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Friday Financial Five – February 28th, 2014

Friday, February 28, 2014


Finding savings in health care

A few years ago, the thought of saving on health care expenses did not seem feasible. Now, with a little bit of digging, consumers might be able to actually reduce health related costs from one year to the next. There is a shift to higher deductible plans, including pre-tax contributions to Health Savings Accounts, and lower monthly premium payments. On top of this, the Wall Street Journal has an excellent piece on the push for price transparency for health services provided. Consumers now shoulder more of a responsibility for the cost of their treatment. As with any type of shopping, the buyer needs price transparency in order to make an informed decision. Consumers shopping around can help create competition and push down the price of goods and services. Lower premiums coupled with downward pressure on the cost of services can then lead to yearly savings.

Delays in 401(k) contributions

Companies are attempting to reduce expense by moving 401(k) matching contributions to one time payments and away from coinciding with periodic payroll. This change may cause the employee to miss market growth or miss the match altogether if he or she is not with the company at year end. Employees may be unaware of deferral deadlines, simply expecting that contributions will be deposited within a reasonable time frame. The Department of Labor standard for companies is the 15th business day following the month the money was withheld, though Safe Harbor plans or the company plan documents may have a different standard. As for company matches, the company can wait until filing the corporate tax return. Missing these deadlines may put the 401(k) plan itself at risk.

A government option in reverse mortgages

Mention a reverse mortgage to a senior and you’ll more than likely get some form of the evil eye. The product has long been considered expensive and difficult to fully comprehend. While there are private companies that provide them, there is also a government option through FHA lenders called the Home Equity Conversion Mortgage. For those over the age of 62 with the bulk of their net worth tied up in home equity, the option at least merits consideration, especially for those that would like to continue living in the house.

FDIC insured banks net over $150 billion in 2013

U.S. financial institutions continue to gain strength, according to a recent release from the Federal Deposit Insurance Corporation (FDIC). Last year, income topped $150 billion, including a $40 billion fourth quarter. Overall, loan loss provisions dropped by just over $8 billion as the housing market showed continued strength. There was also a sizeable drop in banks that were unprofitable, continuing the trend of improvement since 2009.

Bitcoin survives a rough week

Things are not exactly going smoothly in the world of Bitcoin. The Mt. Gox Bitcoin exchange in Tokyo collapsed this week, taking an estimated six percent of the virtual currency with it. The reaction so far has been mixed. There are those that see this as a cautionary tale of dabbling in a lightly regulated virtual currency, despite the value holding this week. Others, including some high profile investors, came out publicly saying this is simply the evolution of the trading environment. Meanwhile, regulators from across the globe will attempt to put policies in place to prevent an exchange collapse from happening again.

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in Providence, RI and can be reached at [email protected] .


Related Slideshow: 10 Historically Bold Moves Made By Big Companies

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10. RJ Reynolds

The Smokeless Cigarette


In 1988, long after the American public wised up to the dangers of cigarettes, RJ Reynolds launched the Premier cigarette. They called it a “smokeless nicotine delivery mechanism that looks and feels like a premium cigarette.” It didn't. Smokers said it tasted like charcoal, and drug users quickly figured out how to use it to smoke crack. It has been reported that RJ Reynolds lost $1 billion on the product.

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9. McDonald's

The McLobster


The alleged lobster roll – no one's sure there was ever any real lobster in there – from McDonald's was about as successful in New England as their McCrabcake was in Maryland. It looked bad, tasted worse, and was shunned by even the most die hard Golden Arches fans. (Unlike the McRib, which continues to have a bewildering trance on McDonald's fans.) The sandwich is still available in some Canadian franchises and occasionally in Maine.

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8. Yahoo

Bans Employees From Working at Home


When Yahoo CEO Marissa Mayer became the company’s chief executive, she instated Google-like food options, offered new benefits, and insisted full-time employees work in the office. The tech world was shocked, and Mayer admitted the mandate could diminish productivity. However, she saw an up side.
"People are more productive when they’re alone,” she said at the time. “But they’re more collaborative and innovative when they’re together. Some of the best ideas come from pulling two different ideas together.”
Now that Yahoo's future looks far brighter than when Mayer started, it seems she was onto something all along.
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7. Sony

Backs Betamax


Sony was right to support Blu-ray over the failed HD DVD, probably because they learned their lesson with the Betamax experience in 1975. That's the year the Betamax video recorder hit stores shelves. A year later, the VHS format hit the market. Sony never licensed its Betamax technology, and the two formats were not compatible. Consumers had to choose between the two. You know how that story ended.
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6. Tesla

Enters the Auto Market with High End Electric


Whoever killed the electric car must not have been looking when the first Tesla Model S cars were sold at the Tesla factory in Fremont, California. The Silicon Valley electric carmaker took the idea of eco-friendly vehicles and turned it into a blueprint for lead-footed success. Tesla's first made-from-scratch car, the electric Model S sedan, received a rare near-perfect score from Consumer Reports. At the time, Bill Ford, the executive chairman of Ford Motor Co., said "My hat's off to them." Tesla has since transformed America's image of electric cars. 
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5. Apple

Fires Steve Jobs


One of the world's most famous college drop outs, Steve Jobs founded Apple, helped it grow into a billion-plus public company, and launched the Macintosh. He was also ousted by Apple's Board of Directors in 1985. The popular take is that the board was stupid to fire Jobs as the leader of the Mac division, because Apple would have more quickly become the company it is today. A new take on the decision posits that the then-30-year old  Jobs was disruptive and incompetent in that role. After 12 years away from the company he founded, he learned the skills and discipline required for Apple's rebirth.

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4. Microsoft

Takes on Sony + Nintendo in the Console Gaming Market


Microsoft has one person to thank for its console gaming success, and that person isn't even real. Master Chief is the hero of the insanely popular "Halo" franchise, which was first released was a launch title with the original Xbox. The game revolutionized First Person Shooters on consoles, and sold millions of consoles along the way. At the time, Microsoft was known as primarily a software company. They may have took a bath on those early consoles, but they now join Sony as one of the two major console makers left standing. (Sorry, Nintendo. The Wii U is going to sink you.)  

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3. Netflix

Changes Pricing Plan


Netflix is back on top now, but it almost went under in 2011 when it mishandled its pricing changes and attempted to slice off it DVD business under the name Qwikster. As they did with the New Coke launch, customers responded with immediate anger, leading Netflix CEO Reed Hastings to apologize. The company reverted to its $7.99 streaming plan and has never looked back.

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2. Ford

Opts out of Government Loans


After Detroit’s automakers went to Washington in 2008 asking for emergency loans to keep their enterprises afloat, the big bus oval was the only one to opt out of the bailout. Ford decided to mortgage all of its assets to raise operating funds instead. Taxpayers eventually spent $80 billion to rescue General Motors Corp. and Chrysler Corp. Ford focused on efficiency and increasing sales without using government bailout  money - thus avoiding the federal tinkering that Chrysler and GM  had to accept as a part of their deals. The company has since kept pace with GM, the country's largest automaker.

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1. Coke

New Coke


Perhaps the most famous brand misstep since Ford's Edsel, New Coke is the Titanic of corporate miscalculation. In the 1970s and early 80s, the soft drink giant faced increased competition from Pepsi and other products. To stay on top, Coke executives stopped production of the classic formula and introduced New Coke with tremendous fanfare. The public's responded with immediate outrage. Coca-Cola re-launched its original formula – called Coca-Cola Classic – almost immediately. Today, unopened cans of New Coke go for hundreds on eBay.


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