhere is that sentiment stronger than in the tech industry, where start-ups are flush with cash, initial public stock offerings have been plentiful and Big Tech is delivering blockbuster profits.“Overnight, the entire world just woke up and went, ‘Oh, wow, we want to go invest in technology,’” said Avlok Kohli, chief executive of AngelList Venture, a company that provides tools for start-up fund-raising.Many new angel investors have some connection to the tech industry but are not the V.I.P.s who are normally invited into deals. Some are complete outsiders. Many are broadcasting their activity on social media and turning the investing into a branding opportunity, a hobby, a networking play, a social status or a way to give back.Karin Dillie, 33, an executive at an e-commerce company in New York, said she hadn’t realized that she could be an angel investor. But in June, when a business school classmate emailed asking her to help fund a calendar app called Arrange, Ms. Dillie decided to go for it. She invested $5,000.“I probably needed someone to give me permission to play the game because investing always seemed so elusive,” she said.Karin Dillie, 33, an executive at an e-commerce company in New York, said she hadn’t realized that she could be an angel investor.Elianel Clinton for The New York TimesMs. Dillie has since joined several informal investing groups, listened to podcasts and set up news alerts for terms like “preseed funding” (the earliest money a start-up usually raises from outside investors). She said she was motivated to support female founders, who raise less than 2 percent of all venture funding.In London, Ivy Mukherjee, 28, a product designer, and Shashwat Shukla, 30, a private equity investor, also started putting money into start-ups together this year to learn new skills and network with others in the industry. They said they were proceeding cautiously, with checks of $2,000 to $5,000, knowing they could lose it all.“If we happen to make our money back, that’s good enough for us,” Mr. Shukla said.The new angels have the potential to transform a venture capital industry that has been stubbornly clubby. They could also put pressure on bad actors in the industry who get away with things ranging from rudeness to sexual harassment, said Elizabeth Yin, a general partner at Hustle Fund, a venture capital firm. The firm also created Angel Squad and shares deals with its members.“More competition brings about better behavior,” Ms. Yin said. (In addition to investing in start-ups, Hustle Fund sells mugs that say “Be Nice, Make Billions.”)The angel boom has, in turn, created a miniboom of companies that aim to streamline the investing process. Allocations, the start-up run by Mr. Advani, offers group deal making. Assure, another start-up, helps with the administrative work. Others, including Party Round and Sign and Wire, help angels with money transfers or work with start-ups to raise money from large groups of investors.AngelList, which has enabled such deals for over a decade, has steadily expanded its menu of options, including rolling funds (for people to subscribe to an angel investor’s deals) and roll-up vehicles (for start-ups to consolidate lots of small checks). Mr. Kohli said his company runs a “fund factory” that compresses a month of legal paperwork and wire transfers into the push of a button.Still, getting access to the next hot tech start-up as a total outsider takes time.Ashley Flucas, 35, a real estate lawyer in Palm Beach County, Fla., began investing in start-ups three years ago. She said it was a chance to create generational wealth, something underrepresented people did not typically get access to.“It’s the same people doing deals with each other and sharing in the wealth, and I’m thinking, how do I break into that?” said Ms. Flucas, who is Black.But it took cold emails, research, building her reputation on AngelList and participating in three angel investing fellowships to get access to deals and construct a portfolio of more than 200 companies, she said. Things especially took off this spring after she invested in several companies that had just graduated from Y Combinator, the start-up accelerator. Some of her investments have appreciated enough on paper to return more than she has put in.Now, Ms. Flucas said, she is getting asked to join venture firms or raise her own fund. “The seeds I planted at the beginning of the journey are bearing fruit,” she said.“It’s the same people doing deals with each other and sharing in the wealth, and I’m thinking, how do I break into that?” Ms. Flucas said.Ysa Pérez for The New York TimesSome longtime angels have cautionary words for those just beginning their start-up investments. Aaron Houghton, 40, an entrepreneur, said he lost $50,000 that he had invested in a friend’s start-up in 2014, along with a $10,000 deal that went belly-up. He sarcastically called the losses a “really nice, somewhat inexpensive wake-up call” that showed he needed to spend more than a few hours researching companies before investing.But that isn’t always an option in today’s frenzied market. Mr. Houghton said he had recently been given little more than a pitch presentation, a high price tag and a few hours to decide whether he was in or out of an investment.“It’s all so hot right now,” he said.In the recent Angel Squad class, one participant asked if investors should be concerned about valuations. Mr. Bahn said it was up to each investor, but he added that there was an upside to the skyrocketing prices. Some tech companies were becoming huge, worth $10 billion or more on paper, creating bigger returns for investors who got in early. That was the exciting thing about investing in young start-ups, he said.“The alpha,” he said, referring to an investor’s ability to beat the broader market, “just continues to grow.” More

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    Americans Are Retiring Earlier Because of Pandemic

