Financial site: Investing, Savings and Economic

The millennial on your cellphone plan is ruining retirement


´╗┐The stereotype of millennials living in their parents' basements is well worn by now, but what about the 30-year-old still on a family cellphone plan? Or the 35-year-old piggybacking mom and dad's Netflix?Parental support of adult "kids" ranges from full dependency to steady drips of cash infusions, with all of it degrading retirement savings. Almost half of U.S. millennials have received some form of monetary assistance, even if they are living on their own, according to a study released Thursday by the financial firm Fidelity. The top budget item millennials get help with, according to Fidelity: cellphone bills, followed by clothing. The budgetary impact is not chump change. A recent survey from consulting firm Age Wave and Merrill Lynch found that 60 percent of Americans over 50 have provided financial help to other family members in the past five years, with 68 percent of that support going to adult children. The average amount given over that time period: $14,900. Deciding when enough is enough is a hard task for everyone involved. "There are so many of us that have enabled our children. It's hard to start saying no," says Mary Ballin, 53, a financial adviser for Mosaic Financial Partners in Walnut Creek, California. Ballin not only advises clients who are trying to get their "kids" off the balance sheet, but she also knows from experience. Her 21-year-old son is currently living at home, taking a break from college. Her strategy is to enforce a payment schedule."We said: 'When you quit school, by October 1 the phone is on you, and by January 1, the car is on you,' " Ballin says. By the time her son is 24, Ballin hopes he will be out on his own. At age 25, he needs to be fully self-sufficient, she says. That is because Ballin and her husband have retirement plans, and they want to shift their focus.

"As that next stage of life is coming sooner and sooner, I want to travel more. I can't keep paying for these kids," Ballin says. WAKE-UP CALLS One way to facilitate the wake-up call is to participate in a financial literacy program together. Wendy Lawrence got her husband and three stepchildren (ages 17, 19, and 29) involved in one through her employer, SunTrust Bank . "We had a frank discussion of how much we spend on them. It was eye-opening," says Lawrence, 45.

The 29-year-old, who lives at home, now pays rent. Lawrence and her husband put some aside to help him save for a down payment. He also is maxing out his 401(k). While Lawrence says her stepson would rather be out on his own, he is glad to be saving. And she gets something in return. "He's 6'5" and has some skills, so if we have something that needs to get done, he does it," Lawrence says. But sometimes that parental wake-up call rings differently. For Barbara Trainin Blank, a freelance writer near Washington, D. C., it makes more sense to pay rent for her 26-year-old daughter to live nearby rather than stay with them because they clash too often. Like many parents, Blank gives her daughter money and has no idea where it goes. The Age Wave study found that this "mystery" money was actually the top destination of contributions, accounting for 36 percent, while cellphones and rent were further down the list.

Blank, 68, would love to get her daughter fully launched so she and her husband can slow down a bit. "We don't really want to retire, but we'd like to be able to," she says. For now, Blank is a bit flummoxed. "Some people have said to just tell her to leave, but that's easier said than done," Blank says. Psychologist Jody Rosenberg, who practices in Los Angeles and has a radio show (psychologicalhealingcenter.com/radio-show/), says the key is to know the difference between what is helpful and what is not. "If they are sitting on the couch eating bonbons, it's unhelpful. If they are in school and getting all their ducks in order, that's helpful," Rosenberg says.(In 12th paragraph, this story corrects the ticker symbol for SunTrust.)

Us central bankers, brokers snap at secs money market proposals


´╗┐Heads of the 12 U.S. Federal Reserve regional banks on Thursday strongly criticized a component of a U.S. Securities and Exchange Commission proposal aimed at preventing runs on money-market funds, saying it did little to change current rules. The measure, part of a series of proposed SEC changes to reduce risks in the $2.5 trillion money-market industry, would let funds ban withdrawals and charge fees for them in times of stress like the 2008 credit crisis. The Fed group warned that allowing money funds to restrict investor withdrawals could accelerate those by sophisticated investors before triggers were breached, leaving other shareholders in the lurch. The policymakers, however, endorsed another alternative in the SEC's plan that would require prime institutional money-market funds to let the value of those shares float, reporting on a daily basis the value of their shares rather than continue the current scheme of assuming they are always worth $1 a share. The central bankers and some financial firms commented on the SEC proposals on Thursday in response to a request by the commission for feedback on its plan. The SEC is still probably months from any formal rulemakings on the issue."We continue to believe that the liquidity fees and temporary redemption gates alternative does not constitute meaningful reform and that this alternative bears many similarities to the status quo," said the letter from policymakers, sent on behalf of the 12 Fed officials by Boston Fed President Eric Rosengren. While the SEC is tasked with protecting investors and ensuring fair markets, the central bank's regulatory goal is ensuring overall financial-market stability.

The Fed officials, some of whom have been outspoken about the lingering dangers of money funds, said the SEC proposal to require funds to adopt a floating net asset value, or NAV, was a far better option from a financial stability perspective. The letter from central bank officials came as large fund companies and brokerage firms released their own views on how money-market rules should be reformed.

SCHWAB PITCHES FOR MUNI FUNDS, RETIREMENT Charles Schwab Corp. in a letter, applauded the SEC's efforts to preserve the economic benefits of money-market funds. It warned, however, that the proposed rule changes have "significant flaws" and costs of implementing them could "outweigh the benefits" for financial firms and the "larger financial system."Schwab, which manages about $168 billion in money-market accounts primarily for retail investors, asked the SEC to combine its two proposals so that institutional prime funds would both report floating values and be able to impose redemption gates and liquidity fees in times of stress. The brokerage firm took issue with a provision that would limit investors to $1 million of withdrawals a day from money-market funds that invest in corporate debt. It wants the limit raised to $5 million and apply to each customer account rather than each customer.

Retail investors often need to make large money-fund withdrawals and could easily cross the $1 million threshold, the letter said. Schwab also wants the SEC to exempt 401(k)s, IRAs and other retirement accounts from new restrictions aimed at institutional money-market funds since the vehicles are used "exclusively" by individual investors. The operational complexity of setting withdrawal limits and reporting floating net asset values on such accounts "would be so great that the effect would be to make it nearly impossible to use money market funds in these types of accounts," the letter said. The firm, which last year waived $587 million of money-market fees for clients to ensure they did not have negative returns, also wants exemptions for municipal money-market funds. Schwab lambasted the SEC for "vastly" underestimating the costs of its rule proposals. For example, expenses for developing a system to calculate floating net asset values for institutional prime money funds will exceed $10 million, Schwab said, compared with the SEC's estimate of no more than $2.3 million. A day earlier, Fidelity Investments told SEC officials that its money fund proposals could increase the borrowing costs of U.S. municipalities by as much as $13 billion.