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Tax Guy: How canceled student-loan and mortgage debts could affect your taxes in the COVID-19 era

In this COVID-19 ravaged economy, debts can pile up beyond a borrower’s ability to repay. However, lenders are sometimes willing to forgive (cancel) debts that are owed by especially beleaguered borrowers. While forgiveness can help you survive financially, it can trigger negative tax consequences. Or maybe not. This column summarizes the most important things borrowers need to know about the federal income tax implications of forgiven debts. Here goes.

Cancellation of debt income is generally taxable

When a lender forgives part or all of a debt, it results in so-called cancellation of debt (COD) income. The general federal-income-tax rule is that COD income counts as gross income that must be reported on your Form 1040 for the year the debt cancellation occurs.

Key point: Lenders are supposed to report forgiven debt amounts to borrowers, and to the IRS, on Form 1099-C (Cancellation of Debt). So, the IRS is supposed to know when debts are forgiven. Do lenders always issue Forms 1099-C when debts are forgiven? Uh, no. Compliance can be spotty.

Beneficial exceptions grant tax-free treatment to eligible borrowers

Thankfully, there are several beneficial exceptions to the general rule that COD income is subject to federal income tax. Here are the ones that are most likely to help beleaguered individual borrowers.

Bankruptcy exception

If debt is forgiven in a Title 11 bankruptcy proceeding, the resulting COD income is federal-income-tax-free. Title 11 encompasses bankruptcy filings under Chapter 7 (so-called liquidations), Chapter 11 (so-called reorganizations), and Chapter 13 (so-called wage earner filings). Legislation passed back in 2005 made it more difficult to file under Chapter 7 and thereby be completely exonerated from unsecured debts such as credit card balances. However, COD income still occurs in some Chapter 7 cases, and COD income still occurs in some Chapter 11 and Chapter 13 cases as well. When that happens, the COD income is federal-income-tax-free.

Insolvency exception

When the borrower is insolvent (meaning with debts in excess of the fair market value of his or her assets) immediately before debt cancellation occurs, the resulting COD income is exempt from federal income taxation to the extent of that insolvency. However, when the debt cancellation effectively makes the borrower solvent (because assets now exceed debts), the COD income is taxable to the extent the borrower is made solvent. The rest of the COD income (if any) is exempt from taxation under the insolvency exception.

Home mortgage exception

An exception for forgiven home mortgage debt was enacted years ago and then extended time after time. The most-recent extension covers qualifying cancellations of home mortgage debt that occur through 2020. Whether this exception will be extended beyond this year depends on our beloved Washington politicians. In any case, you need not be bankrupt or insolvent to take advantage of this deal — which allows an individual to have up to $2 million of federal-income-tax-free COD income from forgiven qualified principal residence debt. That means debt that was used to acquire, build, or improve your main residence and that is secured by that residence. Refinanced debt can also qualify for this exception to the extent it replaces debt that was used to acquire, build, or improve your principal residence. You must reduce the tax basis of your residence (but not below zero) by the amount of COD income that you are allowed to treat as federal-income-tax-free under this exception.

Warning: This home mortgage exception is not available for COD income from forgiven second mortgages, HELOCs, vacation home mortgages, or rental property mortgages.

Deductible interest exception

To the extent COD income consists of unpaid interest that was added to your loan principal and then forgiven, any forgiven interest that you could have deducted — if you had paid it — is exempt from federal income taxation. This exception often comes into play with forgiven principal residence mortgage interest, vacation home mortgage interest, and rental property mortgage interest.

Seller-financed debt exception

When COD income is from seller-financed debt (meaning mortgage debt owed by you to the seller of property that you purchased with the seller’s assistance), the COD income is exempt from federal income taxation. However, your tax basis in the property must be reduced by the amount that you are allowed to treat as tax-free under this exception.

PPP loan exception

The rules for forgiveness of SBA-supervised Paycheck Protection Program (PPP) loans authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) have been a moving target, and future legislation may create more movement. Meanwhile, here is what we know right now after the Paycheck Protection Program Flexibility Act of 2020 (PPPFA) became law on June 5.

* According to the original CARES Act rules for PPP loans, no forgiveness was allowed unless the borrower spent at least 75% of loan proceeds on payroll expenses. The PPPFA lowered the threshold to 60%.

* The PPPFA also gives borrowers up to 24 weeks to use PPP loan proceeds for purposes that will result in loan forgiveness, versus only eight weeks under the original CARES Act rules.

* Borrowers now have up to five years to repay PPP loans that are not forgiven, versus only 24 months under the original CARES Act rules. This favorable change automatically applies to loans made on or after 6/5/20. For earlier loans, borrowers and lenders can agree to modify the loan terms to allow the five-year repayment deal.

* The PPPFA included other liberalizations to the original CARES Act rules. Contact your tax advisor for details.

Key point: While the SBA has released two PPP loan forgiveness applications (a short form for eligible borrowers and a longer form for the rest), some (maybe most) lenders are not currently accepting applications. That’s because the forgiveness issue has proven to be such a moving target. As of now, there’s no hurry, because current SBA guidance says you have 10 months plus at least another eight weeks from the date you received your PPP loan to submit your forgiveness application. See here. Your tax advisor can keep you updated on when to submit your forgiveness application.

Student loan exceptions

COD income from certain cancellations of student loan debt is federal-income-tax-free, as long as the cancellation is contingent on the student working for a certain period of time in certain professions for certain classes of employers. Source: Internal Revenue Code Section 108(f)(1).

For 2018-2025, the Tax Cuts and Jobs Act (TCJA) expanded the tax-free exception to cover certain student loan debt cancellations due to the student’s death or disability. Source: Internal Revenue Code Section 108(f)(5).