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    After years in which Americans worked later in life, the latest economic disruption has driven many out of the work force prematurely.Dee Dee Patten, 57, hadn’t planned to retire early. But when the coronavirus-induced lockdown took hold in 2020 and business dried up at the mechanical repair shop that she and her husband, Dana, owned in Platteville, Colo., they decided to call it quits.Mildred Vega, 56, had even less choice in the matter. Soon after she lost her job because of a restructuring at a Pfizer office in Vega Baja, P.R., the pandemic foreclosed other options.Mrs. Vega and the Pattens are three of the millions of Americans who have decided to retire since the pandemic began, part of a surge in early exits from the work force. The trend has broad implications for the labor market and is a sign of how the pandemic has transformed the economic landscape.For a fortunate few, the decision was made possible by 401(k) accounts bulging from record stock values. That wealth, along with a surge in home values, has offered some the financial security to stop working well before Social Security and private pensions kick in.But most of the early retirements are occurring among lower-income workers who were displaced by the pandemic and see little route back into the job market, according to Teresa Ghilarducci, a professor of economics and policy analysis at the New School for Social Research in New York City.“They might call themselves retired, but basically they are unemployed and in a precarious state,” Ms. Ghilarducci said. Economic downturns typically induce more people to leave the work force, but there has been a faster wave of departures this time than during the 2008-9 recession, she said.After analyzing data from the Bureau of Labor Statistics and the University of Michigan Health and Retirement Study, Ms. Ghilarducci found that among people with incomes at or below the national median, 55 percent of retirements recently were involuntary.By contrast, among the top 10 percent of earners, only 10 percent of exits were involuntary. “It’s a tale of two retirements,” Ms. Ghilarducci said.For the Pattens, most of their company’s revenue came from inspecting school buses in the northern part of Colorado. When schools pivoted to remote learning in March 2020, the business stopped receiving its usual traffic.“On average, we had 10 to 20 buses a day that we brought in and inspected and then put them out on the road for the kids,” Mrs. Patten said. “When spring break hit, we didn’t see another bus.”When schools reopened, they had trouble finding a mechanic. In July, they managed to hire one, but he left almost immediately. And the work was too physically demanding for the couple to carry on by themselves, Mrs. Patten said.They sold their shop and equipment, along with their house, putting some of the money into a retirement account. When a separate certificate of deposit account matures, they plan to buy a home in Denver. Since Mr. Patten is 62, he applied for Social Security — but his monthly benefits will be far lower than what he would have received if he had waited a few more years.Mrs. Patten with a photo of her old home and business. When schools pivoted to remote learning, the Pattens’ business of inspecting school buses stopped.Matthew Staver for The New York TimesThe shift toward early retirement reverses a long-running trend. The share of Americans over 65 still active in the work force is 50 percent higher than it was 20 years ago. Some are working longer because they have to and can’t afford to retire, while others are living longer and in better health and want to keep going into the office.Early retirements not only reflect the pandemic’s economic impact but may also hold back the recovery, because retired workers tend to spend more cautiously. They will also be drawing on Social Security sooner rather than paying into the program and bolstering its long-term viability.“Older generations tend to earn more and lift spending,” said Gregory Daco, chief U.S. economist at Oxford Economics. With this group out of the labor force in greater numbers, “it’s more of a negative than a positive for the economy.”In the 15 months since the pandemic began, about 2.5 million Americans have retired, Mr. Daco said. That’s about twice the number who retired in 2019, which means there are essentially 1.2 million fewer people in the work force over the age of 55 than would otherwise be expected.The abrupt increase in retirements — as reflected in the way people describe their work status in monthly government surveys — has also fallen unequally among groups of different educational and ethnic backgrounds.A November 2020 study by the Pew Research Center found that the share of Americans born between 1946 and 1964 with just a high school diploma who are retired rose two percentage points from the prior February, double the proportion among those with a college degree.What’s more, the share of the Hispanic population in this age group who are retired jumped four percentage points, compared to one percentage point increases for white and Black boomers.Hispanic workers, especially Hispanic women, were hit disproportionately hard by the downturn in leisure and hospitality employment, said Richard Fry, a senior researcher at the Pew Research Center.In terms of older workers over all, “it’s anyone’s guess whether they will return,” Mr. Fry said.The proportion of adults 16 or older who are employed or looking for a job, now at 61.6 percent, has been slipping for years, falling from 66 percent in 2009 to 63 percent in early 2020. But it dived when the pandemic hit and has been slow to recover.The aging of the population, along with the tendency of less educated workers to drop out of the work force amid stagnating wages and fewer opportunities in higher-paid fields like manufacturing, has also hurt labor participation.And evidence is accumulating that more older workers are eyeing the exits.A recent household survey by the Federal Reserve Bank of New York found that the average probability of working beyond age 67 was 32.9 percent, equaling the lowest level since researchers began asking the question in 2014. In November 2020, the figure was 34.9 percent.The premature retirement of millions of workers sensing a lack of opportunity may seem puzzling when many businesses are scrambling to find employees — a conundrum that has forced economists to rethink the workings of the labor market.Part of the answer appears to be a mismatch of skills between available workers and jobs. In addition, salaries in many open positions have remained too low to lure people from the sidelines.If the newly retired workers don’t return, the labor market could get a lot tighter, heightening the risk that the Federal Reserve will need to raise interest rates to tamp down inflation, said Carl Tannenbaum, chief economist at Northern Trust in Chicago.