Pod Insights The Clark Howard Podcast 11.19.24 Decision: Renting Vs Buying A Home / Long Term Care Insurance About this episode Buying a home vs renting is a tougher decision these days, with several factors and new considerations to keep in mind. Also in this episode, since the long term care insurance industry is broken and financially prohibitive in its present collapsed state, how do you prepare for the assistance you may need in old age? Renting Vs Buying A Home: Segment 1 Ask Clark: Segment 2 Long Term Care: Segment 3 Ask Clark: Segment 4 Mentioned on the show: Best Online Banks: Free Checking and High-Interest Savings Accounts Are You Actually Earning Cash Back on Groceries With Your Credit Card? Capital One Shakes Up Its 'Savor' Line of Credit Cards They Bought Insurance for Security in Old Age. They Got a Financial Nightmare Instead How Do You Prepare for the Likelihood of Long-Term Care Costs? Living Will and Durable Power of Attorney: Frequently Asked Questions CarMax vs. Carvana: A First-Hand Experience Selling a Car in 2024 What's the Cheapest Way To Replace a Lost Vehicle Key Fob? 3 Ways To Get a Free VIN Check Before Buying a Used Car Clark.com resources Episode transcripts Community. Clark.com Clark.com daily money newsletter Consumer Action Center Free Helpline: 636-492-5275 Learn more about your ad choices: megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
Transcript 0:00 Speaker 00 Your sausage McMuffin with egg didn't change, your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just $5. Only at McDonald's for a limited time.
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0:50 Speaker 03 It's great to have you here on the Clark Howard Show. You know, our mission is to serve you with advice and information that empowers you so you make better financial decisions in your life. And I want to talk about the renting versus buying a home. And how the decisions you make may be different going forward than they've been to this point. Also, gosh, all the inquiries I'm getting from people saying, what do we do? What do we do? Mom or dads or mom and dads, long term care policy, the premiums have gone through the roof. Do we just pay the higher ones? Do we let it lapse? What do we do?
1:35 Speaker 03 How about if it's you and you're the person with the policy, you got the huge increase? What do you do? We're going to talk about that. So buying a home, renting a place. It's funny because some of us on the Clark team were talking about that recently. You know, the joys of homeownership versus the curse of homeownership, renting and not having to worry about it. I mean, the mentality in the United States, I can tell is shifting away from
2:09 Speaker 03 People being fixated on being a homeowner versus being a renter. This is one that used to be a slam dunk. You wanted to be a homeowner. And this is especially a present issue for people who are fortunate enough to have a second home. Having that second home, is it a joy? Is it a burden? Whatever. So, right now, it's more difficult to think about buying a home because the effective cost of rent, as a general rule in most places in the United States, is much, much lower than what the effective cost per month is for mortgage payment and all the other expenses
2:54 Speaker 03 of owning a house. Roughly a third of Americans historically rent. It'll move up or down a few points in a year. But now it's like, hey, should I be a renter? And there are other factors to consider is the problems you see that people are having from storm damage, or fire damage, or whatever, that owning a home, the difficulty of insuring it and all that, it makes it a tougher deal. So, buying a home has very specific advantages. And right now, everything you read is about, or hear, is why buying a home is a nightmare, or owning a home is a nightmare.
3:38 Speaker 03 But there are real advantages. There's the sense of community, of permanence, of neighborhood. And those things, you can't measure with dollars and cents. If you have school-age kids, or preschool-age kids, that are going to be going through school. Being able to have consistency...
4:01 Speaker 03 And where you are and the schools your kids will attend, they're not having to constantly change schools is you can't rent that place anymore and you go somewhere else. Having the, the friend group that your kids get to be with. And then over time, a home does become a hedge against inflation. Because even though the costs of maintenance and repair and taxes may go up, the costs you're having to pay every month for mortgage stays pretty much level. And even if you have a mortgage at a higher interest rate from recent times, the time will come where you can refi.
4:42 Speaker 03 Rents though, over time, climb with general housing inflation. We've just been in unusual circumstance where rents right now are so much lower. A lot of markets, half the cost of buying a home. The insurance industry meltdown for homeowners insurance is a nationwide problem, but has real inflection points in certain states where it's just an all out disaster. California, Florida, both come to mind right away, parts of Texas. I mean, this is a real present concern. It will not be a long-term one, but it is a present issue.