Finally, under the so-called Defense to Repayment procedure, the Department of Education is required to discharge a federal Direct Loan if a student (borrower) establishes, as a defense against repayment, that the school’s actions would give rise to a cause of action against the school under applicable state law. Federal Family Education Loans can also be discharged under this procedure if certain additional requirements are met. While there is no statutory rule that allows tax-free treatment for COD income from loans that are discharged under the Defense to Repayment procedure, the student loan borrower may be able to exclude COD income amounts under other tax-law exceptions (such as the aforementioned insolvency exception or bankruptcy exception) or under IRS-approved non-statutory exceptions that are issued from time to time.

Key point: The CARES Act suspended all payments, interest, and collections for government-held federal student loans through 9/30/20. In an Executive Order issued on 8/8/20, President Trump extended the suspension through 12/31/20.

Key point: The issue of student loan forgiveness may also prove to be a moving target. Future COVID-19 relief legislation may include good news for student loan borrowers. Your tax advisor can keep you posted on developments.

The bottom line

There are some other more-arcane exceptions to the general rule that COD income is taxable, but covering them would require a whole book that you would probably not want to read. Consult your tax pro if you have questions or want more information the tax treatment of COD income in various circumstances.

In One Chart: These charts show one possible silver lining of the pandemic

Maybe this winter won’t be so bad after all.

While the U.S. and other countries in the Northern Hemisphere brace for a possible twindemic of COVID-19 and influenza toward the end of the year, south-of-the-Equator countries such as Australia, Argentina and South Africa offer a ray of hope: They just had one of their mildest flu seasons.

These charts from the Economist show that the Southern Hemisphere, where the winter flu season runs from May to October, has seen a steep decline in the number of influenza infections and deaths so far this year compared with the previous five years. The World Health Organization processed 200,000 influenza tests in the first two weeks of August; just 46 were positive this year, compared with almost 3,500 during a typical year.

And while about 86,000 Australians test positive for the flu on average between May and mid-August each year, with around 130 dying, the government only recorded 627 influenza cases and a single death during the same window this year.

Check out some of the charts below.

The Economist and some health experts, including Dr. Anthony Fauci, credit the social-distancing and personal hygiene measures taken to stop the spread of the coronavirus from also stemming the annual tide of flu outbreaks in the Southern Hemisphere. There is a concern, however, that as people grow lax in wearing face masks and avoiding crowds, and schools and businesses reopen, that the flu could spread. Indeed, the Economist notes that flu cases could also still spike in the Southern Hemisphere this year and next, since fewer people have developed immunities to this year’s strain.

So health experts from the Centers for Disease Control and Prevention and the American Academy of Pediatrics are pushing for all Americans over 6 months old to get flu shots this year to further minimize their chances of getting sick. The U.S. flu season generally begins in October before peaking between December and February. CDC director Robert Redfield recently warned that America is bracing for “the worst fall, from a public health perspective, we’ve ever had” if both COVID-19 and flu cases overwhelm hospitals. The flu has sent between 140,000 and 810,000 Americans to the hospital each year since 2010 and is responsible for between 12,000 and 61,000 deaths a year.

Related:Vaccinating children against the flu is ‘more important than ever’ this year: pediatricians

Fauci, the director of the National Institute of Allergy and Infectious Diseases, also cited the Southern Hemisphere’s historically mild flu season during a congressional hearing on the nation’s coronavirus response on Wednesday.

“If we continue to do what each of us have been saying — regarding the kinds of preventive measures of mask wearing, social distancing, avoiding crowds, washing hands, etc. — if we do that as we get into the fall and the winter, for the purpose of COVID-19, it is likely to have a positive impact on the infection rate of influenza,” he said. “Because our colleagues in the Southern Hemisphere, particularly in Australia, have found because of that, they’ve had a very, very low, mild influenza season.”

So if Americans practice these public health measures and get their flu vaccines, he said, “hopefully we can have a very, very low level of flu that would not then complicate what will clearly be a challenge in the winter with COVID-19.”

Fauci in that same hearing got into a heated exchange with Sen. Rand Paul, accusing the Kentucky Republican of repeatedly “misconstruing” COVID-19 research and “not listening” to the CDC.

Follow MarketWatch’s coronavirus coverage here.

Next Avenue: 33 ways the remote classroom made learning better for my students

This article is reprinted by permission from NextAvenue.org.

Considered technologically inept by people who know me and by strangers who have heard my curses and cries for help in the “quiet” New School faculty room in New York City, I am as surprised as anyone that I’m not just Zoom ZM, -7.10%   teaching my advanced nonfiction class. I am digging it.

So are my adult students.

I am 72 years old and began teaching 50 years ago. I started with first grade in a New York City public school, then offered writing instruction at The New School, Hunter College and New York University and, for many decades, I’ve been teaching an advanced nonfiction workshop of personal essayists, memoirists and op-ed writers in my living room.

Some of my workshop students have been in the class for as many as 17 years, and not because they flunked. They are good writers and hard workers who stay with it revising and revising. Some have had essays and books published that came out of the class.

How COVID-19 changed my students’ writing and my teaching

Then came the pandemic.

In March, when remote teaching was about to become a reality, a longtime student of mine volunteered to host our sessions virtually, sending the Zoom links and offering newcomers instructions beforehand. Another volunteered to digitally line up everyone’s manuscripts before each class for easy access.

Frankly, I wasn’t sure how it would go. Turns out: it is terrific.

The way I now teach and the way the students now learn is better than how we used to do it in person. In July 2020, two longtime students had essays they wrote during the summer session accepted for publication.

Also see: Teachers face an agonizing life-or-death decision; many are retiring early or simply leaving the job

The structure of our sessions hasn’t changed. The students still read their work aloud. The rest of us still follow along with our copies, write comments on the manuscript and then discuss it.

What has changed: instead of a maximum of five pages as before, students now submit up to three pages by the morning of class. Those who can, and wish, have an opportunity to read the work before we start Zooming.