“We already have a challenge of keeping labor force growth at decent levels,” he said. “Immigration is down, the birthrate is down, and it’s much harder for the economy to maintain its productive potential if all these folks stay retired.”Mrs. Vega said she might take a part-time job once the pandemic ebbs enough for her to comfortably return to an office setting, but she plans to spend the rest of her time with her parents and children.She qualified for a Pfizer pension available to retirees 55 or older. Though early retirement wasn’t in her plans, she is trying to make the best out of her situation.“I loved my job, but I don’t miss the stress levels,” she said. “The constant stress affects my mental and physical health. The pandemic made me realize how much time my job was taking away from me to spend with my family.”The Pattens feel unnerved with the sudden change after 22 years of nonstop work, but they, too, are looking at the upside.“We both know that, at our age, it was probably the best thing for us,” Mrs. Patten said. “We will get used to all of this time on our hands. Our plan is to volunteer, travel and look for a new place to live after 30 years on the old homestead.” More

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    Ron Lieber: Invest in the People You Love

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    If you’re emerging from the pandemic in better financial shape than before, ask yourself this: What will you spend to renew your bonds, and how will you do it?In early 2013, three years after the unexpected death of her husband, Chanel Reynolds posted a warning to those who had neglected the bonds that ought to matter most.She had started a website to help people avoid a predicament she had found herself in after he died. His will had an executor but didn’t have signatures, and she didn’t know many of his passwords. The resulting red tape seemed as if it would suffocate her.Her message to others, who might not know whom to put down in their will as a guardian for a child or an overseer of their estate, was this: “If you are at a loss for whom to name, get out there and tighten up your friends and family relationships. Find some better friends. Be a better friend. This is everything. This means everything.”As many of us stumbled toward the light these last few months, I kept returning to her entreaty. Americans who have been lucky enough to keep their jobs have saved more money this past year than they had in decades. So it seems wise — urgent, even — to plot the best way to invest in our ties to other people.Last week, when discussing the spare money that so many want to spend so quickly, I focused on the what — bigger and better emergency funds, and experiences rather than things. This week, I asked people who spend their professional lives thinking about relationships to address the who.For all of Ms. Reynolds’s organizational foibles, she did not fail at friendship. When her husband, José Hernando, was near death in the hospital in 2009 after he was hit while riding his bicycle, her people came running. “I was on a sinking ship, shot out the few flares that I had and was hoping that they would come find me,” she said. “And they did.”You can’t buy that kind of support at any price. But you can invest in it. In his book “Consolations: The Solace, Nourishment and Underlying Meaning of Everyday Words,” the poet and walking-tour leader David Whyte observes that the ultimate touchstone of friendship is “the privilege of having been seen by someone and the equal privilege of being granted the sight of the essence of another.”It is hard to bear witness through Zoom. “I’m already plotting and planning to see all my friends in Britain and Europe,” Mr. Whyte told me this week, from his home on Whidbey Island in Washington.This will not be cheap, for him or anyone else trying to snap up scarce airline seats. But it is restorative in a way we may not always realize. “You can see, through a very good friend, a bigger version of yourself,” he said. “They became friends with you because they saw something more than what you, perhaps, see every day.”Erica Woodland, a licensed clinical social worker and the founding director of the National Queer & Trans Therapists of Color Network, put out a plea for people to remember how extended circles of more loosely affiliated people rallied around one another these past 15 months. Mutual aid networks sprang up to provide food and help in neighborhoods all over the country.Maybe you had no need, didn’t know about the networks, or didn’t or couldn’t pitch in or form your own group for whatever reason. But for others, they were essential.“We don’t expect folks outside of our community to actually care for us,” Mr. Woodland said. “There is a practice of care that is not new to our communities but became more interwoven thanks to the intersecting challenges of 2020.”These organizations are exemplary not just because they facilitate the basics of care and feeding. They also help people navigate confounding systems, like overloaded state unemployment departments.And it is this mutuality that can make any money you spend within your own friend or family circles feel less like an awkward act of charity. Instead, it becomes more like a reciprocal act — or an investment in your own future care. I learned this intimately on the receiving end, during my own period of grief this year, when members of my synagogue kept showing up to feed my family and me.There are a number of ways to put all of this into practice. If you’re trying to get the gang back together someplace far away, as Mr. Whyte is with his pals in Europe, you could offer to pay for a shared rental house if you’re the most flush.Elizabeth Dunn, the co-author with Michael Norton of “Happy Money: The Science of Happier Spending” and the chief scientist of a company called Happy Money, suggested a more subtle twist: If you’re trying to reconnect with a long-lost friend who has less money than you, just tell that person you’re going to get on the plane for a visit. It’s the type of prosocial investment in others that Professor Dunn’s research has shown will pay off in your own contentedness.During the pandemic, Ms. Reynolds, who lives in Seattle, paid for a lawyer to help relatives of a deceased friend from Minneapolis who were trying to navigate the legal process after her death. “Going through probate alone is like walking through a country where they speak a language that you have never even heard before,” she said.Having the money to pay to help friends is not a requirement, though. In the years after her husband’s death, Ms. Reynolds found herself easily remembering the birthdays and death anniversaries that people close to her were marking — or was just more inclined to text when she was thinking of them.