33 reasons classes are better for us

But I think there are 33 other reasons why the virtual writing classes have been so successful for my students and for me:

1. I don’t have to clean my guest bathroom beforehand

2. Recalling the training I received in 1970 that the teacher should immediately set the tone and let the class know what is expected and can ease up after, I am now stricter and more emphatic, beginning each session with very clear rules and boundaries

3. I tell my students I do not want them to chitchat

4. Or eat

5. Or walk around

6. I convey a mix of toughness and tenderness, as I remind them that writing is hard work

7. Harder than discussing it

8. Harder than having written

9. I remind them, too, that the pandemic is probably giving them more to say and more to reflect upon which hopefully inspires them to dig deeper (it actually has)

10. My students now have more time, are reading more and have a greater sense of urgency in their writing

11. Their writing is stronger because it is more urgent

12. After many, many revisions; my students are now actually more eager and willing to revise and revise

13. The pandemic publication success of two of the students inspires and excites everyone

14. Among my strengths as a writing teacher is having what my grandmother called “good rappaport” with students, from those who are new to the process to seasoned pros; with Zooming, we have “greater rappaport”

15. It helps that I can now look out and see everyone at the same time in their natural habitats with their dogs, cats and, if they have curious loved ones, their partners or children

16. I can see what is on my students’ bookshelves and hear how their pets sound, which is fun for us

17. And know at one glance, up close and personal, what their natural and dyed hair colors are — and if they have gray roots

18. It helps that they can see my home office

19. Which I declutter before we Zoom

20. By putting my piles of paper in a closet and under the sofa which I clear off except for the colorful throw blanket and decorative pillows

21. Our 7 p.m. restroom break bonded us further when I opened my window and we participated in the New York City pandemic cheer for health care workers

22. I’ve learned how to track changes in red in the emailed manuscripts

23. It is getting easier and easier

24. As do most things one does over and over

25. Including Zooming and other technological things that once threw me

26. I am much quieter during class than in the past, letting students do more of the commenting

27. I make more detailed comments on their manuscripts and when I send the pieces back, I tell students they can email me if they wish to discuss anything, giving them more time and individual attention than I did before

28. They want more of me now

29. I want more of them

30. Despite the clarity and insistence with which I establish the ground rules each week, we sometimes find ourselves relaxing and chatting about books, family, struggles, haircuts, hair colors and more

Don’t miss: The U.S. drops to No. 28 on this global well-being index

31. We laugh

32. They are taking greater risks, continuing to be braver, more self-revelatory and more truthful in their writing

33. I could not be more thrilled.

Nancy Davidoff Kelton has written seven books including “Writing From Personal Experience”  and a memoir, “Finding Mr. Rightstein,” which she is adapting for the stage, and essays for the New York Times, the Boston Globe, Parents, Working Mother, the Baltimore Sun and other publications.  She teaches writing at the New School, at the Strand Bookstore and privately.

This article is reprinted by permission from NextAvenue.org, © 2020 Twin Cities Public Television, Inc. All rights reserved.

Kelley Blue Book: How the Jaguar I-Pace matches up in the EV market

The Jaguar I-Pace is an electric sport-utility tasked with taking on established rivals like the Tesla TSLA, +1.95%  Model X. It also rivals newcomers like the Audi e-tron, Mercedes-Benz EQC, and upcoming Rivian R1S SUV. So how does the I-Pace separate itself from the competition?

  • The Jaguar I-Pace is the British brand’s first EV
  • The I-Pace has a base price of $70,525 and offers 234 miles of range
  • A fast charger will provide an 80% charge in 40 minutes
  • Level 2 240 volt home charger requires 12 hours 
  • Provides sports car level handling with luxury off-road capability

We’re going to break down the technical aspects of the I-Pace and see how the specifications match up. The EV marketplace is relatively small right now but a flood of new models and interesting choices wait in the wings.

Being one of the first on the scene could work to the advantage of the I-Pace. Still, Jag’s first-ever EV needs to prove it has the staying power to meet current and future rivals.

Power and range

These are two of the most important subjects in the EV lexicon. In terms of power, the I-Pace has plenty to offer. The electric powertrain is centered around a 90-kWh lithium-ion battery pack which sends power to all four wheels. In total, the all-wheel drive I-Pace has the equivalent of 394 horsepower, which is enough to propel this SUV from zero to 60 mph in about 4.5 seconds.

That’s rapid, though not as crazy quick as the 2.7 seconds it takes a Tesla Model X (optioned in Performance trim, with the optional Ludicrous Mode upgrade) to launch itself to the same speed. While they haven’t officially hit the U.S. market, the Audi e-tron and Mercedes-Benz EQC are estimated to be about 0.5 to 1.0 second slower than the electric Jaguar in the sprint to 60 miles per hour.

The I-Pace also holds an edge over its German rivals when it comes to driving range. With 234 miles available per charge, the Jaguar has a slight edge over both the e-tron and EQC. This also compares nicely with base models of the Rivian R1S SUV, which is expected to have a minimum of 230 miles of range when it arrives next year.

According to Jaguar, using a DC fast charger will provide an 80% charge in about 40 minutes. That sounds great, in theory, but fast charging is still relatively rare and many EV owners rely on more commonly available 240-volt outlets, particularly when charging overnight at home. Using this method, an I-Pace needs more than 12 hours to fully charge.

Jaguar luxury brings upscale pricing

One of the biggest drawbacks to the I-Pace is the high price you have to pay to own one. Granted, you’ll never need to stop and spend money on gasoline. But that doesn’t hide the fact this Jaguar EV starts at more than $70,000. This is about equal to what you’ll pay for a base model of the Tesla Model X, which starts at roughly $81,000.

The Audi e-Tron starts around $75,000, while the entry-level Rivian R1S should carry a base price of around $70,000, too. Mercedes-Benz has yet to announce the price of the U.S. version of the EQC sport-utility. But it’s safe to assume it’ll land squarely within this price range.

Also see: Automakers are gambling on electric pickup trucks—will consumers buy them?

If the Jaguar name conjures up images of beautiful lines and constant breakdowns, it’s worth noting the strong warranty that’s attached to the I-Pace. There is a 5 year/60,000 mile standard warranty, along with a battery-related warranty that stretches to 8 years/ 100,00 miles. This could help put the I-Pace on the shopping list of people who want a reliable zero-emission SUV, and are less concerned about the caché of being an early-adopter tech devotee.

Can the Jaguar I-Pace replace a normal SUV?

The electric powertrain provides incredible power, especially when you dip into the accelerator at highway speed. The 512 pound-feet of torque allows the I-Pace to surge ahead of traffic. That enthusiasm, however, might put a dent in your ultimate driving range. Thanks to the low center of gravity provided by the electric motors and battery pack, this Jaguar SUV has sports car-like manners.

This driving fun doesn’t come at the expense of a rigid and bouncy ride, thankfully. A Jaguar wouldn’t be a Jaguar if it rattled over bumps with the grace of a lumbering steamroller. With this in mind, the I-Pace offers an eerily-quiet driving experience thanks to its near-silent electric motors. It provides a luxurious means of getting from Point A to Point B in style and comfort.

High-tech cabin

Step inside and you’ll find a dashboard dominated by touch screen surfaces. It’s modern but not overwhelming. The controls don’t require a degree from MIT to operate and understand. The I-Pace comes standard with everything from a Meridian sound system and Wi-Fi hotspot, to safety features like automatic emergency braking, lane-keeping assist, and a driver drowsiness monitor.

You might like: A look at Cadillac’s first electric car, promising a range greater than 300 miles

Optional extras include premium leather seating surfaces, heated and ventilated front seats, a 360-degree camera, adaptive cruise control, and high-speed automatic emergency braking.

How good is the Jaguar I-Pace?

Jaguar is ahead of many other luxury brands when it comes to getting a toehold in the EV marketplace. In many ways, the I-Pace is a totally normal SUV, thanks to its roomy cabin and handy 25.3 cubic feet of cargo space behind the rear seats. The overall shape straddles a line between slinky station-wagon and low-slung sport-utility.

Also see: 8 new luxury SUVs for under $50,000

The electric powertrain provides effortless speed. However, the driving range doesn’t exactly set a new standard when it comes to miles-per-charge. Added competition from other luxury brands could turn up the heat on Jaguar to provide a wider spectrum of performance. Tesla does it with its multiple battery options. It should come as no surprise to learn that Jaguar has agreed to cooperate with BMW on the research and development of electric powertrains for future EV models.

Also see: Which is better? The Tesla Model S and Model 3 compared

While it has an early start on its main rivals, the I-Pace is only the beginning of a heated battle for dominance in the premium EV segment.

This story originally ran on KBB.com.

Personal Finance Daily: How a seasonal job may affect your unemployment benefits and experts advise caution as Americans feel comfortable eating at restaurants again

Hi, MarketWatchers. Don’t miss these top stories:

Personal Finance
Funding for the extra $300 unemployment benefit is nearing depletion — but it’s lasting longer in some states

More than 94% of the FEMA disaster-relief money being used to fund the extra benefits has been distributed to make the $300-a-week payments across more than 20 states

Vacuuming — and 7 other things people stopped doing at home during the pandemic

If you’re anything like us, you’ve somehow let certain household chores fall by the wayside over most of this strange year.

Americans are starting to feel more comfortable eating at restaurants, but experts say to proceed with caution

‘When eating you physically can’t wear a mask but you can minimize that risk by popping it back on between bites,’ one infectious disease doctor suggested.

Walmart is hiring 20,000 seasonal workers — here’s how a seasonal job could affect your unemployment benefits

Walmart, Target and 1-800-Flowers.com are among the companies taking on workers for the holiday shopping season.

See the Bel Air estate that Kathy Griffin is selling for $16 million

On the D-List no more, the comedian Kathy Griffin is selling her swanky Bel Air estate in Los Angeles for $15,995,000. Josh Altman and Matt Altman of Douglas Elliman hold the listing.

Google will cover $2,500 of employees’ student-loan debt

Some 8% of U.S. companies offer student loan contribution benefits as of 2019, according to a survey by the Society for Human Resource Management.

My wife had a baby in June. She has $140,000 in student loans — and just asked for my ‘blessing’ to work part time

‘Losing $30,000 a year will limit our ability to save for our child’s education, save for retirement, and take vacations. We currently have child care 100% covered between two sets of grandparents.’

New home sales surge to highest level since before the Great Recession

‘Already, more new homes have sold in 2020 than did in all of 2019,’ one economist said.

Mortgage rates are near record lows — but many Americans will struggle to find a lender willing to give them a home loan

The supply of mortgages has dropped to the lowest level since 2014, according to one metric.

How to do Halloween safely during the pandemic: no trick-or-treating door to door or wearing costume masks

The CDC posted its Halloween and Day of the Dead coronavirus guidelines — but Americans are still stocking up on candy

Elsewhere on MarketWatch
Mark Cuban wants the government to give every American a check for $1,000 every two weeks

Back in May, with the economy reeling from the coronavirus lockdown, Mark Cuban said it was time for the government to step in with “trickle-up economics” to save small businesses. He said this week that he stands by his plan.

Here’s where Trump and Biden stand on China and other trade issues

How Donald Trump and Joe Biden compare on dealing with China, trade agreements like the Trans-Pacific Partnership and bolstering U.S. manufacturing.

Why we need water futures

Investors will be able to make wagers on the price of water later this year with the launch of futures contracts, which are expected to better balance supply and demand for the commodity and hedge price risks.

Walmart is hiring 20,000 seasonal workers — here’s how a seasonal job could affect your unemployment benefits

Fall just started, but in the retail sector, that means the holiday season is just around the corner — and that means new job openings.

Walmart WMT, +0.82%  on Wednesday announced it will start its holiday hiring process by bringing aboard 20,000 seasonal workers for its e-commerce fulfillment centers. Target TGT, +0.84%   on Thursday said it is seeking 130,000 seasonal workers for openings across the entire company, a number on par with its seasonal hiring last year. Earlier this month, 1-800-Flowers.com said it planned to hire 10,000 seasonal workers, up from the 8,000 temporary workers it hired in the 2019 holiday season.