“One version of this is ‘I have more, so I will spend more to care for the people I love,’” said Mr. Woodland, the social worker who runs the therapist network. “I also think it’s almost easier to spend money than to spend time, to say that ‘I prioritize you and want to know you in a more intimate way.’”Among couples with children, time has often been its own fraught asset these 15 months. Even if you won back your commuting time, you may have been stuffed in a home with two adults working and children who needed all manner of supervision. It has been a form of quality time, perhaps, but maybe not precisely what you needed to renew or reinforce your romantic bonds.To people seeking to shore those up, Eve Rodsky offers a counterintuitive possibility: Be as thoughtful about spending time apart as you are about time together. Ms. Rodsky, the author of “Fair Play: A Game-Changing Solution for When You Have Too Much to Do (and More Life to Live),” learned this from surveying 1,000 members of the community that she has built around her work.Many people have changed during the pandemic. Maybe your partner has in ways you haven’t even recognized. So offering time — and a budget — toward whomever that person wants to become is its own act of service.“The permission to be unavailable to each other is the investment that they have in each other,” Ms. Rodsky said in a recent interview. Now, she and her husband each have a weekend day to themselves; she has Saturday this week.This year, Ms. Reynolds got engaged, which set off a whole new round of bond-forging investments, including making plans to buy a home with her intended.Given her experience in 2009, she took her own advice about making sure that some of the most important things in life could persist even if the worst happened to her next husband.“I said — in what I hoped was a beautiful and loving way — that if he dies before the mortgage is paid off, that I needed him to up his life insurance to cover his share,” she said. “And he said, ‘OK.’ It was kind of amazing.” More

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    Why Finance Gurus Switched Their Bait From Millions to Thousands of Dollars

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    Their YouTube videos went from promising proprietary secrets for achieving wealth to any little update on the stimulus. And the viewers came rolling in.“Mark your calendar, there’s a big day coming!” On Jan. 9, with the dream of $2,000 stimulus checks not yet deflated, the Southern California real estate broker Kevin Paffrath uploaded a video to his “Meet Kevin” YouTube channel, updating viewers on the status of the stimulus. Sitting before an array of glowing LED screens and pop-culture paraphernalia (a star from the Super Mario games, Thor’s hammer from the Marvel movies), Paffrath, a wiry white man in his late 20s with a close-cropped beard, leaned into the lights and greeted his viewers. Using the earnest eye contact of a veteran YouTuber, he ran through a summary of the situation: the interests at play in Congress, the details of proposed bills, the tangled qualifications for relief. Out of focus, over his shoulder, the monitors reminded us to visit his “Meet Kevin School” and sign up for courses to “Master Stocks”; at the end of the video, we are invited to “#BecomeMore” through investing, to subscribe to his channel and, of course, to smash that “like” button.This video would be just one of dozens about potential stimulus packages posted that day, even that evening — many of them from finance influencers like Paffrath, whose pitches normally involve real estate, stocks or airline points. A year ago, they were promising to share their proprietary secrets for achieving wealth, staging monologues in the drivers’ seats of luxury cars and poolside on cruise ships. Brian Kim, a Chicago accountant, had previously been explaining tax preparation, including how high-earners could reduce their obligations; Ramy Wahby once raised a complimentary glass of Champagne from a first-class airplane seat and offered to explain how he used airline rewards to get there. Now all that had changed. The thumbnails on their channels may have kept their usual style — buffoonish facial expressions, glaring yellow text — but it was videos about stimulus checks that came to dominate their feeds. They vied for the role of soothsayer before a rapt audience with a seemingly insatiable demand for information about when the government would offer financial relief.Personal-finance influencers turned out to be naturals for this part. They were already performing as the shamans of a core American mythology: that though the world may be divided into haves and have-nots, the only thing standing between you and life among the haves was some arcane savvy. The influencers were exactly like you, they promised; it’s just that they had cracked the code and would, in their magnanimity, break a taboo to share its secrets with you. (Simply sign up for their classes, buy their books and use the appropriate coupon codes at checkout.) Their shift to stimulus content was sudden and significant, but it was merely a change to the type of knowledge in which their enlightened-everyman personas were trained: Instead of decoding real estate or cryptocurrencies, they opined on means-testing and party politics.In Paffrath’s case, stimulus-check updates began doubling his other videos in view counts; one update became the most popular video on his channel, with 1.1 million views. For other finance gurus, these updates took over their output entirely. Their audiences grew dramatically, but the shift required a tacit admission: that the people they had been teasing with paths to affluence had ended up sitting around with everyone else, hoping for a check.Viewer demand didn’t come from upward-bound entrepreneurs after all, it seemed, but rather from those enduring the kind of precarity where the precise timing of a $2,000 deposit could mean keeping the lights on or the difference between housing and eviction. These audiences didn’t want yesterday’s news, or even this morning’s; the slightest budge toward progress was meaningful and welcome. So the output of YouTube updates was relentless: Every hour, a glut of new videos provided the latest on whether relief was coming and how many dollars of it were likely to arrive.The audiences they had been teasing with paths to affluence had ended