Overall, holiday retail sales are expected to grow between 1% and 1.5% year-over-year, according to forecasters at the consulting firm Deloitte.

This is no ordinary holiday season of course.

The jobless rate remains high, even if it is coming off from double-digit jobless rates in the spring, when the coronavirus pandemic initially roiled the economy. An estimated 3.5 million homeowners are in mortgage forbearance because of their suddenly rocky finances. And on Capitol Hill, the prospect of a deal for another round of fiscal stimulus — including more stimulus checks and enhanced unemployment benefits — seems dim for now.

So how does that play out for a person who’s thinking about applying right now for a seasonal position? Here’s a look:

What’s the pay?

The hourly rate ranges from $15.75 to $23.75 for the Walmart positions, depending on location. Many of the positions may turn into permanent jobs, the company noted. At Target, worker minimum wage is $15, and workers get certain benefits including access to virtual doctor visits and backup childcare.

That’s right around the average hourly pay for all retail-sector workers, according to federal data. Between October 2019 and December 2019, the average hourly pay for all retail sector workers was just under $20, according to information from the Bureau of Labor Statistics.

A company spokeswoman for 1-800-Flowers.com FLWS, -0.08% did not specify what the exact pay is for seasonal workers, but said wages are competitive and positions are still available.

Last year, the retail industry hired an estimated 562,000 people to help with the holiday rush in November and December, according to a spokeswoman for the National Retail Federation, a retail-sector trade association. The organization hasn’t yet released its 2020 holiday forecast, which includes hiring projections, but the spokeswoman noted “surprisingly robust spending” in holidays, like Mother’s Day and Father’s Day, so far this year.

What do I need to know if I’m on unemployment benefits?

“It’s really in a person’s interest to look for, and take work, if possible,” said Michele Evermore, Senior Policy Analyst at the National Employment Law Project.

For one thing, she noted, if a worker still hasn’t exhausted the state-level unemployment insurance they are eligible for in their “benefit year” — generally, the 52-week span that starts from an initial jobless claim — they can resume receiving those benefits if their seasonal job ends and they cannot find other work.

Another important point is that if a job seeker getting unemployment benefits turns down a job offer, the employer is obligated to notify the state labor department — and that can jeopardize someone’s potential for future benefits.

The $300 a week federal benefits resulting from President Donald Trump’s executive order have ended, even though some states are still in the process of retroactively distributing the supplemental federal unemployment pay. So if someone still hasn’t received that pay, Evermore said they can still take a job now and get the benefit.

Does a seasonal job mess up my mortgage forbearance agreement?

Not necessarily, according to Karan Kaul, senior research associate in the Urban Institute’s Housing Finance Policy Center. Under the current laws, lenders can authorize forbearance for up to one year if a homeowner is experiencing financial hardship related to the pandemic. Hardship doesn’t hinge on whether someone has a job or not, he said.

A borrower could land a seasonal job to help them and their family make ends meet, but they could still be facing financial hardship, Kaul noted.

The question of whether homeowners have to notify lenders about new jobs or sources of income may vary by agreement terms, he said.

Kevin O’ Leary says investing $100 a week will make you a millionaire by retirement

Everyone approaches retirement differently, but there’s only one way they should really prepare for it: by investing, said Kevin O’Leary, a host of ABC’s DIS, -0.48% television series “Shark Tank.”

Some people plan for retirement over the course of their careers, while others wait to think about that next stage of their lives when it gets closer. Not all Americans save adequately for their old age, partially because they can’t afford to do so or because they have other, more present-day financial obligations, such as student loans, child care and high costs of living, to worry about.

Still, there’s a portion of the population, albeit small, that pursues retirement early — in some cases, by the time they’re in their 30s or 40s. They do so by living frugally and dedicating most of their income to the stock market. This movement is known as FIRE, short for “financial independence, retire early.” O’Leary, founder of the O’Leary Financial Group, originally spoke about the FIRE movement with Grant Sabatier, an early retiree and host of the Millennial Money podcast, where they also discussed the skills it takes to achieve such a feat.

The “Shark Tank” host, known as Mr. Wonderful on the show, spoke with MarketWatch about how feasible saving for retirement is for most Americans, how they can become millionaires by the time they retire and why Americans need to take the concept of financial independence so seriously. This interview was edited for clarity and length.

See: A recession won’t end the FIRE movement, but it will change it for the better

MarketWatch: What were your first thoughts about the FIRE movement and how feasible do you think it is for most Americans?

Kevin O’Leary: It is a very strong, motivational platform. I like the idea of it. The old idea of retiring at 65 or even 60, or 62 — those targets don’t even make sense anymore. The economy has changed so much and a lot of people didn’t start saving soon enough.

I make the point that the pandemic has exposed one of those classic “king has no clothes on” situations. When I was doing PPP [Paycheck Protection Program] loans with the companies I’m an investor of, I discovered a majority of them did not have anything saved or even invested for retirement. Some of these people are in their late 20s, some in their late 30s, some in their late 40s. That exposed a big problem to me and the more I dug into it, I found out more than 100 million Americans don’t even have any investment accounts. That’s over a third of the population who don’t have anything saved for retirement. So I like the idea of focusing on retirement because it is a wake-up call. But the truth is, when you come to that point in your life, a majority of the people don’t have enough to retire on, given how low interest rates are for savings accounts and they haven’t invested in the markets properly over their entire career. I founded a new app to help solve this problem, I’m the chairman of it — it’s called Beanstox — and it helps people pull small amounts of capital into a portfolio that invests for them over the next 20, 30, 40 years.

MW: You work with a lot of small-business owners, many of whom have been impacted by this pandemic. How can people, especially entrepreneurs and small-business owners, manage keeping their livelihood afloat but also think about their futures and future savings?

O’Leary: I’ve learned over the years working with all kinds of people — business owners, entrepreneurs, my own employees — that there’s a very simple tactic you can take in your life that determines whether or not you’re going to be OK when you retire. I call it the 90-day test. It is very simple, and doesn’t even require any technology. Look at everything you bring in, it could be a side hustle, a salary. All of the income, every single dime of it. Then you do the same thing for expenses. What you’ll find is many people are living above their means, and they’re spending more in a 90-day period than they’re taking in. Where you find it manifested is credit card debt, which is being charged at 18-21%. It puts people in a horrible place. You’re losing your net worth every year doing this.

The way you change it is so simple. Most people buy stuff they don’t need. So I say everybody can reduce their cash out by about 15%, minimum. It is very simple to do. You just look at the thing you’re going to buy and ask “do I need this or should I take this money and invest it?” There are so many different apps that do this. I created one because I couldn’t find what I wanted. I’m not asking people to become stock pickers and technicians and day traders or to round up their credit card purchases. I am telling people, you can find a way to save $100 a week and invest it. One hundred bucks a week. There’s some crap you don’t need to buy that equals $100 and if you do that and start in your early 20s, you’ll end up with $1.5 million in retirement. That’s my mission, that’s my goal.

MW: Along with investing apps, what are some other ways Americans can better prepare for their futures?

O’Leary: I’m a big investor in the wedding industry. I have many companies that service weddings. Honeyfund is one of my companies and we do wedding registries, and we also have the data for years and years. You’ll find that most marriages fail, most unions fail, within seven years. Fifty percent of the time it has nothing to do with infidelity. It has to do with financial stress. One partner outspends the other, they don’t have a financial plan, they don’t have a goal. Getting married is so euphoric, it is a wonderful thing and I totally endorse it, but you are building a business relationship in the sense you’re going to be taking on obligations. You may buy a home, have children. These things are financial stresses and they need a plan for it. These are the things that are so mundane but when you actually go forward 10, 20 years, you figure if you have a plan you end up in a better place.

When I talk to people who are planning their lives, I tell them money sits at the table with you and your family every day. I wrote three books on this, all bestsellers, but they all deal with the same problems over and over again. The basic lessons go right through to investing, having money set aside and not spending on things you don’t need. It’s a huge problem in America.

I used to be in the education market for years. We teach geography, math, reading and everything else, but nothing on financial literacy. It’s crazy.

MW: A lot of people in their 20s and 30s might not want to retire too early but they have a savings number in mind that would give them financial independence. How important is it to achieve financial independence and what does that mean for you?

O’Leary: It means that at the back-end of your life, you have the freedom to pursue the things that matter to you, whether that’s family, children, travel or hobbies that are important to you. The whole idea of wealth is happiness. I try to tell people, look, if you don’t want tremendous stress in life, because a lot of stress can be unhealthy, you have to have a plan that allows you to have a lifestyle you want to have when you’re past 60 years old. Now what matters to people is: their health, their ability to see their children, if they have them, or their family, the ability to travel. The pandemic has squashed that for a while but we have to make an assumption that in six months from this, things are somewhat normalized.

You have to start thinking about what you can get from investing. The market provides on average 6-8% on an annual basis over a long period of time, so you have to start thinking, OK, can I live off of 6% of my portfolio, and after it pays 2% in taxes a distribution of 4%. You’re going to find you really want to get to $750,000 to $1.5 million invested, so that you can live off of that. The average salary in America is $58,000, and if you work backward, you can save $100 a week. You can put that money in the market, and buy an indexed or exchange-traded fund.

Also see: These early retirees saw their investments plunge more than $200,000 — but stoll manage to stay calm

MW: How do you think we as a society can do better to help Americans achieve greater financial literacy?

O’Leary: Number 1: Education. Number 2: Making investing really easy and that is one of my mandates for myself in 2021-2022. I’m crisscrossing the country and doing all kinds of virtual educational events. I developed the app because I learned how hard it is. With it, you can put $100 aside, and build a diversified portfolio. When I first started this journey in financial literacy, I made the assumption people know how to buy stocks and bonds but of course they don’t, we don’t teach them that.

MW: Do you think there are any major misconceptions that keep people away from investing?

O’Leary: There’s this idea of daytrading that has become very popular, which to me is a speculative gamble really. That is not investing.

MW: Was there a time you can remember when you felt you had achieved financial independence?

O’Leary: I was very fortunate. One of my companies was a huge success. It started in a garage and we sold the Learning Company for $4.2 billion. All the founders overnight had this big liquidity event. I tried to retire for three years. I had this strategy, I wanted to see every beach on Earth. It was one of the things I wanted to do. To see these amazing beaches — in Cyprus, Cambodia, Vietnam and Europe. I did them all and I was bored out of my mind. This isn’t life, this sucks. It was going from one place to another and saying I hit this beach. So I have seen every beach on Earth, every beach that’s famous, but to me that is not an achievement at all. Now I work harder than ever on the things that matter to me.

You have to find out what you want with your life, what makes you happy, and how you want to burn your hours of the day. I really enjoy what I do and the only reason I can do it is because I have financial freedom. I achieved it because I worked for it, but retirement doesn’t work for me.

MW: In your experience, how have you seen the concept of retirement change and what do you think is most important for people to know when it comes to pursuing some sort of retirement security for themselves?

O’Leary: Retirement isn’t what it used to be in the ‘60s, ‘70s and ‘80s. Retirement now is a change in how you spend your day. That’s all. It’s just a change in how you spend your time and a change in what you pursue. If you elect to pursue something that doesn’t have income associated with it, you need to accumulate enough money in an investment account so it can pay you.

Where Should I Retire?: We want to leave colder Midwest states for ‘warmer and drier climes’ and good, affordable health care on $44,000 a year — so where should we retire?

Dear MarketWatch,

My wife and I will be retiring in five years. We have lived in colder northern Midwest states for most of our lives and are ready to live in warmer and drier climes!

We will have an annual combined income of $44,000 from Social Security. We will also have approximately $600,000 total in my 403(b) and traditional IRAs. In addition to a warmer, drier climate, we would like good options for outdoor activities, especially hiking.