up sitting around with everyone else, hoping for a check. Paffrath typically uploaded two videos each day. Some content makers uploaded three or more. There was, often, simply not much to say. The key to collecting views was simply to serve as foil to what the audience saw as an infuriating lack of urgency from Congress and the president. The YouTubers tended to mimic the calm, authoritative style of cable-news anchors, but other than reading other peoples’ reporting off printer paper, there was little to do beyond trying to match their viewers’ exasperation. The visuals, comically, featured the same techniques used to press investment schemes: stock images of fanned-out $100 bills and tantalizing click bait like “$4,200 STIMULUS!”Paffrath has a charisma that cuts through all this. He’s exceptionally talented at talking to a camera, a natural salesman. But when he turns to a flowchart breaking down the Biden stimulus proposal, what might even be sincerity leaks out. Judging by the ad hoc community formed in his comments sections, his viewers appreciate it.Then you remember the neon advertisements behind him and the exhortations to go “from $0 to millionaire and beyond.” That Paffrath, a multimillionaire landlord who once extolled the virtues of misleading tenants and vigorously refusing to rent to people with suboptimal credit scores, has come to be an exasperated avatar for emergency economic relief for the neediest — most of whom would be spending it on rent — feels deeply, typically American. A CNBC profile reported that Paffrath actually makes most of his money not from the industry he built his status on, not from investing or even from buying rental properties, but via his audience itself, from his YouTube channel’s advertising revenue and affiliate programs..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.This confluence of the sincere and the cynical recurs constantly in stimulus-check YouTube. It serves a uniquely American need: Even at the height of desperation, nothing can ever dispel the mirage that riches are available to anyone with the work ethic and (if you insist) a little savvy. In the days leading up to the relief bill becoming law, Paffrath’s stimulus content remained his most popular product; soon he was posting videos calming those members of his audience for whom the $1,400 deposit had not yet arrived. Can the path forward for someone like Paffrath really lead back to making videos from the driver’s seat of a Tesla, promising to make viewers rich? Or will what he has seen during this stint — months of tending to a public desperate for news of a couple thousand dollars — open his eyes to the possibility of being just another rich person hustling the poor?Adlan Jackson is a writer from Kingston, Jamaica, who writes about music in New York. This is his first article for the magazine. Source photographs: Screen grabs from YouTube More

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    On the Post-Pandemic Horizon, Could That Be … a Boom?

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesVaccine RolloutSee Your Local RiskNew Variants TrackerCredit…Maxime MouyssetSkip to contentSkip to site indexOn the Post-Pandemic Horizon, Could That Be … a Boom?Signs of economic life are picking up, and mounds of cash are waiting to be spent as the virus loosens its grip.Credit…Maxime MouyssetSupported byContinue reading the main storyFeb. 21, 2021, 3:00 p.m. ETThe U.S. economy remains mired in a pandemic winter of shuttered storefronts, high unemployment and sluggish job growth. But on Wall Street and in Washington, attention is shifting to an intriguing if indistinct prospect: a post-Covid boom.Forecasters have always expected the pandemic to be followed by a period of strong growth as businesses reopen and Americans resume their normal activities. But in recent weeks, economists have begun to talk of something stronger: a supercharged rebound that brings down unemployment, drives up wages and may foster years of stronger growth.There are hints that the economy has turned a corner: Retail sales jumped last month as the latest round of government aid began showing up in consumers’ bank accounts. New unemployment claims have declined from early January, though they remain high. Measures of business investment have picked up, a sign of confidence from corporate leaders.Economists surveyed by the Federal Reserve Bank of Philadelphia this month predicted that U.S. output will increase 4.5 percent this year, which would make it the best year since 1999. Some expect an even stronger bounce: Economists at Goldman Sachs forecast that the economy will grow 6.8 percent this year and that the unemployment rate will drop to 4.1 percent by December, a level that took eight years to achieve after the last recession.“We’re extremely likely to get a very high growth rate,” said Jan Hatzius, Goldman’s chief economist. “Whether it’s a boom or not, I do think it’s a V-shaped recovery,” he added, referring to a steep drop followed by a sharp rebound.The growing optimism stems from the confluence of several factors. Coronavirus cases are falling in the United States. The vaccine rollout, though slower than hoped, is gaining steam. And largely because of trillions of dollars in federal help, the economy appears to have made it through last year with less structural damage — in the form of business failures, home foreclosures and personal bankruptcies — than many people feared last spring.Lastly, consumers are sitting on a trillion-dollar mountain of cash, a result of months of lockdown-induced saving and successive rounds of stimulus payments. That mountain could grow if Congress approves the aid to households that President Biden has proposed.When the pandemic ends, cash could be unleashed like melting snow in the Rockies: Consumers, released from their cabin fever, compete for hotel rooms and restaurant tables. Businesses compete for employees and supplies to meet the demand. Workers who were sidelined by child care responsibilities or virus fears are drawn back to the labor force by suddenly abundant opportunities.