We’ll be selling our home in Michigan, which should net about $200,000. We hope to buy with, at most, a very small mortgage. So we plan to keep the total housing expense below $1,000 a month.

We lived in Arizona for a time while in the military and wonder if that is a good state to retire. Although we would like to be somewhat close to a larger metro area for cultural offerings, we prefer to live in a smaller city or suburban area.

We have been torn between retiring close to children in Omaha, Neb. and Tucson, Ariz. (my preference).

We would like to be closer to good, affordable health care, which increases the attractiveness of Omaha. A nice-to-have would be a more multicultural location, with various cultural offerings, which is what I think of in Tucson. But perhaps Lincoln, Neb.?

So I’m not willing to make climate and average temperature a make-or-break issue, I think we are more interested in a lower overall housing cost, health care, and recreation opportunities. And if we can find that in a multicultural area we would be elated.

John

Dear John,

You’re on the right track. I’m thinking a college town could give you much of what you want.

The other question is how close you want to be to your adult children, or perhaps more accurately, the grandchildren. Do you want to be available for last-minute babysitting and chauffeuring, or do you prefer to be a bit of a drive away? And what do your kids want? Will they let you help? And let you spoil the grandchildren? Or do they have firm ideas about what you can and can’t do, down to what snacks you can offer?

Finally, if you move to their part of the country, are they likely to stay there as you age? If not, perhaps you want to make this move for you and a subsequent move to be closer to them when you need their help.

To find your spot, I asked MarketWatch’s retirement tool for help. My “must haves”: a metro area of 100,000 to 250,000, a college town (defined here as home to top research universities), a five-star-rated Medicare hospital, a top-rated cancer hospital and median home prices below $250,000. My “nice to haves”: a below-average cost of living, a national forest and a national wildlife refuge (for recreational opportunities beyond the standard state and local parks), an airport and public transit. I left out any temperature requirements.

At first I narrowed it down to the regions where your children are but later opened it up to anywhere in the U.S. I ruled out any place much further north than Omaha because of weather (sorry, Sioux City, Iowa).

No metro delivered 100%, but both Lincoln (capital of Nebraska, home to the main campus of the University of Nebraska and 290,000 people) and Tucson (550,000 people) rank well for what you want. Obviously they are very different in weather.

Read:5 things to know about health care in retirement

Also: Health care will cost this much in retirement — but probably even more

I encourage you to see what results you get using other criteria, such as weather or a different metro size. You can sort by either population or cost of living. Data can only tell you so much, of course. And be sure to visit in the least-pleasant weather so you have a true picture of what you’re getting. Not that you can’t spend some time in Tucson during the winter or Omaha during the summer.

Here are three suggestions beyond Lincoln and Tucson.

Kayakers enjoy the Terry Trueblood Recreation Area in Iowa City.

Justin Torner/courtesy Think Iowa City

Instead of Lincoln, Nebraska…. Iowa City, Iowa

The Iowa City metro area, with just over 170,000 people, including nearly 80,000 in Iowa City and more than 21,000 in the suburb of Coralville, came out on top for the criteria I entered, even when I looked at the entire U.S. It met 90% of the wish list. All that’s missing is an airport — but the Eastern Iowa Airport in Cedar Rapids is 30 minutes away — and a national wildlife refuge (though there is a state wildlife management area nearby).

Iowa City is home to the University of Iowa (more than 32,000 students, so bigger than the University of Nebraska) and the renowned Iowa Writers Workshop. You’ll find some big-city entertainment offerings at the university’s Hancher Auditorium, and of course there is plenty of Big Ten sports action if that’s your thing. And if you care a lot about politics, you can revel in the attention of the presidential caucuses every four years.

While all three of my suggestions have an above-average number of primary-care physicians per 100,000 people, according to data from the University of Wisconsin Population Health Institute. County Health Rankings & Roadmaps 2020, Iowa City fares best. (Lincoln, by the way, falls below the U.S. average.)

Yes, Iowa is pretty flat. But you can still find some good hiking. Nearby Lake Macbride State Park is one place to start.

A surprise: The Herbert Hoover Presidential Library is just east of Iowa City. Or you can explore the 375-million-year-old fossilized Devonian ocean floor at Coralville Lake.

Iowa City is less diverse than the U.S. as a whole, but more diverse than Lincoln. The presence of a major university, however, should provide some of the multicultural feeling you are seeking.

The website Livability loves this city — it ranked Iowa City second in 2017 and fourth in both 2018 and 2019 among its best places to live.

There’s no sugarcoating this: you will still have winter. Average highs in January are just below freezing, so perhaps that’s not much of an improvement over Michigan. Lincoln is only a few degrees warmer. Time to visit the grandchildren in Tucson? Humidity for the metro area during July, measured by dew point, just crosses the line into what could be considered high humidity, according to data from Prism Climate Group, part of Oregon State University.

A disadvantage to Iowa City could be the distance to Omaha and family. It’s nearly a four-hour drive, rather than 1 hour from Lincoln.

Sperling’s Best Places says housing in Iowa City is more expensive than Lincoln, though both are well below the national average. Here’s what kind of house your money will buy you in Iowa City, using listings on Realtor.com (which, like MarketWatch, is owned by News Corp.), as well as those in Lincoln.

The Albuquerque International Balloon Fiesta is in the skies above both Albuquerque and Rio Rancho. The Rio Grande helps separate the two cities.

Getty Images

Instead of Tucson…Rio Rancho, New Mexico

You say you prefer suburbs to the city. Rio Rancho, just north of Albuquerque, gives you that.

The main city in sprawling Sandoval County, Rio Rancho has 100,000 residents and is growing quickly. The local Chamber of Commerce boasts that the city has the lowest crime rate in the state and low property taxes. It’s popular with retirees; over-55 communities are scattered throughout. You’re practically next door to Albuquerque, which with 560,000 residents is similar to Tucson, or you can catch the Rail Runner train 10 minutes away in neighboring Bernalillo and be in Santa Fe in 30 minutes.