“There will be this big boom as pent-up demand comes through and the economy is opening,” said Ellen Zentner, chief U.S. economist for Morgan Stanley. “There is an awful lot of buying power that we’ve transferred to households to fuel that pent-up demand.”That vision is far from a certainty. Delays in the vaccine rollout could stall the recovery. So could new strains of the virus that render vaccines less effective. A political standoff in Washington could hold up aid for unemployed workers and struggling businesses. And even if the economy avoids all of those traps, there is unlikely to be a single moment when public health officials give an “all clear”; it could be years before people pack into bars and sports stadiums the way they did before the pandemic.A boom also carries risks. In recent weeks, prominent economists including Lawrence H. Summers, a Treasury secretary under President Bill Clinton, have warned that Mr. Biden’s relief proposal is too large and could lead the economy to overheat, pushing up prices and forcing the Federal Reserve to bring the party to a premature end. Fed officials have largely dismissed those concerns, noting that the consistent problem in recent decades has been too little inflation rather than too much.Other economists fear that the rebound will primarily benefit those at the top, compounding inequities that the pandemic has widened.“We may see a boom in the future, but that may just leave some people even further behind, or may give them a trickle when they need a waterfall,” said Tara Sinclair, a George Washington University economist.But for many businesses and households that have struggled to stay afloat during the pandemic, those concerns pale in comparison with the opportunities that a boom could provide.The Coronavirus Outbreak More

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    How to Win at the Stock Market by Being Lazy

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    #masthead-section-label, #masthead-bar-one { display: none }GameStop vs. Wall StreetRobinhood’s C.E.O. Under the GunGameStop Investors Are TestedYour TaxesReader’s GuideAdvertisementContinue reading the main storyUpshotSupported byContinue reading the main storyHow to Win at the Stock Market by Being LazyThe drama of GameStop is misleading; the surer path to wealth is extremely boring.Feb. 4, 2021, 5:00 a.m. ETMany parts of the GameStop story — the wild swings over the last couple of weeks in shares of the video-game retailer and a few dozen other out-of-favor stocks — are not exactly new.Long before Reddit, the Yahoo message boards of the late 1990s democratized the expression of strong opinions about stocks (they didn’t call them “stonks” in those days).Short squeezes and market-cornering were maneuvers well before Randolph and Mortimer Duke — the fictional securities-fraud-committing villains of the 1983 comedy “Trading Places” — were greedy little boys.What has been weird to watch, if you’ve spent your life plodding away at building a retirement fund, reading books about personal finance, weighing fee structures and tax implications of various investment vehicles, is the mix of righteous anger and gleeful anarchism driving it all. Many of the traders driving the GameStop mania in recent days want to strike it rich and bring down what they view as a corrupt, rigged system along the way.Yes, there is abundant greed and venality on Wall Street. But the reality is that the stock market has also offered a path for ordinary people to build wealth — and more so in the last generation than ever before. You haven’t needed to burn down the system. All you’ve had to do is take the laziest, simplest approach to stock investing imaginable, and have a little patience.Ever since Vanguard introduced its S&P 500 index fund 45 years ago, ordinary investors have been able to invest in broad stock indexes in a tax-efficient manner, with extremely low fees. Any schlub on the street can put money to work harvesting a small share of the earnings of hundreds of leading companies, led by some of the sharpest corporate executives on earth and their millions of employees. You haven’t had to do much of anything![embedded content]Your returns would have been strong even if you had terrible timing. Suppose you had received a $10,000 windfall in March 2000, the peak of the dot-com bubble and a moment at which we can all agree stocks were overpriced. Yet even with such unfortunate timing, if you invested that money in a low-fee S&P 500 index fund and reinvested dividends for the last 20 years, your $10,000 would have turned into nearly $28,000 by the end of this past month — a 5 percent annual return when adjusted for inflation.And that was the single worst month in decades to begin investing. On average, if you were to select a month between 1990 and 2019 to begin investing, your annualized return through January 2021 would have been 9.8 percent after inflation. Simply for having the patience to sit on your hands.(Those returns would have been reduced by a few hundredths of a percentage point by mutual fund fees, and more by taxes if the money was not in a tax-advantaged account.)It gets better. Most people don’t receive and invest a single windfall, but rather chip in savings gradually.So suppose you had begun saving $100 a month at the start of the year 2000 — again, near the peak of a bubble — and had continued doing so ever since, increasing your savings along with inflation, putting the money into an S&P 500 index fund and reinvesting dividends. Over the last 21 years, you would have contributed about $32,500, yet your portfolio at the end of January would be worth more than $103,000.You achieved a 10.5 percent annualized rate of return, because while some of your savings was invested at market peaks, your slow-but-steady approach ensured you were also buying shares during periods when the market was depressed, as in 2002 and 2009.As recently as the 1970s, this strategy would have been hard to carry out. Modern index funds didn’t exist until John C. Bogle invented the concept for Vanguard in 1976. Mutual funds in the past had much higher fees than they do today. Buying lots of different individual stocks would have required high brokerage fees as well, making it all but impossible for people with modest savings.Moreover, the advantages of a “buy the index” approach were not as well understood until recent decades. Academic finance research in the second half of the 20th century had a series of findings about the efficiency of markets that, taken together, imply that the best long-term investing strategy for most people is simply to put money into the market as a whole and minimize fees and taxes. Personal finance advisers and commentators widely embraced this finding, with adjustments that depend on the investor’s risk preferences, particularly investing some slice of the portfolio in safer bonds.The result: In recent decades, following the most obvious