The cost of living is comparable to Tucson, according to Sperling’s Best Places (though the Chamber of Commerce says you’ll find more in your price point in Rio Rancho).

Where Rio Rancho has an edge is with its milder summer climate — average July highs are 91 degrees, compared with 100 degrees in Tucson. The area gets four seasons, none extreme; locals say that if it snows, don’t bother shoveling because it will probably be gone by noon.

Your desire for quality health care is fulfilled with two local hospitals — UNM Sandoval Regional Medical Center (which is now the center for all orthopedic surgery within the UNM medical system) and Presbyterian Rust Medical Center.

Hiking? Try the foothills of the Sandia Mountains on the eastern side of Albuquerque or the Valles Caldera National Preserve (part of the National Park Service) northwest of Santa Fe. Both are a bit of a drive.

New Mexico has a distinctive culture. Within Sandoval County are nine Native American pueblos on top of the Gathering of Nations, the largest pow-wow in North America, in Albuquerque, located in Bernalillo County. There’s also a large Hispanic population. And if you don’t know about green vs red chiles

With Albuquerque less than a half-hour away from Rio Rancho, you’d have easy access to the city’s (and university’s) cultural events as well as the airport. Read more about Albuquerque here and here.

But you don’t always have to go to Albuquerque for events. The 7,000-seat Rio Rancho Events Center has attracted some big-name acts, and the city is building a new amphitheater as another cultural venue.

At the moment, there are no nonstop flights to Tucson. The drive is 6½ hours.

Here’s what the housing market looks like in Rio Rancho today, using listings on Realtor.com. You can contrast that with Tucson.

Crater Lake National Park is a recreational draw for the Rogue Valley.

iStockphoto

Wild card: Oregon’s Rogue Valley

For another “warmer and drier” option, I looked in the Pacific Northwest. This is pricier than both Midwest college towns and the Southwest, so I bumped up below-average cost of living to a must-have, and I left out the size of the metro area. I got Walla Walla, but I feared that at 33,000 residents it was too small for the amenities you want, given the cities you were considering. Spokane? Too much snow.

I settled on Orgeon’s Rogue Valley, an area that has low summer humidity even as average highs reach into the upper 80s, modest rainfall and little snow. The cost of living is below the national average, according to government data, but housing is on the pricier side.

The center is Ashland, home of Southern Oregon University and the renowned Oregon Shakespeare Festival. It’s also the most expensive part of the metro area, so start by looking at Medford, 15 miles away and home to 83,000 people. Here’s what’s on the market there now, according to Realtor.com listings.

A word of warning: This part of Oregon usually isn’t hit by wildfires. That changed this year, and you will have to decide whether 2020 was a one-off or a harbinger of a new future. Medford is surrounded by forests and mountains, which in better times means plenty of the hiking opportunities you want.

You can also drive 65 miles to Crater Lake National Park, created by the collapse of a volcano and where the Rogue River starts its journey to the Pacific Ocean. Or you can explore the state’s southernmost wine region; the Rogue Valley has three valleys with distinct climates and 88 vineyards, many around Medford and Ashland. The airport in town will get you to other western destinations, but not Tucson.

Medford is popular with retirees; the Census Bureau says 17% of the population is 65 or older. However, it’s no more diverse than Lincoln or Iowa City.

Readers, where should John and his wife retire? Leave your suggestions in the comments section.

Economic Report: New home sales surge to highest level since before the Great Recession, as buyers are pushed into the construction market

The numbers: Sales of new single-family homes in August exceeded an annual rate of 1 million for the first time since 2006, as buyers were forced into the market for newly-constructed properties thanks to the dearth of home listings.

New home sales occurred at a seasonally-adjusted, annual rate of 1.011 million, the Census Bureau reported Thursday. That represents a 4.8% increase from an upwardly-revised pace of 965,000 homes in July. Compared with last year, new home sales are up 43%.

Economists polled by MarketWatch had expected home sales to drop to median pace of 900,000.

What happened: Not all parts of the country saw an uptick in sales despite the historically high rate nationally. New home sales fell 21.4% in the Midwest and 1.7%. Comparatively, the South saw the biggest increase in sales with a 13.4%, which sales volumes rose by 5% in the Northeast.

The median sales price in July was $312,800, down from July’s median price. The inventory of new homes fell to just 282,000, representing a 3.3-month supply at the current pace of sales. That’s down from a 4-month supply in July. A 6-month supply is considered the benchmark for a balanced market.

The big picture: The burgeoning interest in newly-constructed homes largely stems from the lack of existing-homes for sale. While existing-home sales have also occurred at a fast pace, the inventory of homes left on the market is fast dwindling.

Sellers have been reluctant to list their properties despite that. A new report from Realtor.com found that nearly 400,000 fewer homes have been listed for sale since the start of the pandemic compared with a year ago.

Meanwhile, record-low mortgage rates continue to awaken demand among buyers, as evidenced by mortgage application data from the Mortgage Bankers Association. While this data is volatile, the trend line suggests that there will continue be strong momentum in home sales, according to High Frequency Economics chief U.S. economist Rubeela Farooqi.

Home prices could become a barrier for the real-estate market though. The combination of low supply, low interest rates and high demand has sent prices skyward — and some buyers could eventually find themselves priced out of the market.

What they’re saying: “Already, more new homes have sold in 2020 than did in all of 2019,” said Danielle Hale, chief economist at Realtor.com. “With the number of existing homes for sale down consistently and considerably from a year ago, new homes are an important segment of opportunity for home shoppers.”

Market reaction: The Dow Jones Industrial Average DJIA, -0.23%   remained flat, while the S&P 500 SPX, -0.08%   rose slightly in Thursday morning trading. Shares of home-building firms PulteGroup PHM, +0.98%   , LGI Homes LGIH, +1.19%   , and Lennar Corp. LEN, +1.59%   all increased.