conventional wisdom of how to invest has been possible even for small investors.If the market is rigged, it is rigged in a way that allows people to achieve a substantial return on their money by watching television or playing golf or taking a nap, rather than by spending their hours scouring message boards or developing elaborate theories of how to enact revenge on perfidious hedge funds or learning what the gamma of an option is.Think of Corporate America — the hundreds of large companies in which you are investing if you put your money into index funds — as a sports franchise.There are people who try to make money by betting for or against the franchise. They may put in lots of effort calculating proper odds, and once in a while may win big, turning a small wager into a big score. The very best at this — the sharps, in sports betting terminology — will even win more than they lose and be able to make a living out of it.But over all, the system is a zero-sum game, and most people who play are going to lose money once the sports books’ cut is accounted for. If you decide to try to make a fortune by betting on professional sports, you might even conclude that the system is rigged against you, because in a sense it is. The consistent winners are going to be highly skilled sports bettors who have been doing this a long time; and the casino, which takes a share of every pot.In this analogy, those fortune-hunting newcomers are the people who have taken to trading options on GameStop and other stocks in recent months.Then there are people who work hard to make that franchise operate: the team executives, the coaches, the players. They put in long hours to make the franchise a success, and while part of their pay is linked to the franchise’s success, the bulk of their compensation is cash in exchange for their labor. They can be well compensated, but theirs are rare talents and they have to work really hard.They are the equivalent of the executives and employees of the companies whose stock shares trade on public exchanges.Then there are the passive owners of the sports franchise. For instance, the owner of a minority share who doesn’t even have to help hire and fire team presidents. Other people do all the work of running the team. These owners just enjoy the benefits of earnings, year after year.It is not without risk: The franchise might sign an overpriced free agent, or ticket sales might collapse because of a pandemic. But if they are patient, they can expect that their investment will eventually pay off. And that is true even though they spend their time doing something other than examining point spreads and drawing up plays.There are no guarantees in life. Some people who are aggressively trading meme stocks will presumably walk away with significant profits. Index funds won’t generate the kind of overnight payoffs that buyers of GameStop options are evidently looking for. And the decades ahead may offer lower returns to stock investors than the decades just past.But the extraordinary payoffs of being a passive stock market investor are not something to overlook. When you are offered a free lunch — a reasonable expectation of good returns with zero effort and only moderate risk — it makes sense to eat it.Successful investing is not nearly as exciting and potentially painful as trading options on GameStop or sliding down the steps of Federal Hall on Wall Street. But then, it isn’t trying to be.Credit…Kena Betancur/Agence France-Presse — Getty ImagesAdvertisementContinue reading the main story More

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    Will an Overdraft Balance Impact Your Stimulus Check?

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    AdvertisementContinue reading the main storySupported byContinue reading the main storyTheir Finances Ravaged, Customers Fear Banks Will Withhold Stimulus ChecksBanks have the power to decide whether to let overdrawn customers gain access to the stimulus money being deposited into their accounts, but they have taken different approaches.Morgan Banke was hoping her bank would waive her overdraft fees so she could tap her stimulus funds, but the bank’s officials said they would not.Credit…Narayan Mahon for The New York TimesDec. 31, 2020Updated 5:52 p.m. ETSince August, Morgan Banke has had just enough money in her bank account every month to pay either her rent or her car insurance. The unemployed mother of two has relied on her bank, the Dupaco Community Credit Union in Dubuque, Iowa, to cover the difference. But each time she makes that choice, the bank charges her $28 in overdraft fees. Her account is $780 in the red.When she heard that the federal government was working on a fresh stimulus package, Ms. Banke called Dupaco to ask whether it would waive the outstanding fees. If it did so, she hoped, she could tap the stimulus funds. Bank officials said no.Ms. Banke, who has been selling her possessions on Facebook to make ends meet, doesn’t know if she will get any of the money. “When we were told we were getting another stimulus, I was excited,” she said. Now, she is dejected.As 2020 comes to an end, the $600 promised by the federal government — poised to begin appearing in bank accounts this week — is welcome news to millions of needy Americans whose finances have been devastated after nine months of economic crisis wrought by the coronavirus pandemic.But for people whose bank accounts are overdrawn, whether they get their hands on the money depends on what the country’s banks — which, as in Ms. Banke’s case, also are the creditors on overdrawn accounts — decide to do. Banks hold this power because, for a vast majority of people, the stimulus money will be deposited in the same bank accounts in which they also receive tax refunds.In the past week, the largest United States banks have pledged to temporarily zero out their customers’ negative balances so they can get access to their stimulus money and put it toward whatever expense seems the most pressing. Negative balances typically include the various fees that banks tack on to customers’ accounts for letting the customers withdraw more money than they have.Representatives of Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said the banks would be crediting customers’ accounts for roughly a month after the money arrived. After that, the banks will revert the accounts to their previous overdrawn status. It was a reprise of the relief they offered their customers when the first round of stimulus money was distributed in April.Large regional banks, including Fifth Third Bancorp, Truist (the institution formed by the combination of SunTrust and BB&T), PNC Financial Services and US Bank, are following suit.However, some regional and community banks — which often serve areas where there is little competition, including poor neighborhoods and rural communities — are pursuing different approaches. Some smaller banks say they are considering customers’ requests on a case-by-case basis.Citizens Bank, a regional bank catering to customers mostly in the Northeast, said it would temporarily zero out all customers’ accounts, but only if the customers called and specifically requested it. A Citizens spokesman said the bank would email customers a reminder that the option was available to them.Some banks, including Chase, have pledged to temporarily zero out their customers’ negative balances, so they can get access to their stimulus money.Credit…John Taggart for The New York TimesThe disparate approaches of smaller banks often put the onus on customers to figure out what options they have — when many are already stressed out by the enormous financial challenges they face. Consumer income fell in November; layoffs continue, particularly in hard-hit industries like restaurants; and the unemployment rate remains high.Dupaco, the credit union where Ms. Banke, 25, has had an account for six years, ever since she started working as a bartender in Dubuque, doesn’t have a blanket policy for customers. “We work with members on an individual basis to address whatever situation they might have,” Dave Klavitter, a Dupaco spokesman, said. He declined to address Ms. Banke’s case.Having waived Ms. Banke’s overdraft fees on three earlier occasions, bank officials were unwilling to grant her a waiver yet again when she called them recently to ask for one, Ms. Banke said. Although the bank hasn’t said she won’t get the $600 in stimulus funds, Ms. Banke, who lives in Madison, Wis., remains worried. She can’t work because her 5-month-old son has a respiratory illness. She plans to ask Dupaco if it can zero out her balance temporarily.Temporary forgiveness from banks might not be enough, especially for those in the worst financial straits. Since the coronavirus outbreak hit, one in four people in the United States has struggled to pay monthly bills, according to a study released in late September by the Pew Research Center. One in three has dipped into savings or retirement accounts. One in six has borrowed from family or friends to cover bills.Bank fees are adding extra pain to some Americans’ pandemic-induced woes. In 2019, according to the Center for Responsible Lending, big banks collected more than $11 billion in overdraft fees from their customers, with 9 percent of customers paying more than 80 percent of the fees. For the first nine months of 2020, customers of big banks paid $6 billion in overdraft fees, according to Rebecca Borné, a researcher at the nonprofit, which advocates better treatment of consumers by financial institutions.The total amount of penalty fees that bank customers paid in 2020 could end up being lower than last year, but because such a large amount of the penalties are paid by such a small subset of customers, the impact of those fees on their finances will most likely be far worse this year.Aside from the temporary truces some banks have made with their customers around the stimulus checks, banks have not modified their overdraft policies during the pandemic, Ms. Borné said. “Charging unreasonably high fees, multiple fees per day, extended fees and other practices that manipulate the charges to maximize the fees — those practices hurt those struggling the most,” she said.On Christmas Eve, Andrew Shorts, an artist living in Ogden, Utah, was scrambling to pay his electricity bill so that he would not lose power and heat. Mr. Shorts, who makes murals and graphic design projects for local businesses, has been locked out of his account at Zions Bank, a Salt Lake City-based lender, since a rapid fire of automatic deductions for household bills this fall pushed his balance $150 into negative territory.When he called Zions two days before Christmas, a representative told him that he would probably have to pay the bank what he owed it and settle for the remainder. The bank changed its policy after President Trump signed the stimulus bill on Tuesday. A spokesman said Zions would zero out all negative balances of up to $2,000 for 30 days to let customers get their stimulus money.Mr. Shorts described the $600 stimulus payment as “the equivalent of a pool noodle while my wife, child, myself and my now crippled business are drowning in the open sea.” But he still wants the money. In the meantime, he scraped together just enough to pay his electricity bill.On the day Congress passed the latest stimulus legislation last week, Misha Roberts, a 26-year-old student at Ohio State University, could not bring herself to sign into her PNC online account and look up the balance. She knew it was somewhere between $1,200 and $1,700 in the negative, thanks to a combination of bills for basic expenses she could not afford, which were automatically deducted from her account, and overdraft fees.Some banks have closed accounts that have overdrawn balances. A PNC spokeswoman said in cases where accounts had recently been closed, either the I.R.S. would mail the customer a check or PNC would let the customer use a different existing account to receive the money.Ms. Roberts, who wants to be a nurse, is working to pay for college and has already had to drop out several times after running out of money. For two years, she worked overnight shifts as a home health aide, earning $10.50 an hour. But when the pandemic hit, the company sending her out to care for elderly people started to lose clients.“Less hours to go around means less money to go around, and it made my work environment really tense at times,” Ms. Roberts said.She recently quit and now spends weekends cleaning the common spaces, including the gym, communal kitchens, stairwells and lobby, in the apartment building where she lives, making $15 per hour. In an email on Monday, she said of the $600 stimulus: “I really need it or I might be forced to leave school again.”Late on Tuesday, after learning PNC would temporarily zero out customers’ overdrafts, Ms. Roberts finally worked up the courage to look at her balance. But when she tried to sign in, she said, she was blocked. PNC had closed her account.AdvertisementContinue reading the main story More