5:27 Speaker 03 Why do I say it won't be long-term? Because the insurance industry will adapt and adjust and will stabilize. It will, but right now it's a mess. Second homes present a different issue. What happens with second homes is people go through a cycle with them. When they first have one, they're really, really happy about it. They love going there. They look forward to being there. It was a dream to have that. But then as you go through the years and you age and whatever, the second home becomes less desirable. In Florida right now, second homes for a lot of people feel like an albatross.
6:09 Speaker 03 I read stuff all the time about people reassessing, do they really want to have that home in Florida? Because you know, storm after storm, the insurance market meltdown, climate change factors, all those things figure in. So first homes, long-term, if you are a long-termer in something.
6:31 Speaker 03 I think that having ownership of a home ultimately makes sense. If you're not really settled in an area, renting makes sense. Owning a second home may or may not make sense. Financially, it really doesn't. But from those things I talked about, lifestyle and all that, it certainly could.
6:53 Speaker 04 Okay, this question came in from Rebecca in Georgia. I've been a longtime online bank user. I've also held a traditional set of accounts at Wells Fargo, primarily because when I set up the online banks, originally they required a link to another bank to find them. And occasionally, I have a need for a notary. I've also been using the checking and debit card recently to segregate funds for a family member who struggles not overspending on credit cards. So the bank is now imposing fees, which I've never had with them. I'm exploring other options. My question is, is there any reason to need a brick and mortar these days? Or can I go purely online?
7:28 Speaker 03 Great question. Banks are closing branches as fast as they possibly can. The only exception has been Chase Bank that has been the complete marvel of the industry with how they are still opening branches, using them almost like billboards, having them open. But my question for you, other than the notary, which I'll tell you with notaries, there are now notary services all over the country. Then when you need one, you just hire one. Really simple. Yeah, you're going to pay them some money, but nothing compared to what you're having to pay in all those monthly bank fees to a giant monster mega bank like Wells Fargo.
8:11 Speaker 03 I ask you, how routinely do you ever go to a bank branch? I don't have a bank account with any bank, but my credit union, I'm never there, never. I do the equivalent of banking with Charles Schwab. Maybe I'm in a branch once every 18 months. And they don't have many offices in a city because they know most people are never going to walk into one. So I think you're absolutely fine today if you answer, yeah, I'm really never going in a Wells Fargo, to dump them, dump their fees, go to an online bank. Where you don't have any of those fees.
8:52 Speaker 04 Arthur in Florida says, I have a Capital One Saver One credit card and a Citi Double Cash Card. My total charges for a month averaged $900 to $1,100 for either card. My Citi Card is 2% on any purchase. My Saver One is 3% on dining and pretty much 1% on everything else. Which card should I be using?
9:11 Speaker 03 Okay, both. You use the Saver Card only for restaurants, if that's the only bonus category to get to 3%, and use the Double Cash everything else, because then you're earning minimum 2%, not the minimum 1%, that you earn routinely with the Saver Card. Saver is like savoring the food. The way it's spelled, it's cute. So, that's dining only, Double Cash, everything else, and your blended, probably average earn in a month will be like 2.3, 2.5, depending on how much you eat out.
9:53 Speaker 04 Now, a couple of fun ones. Scott says, I was in Paris last week and was looking forward to going up the Eiffel Tower. One of my favorite Clark stories was having your family climb the stairs because you didn't want to pay for the elevator. I was excited to go up the Eiffel Tower for free via the stairs. I was disappointed when I got there to see that they now charge 14 euros for the pleasure of climbing upstairs. Inflation, I guess?
10:16 Speaker 03 Okay, so we did have to pay to go up the stairs. It wasn't 14 when I took the kids. That was 2012 that I took them. But it was much cheaper than going in the elevator, which is why we did the stairs. Do you know, last month, my wife, Laine, and I were in Paris, we were staying like a three-minute walk from the Eiffel Tower, and it was so fun to just walk by and see it. We never went and climbed it, and certainly didn't ride the elevator.
10:49 Speaker 04 Ken in Alabama says, why does Clark wear such huge headphones during the podcast? In sharp contrast to Chris's lack of even any visible earbuds, Clark's headphones look like a torture device from a Saw movie.
11:01 Speaker 03 Okay, so if you ever watch our YouTube show, like, obviously Ken does, who sees my, what we call cans, my...
11:10 Speaker 04 It's a sportscaster like headset.
11:11 Speaker 03 Sportscaster headset because I can't stay still. So I always mess up the audio because I'm always turning away and I'm, I'm walking and you know, because we stand when we do this because you have more energy if you stand than if you sit. So I'd always be moving from the microphone, the audio would be messed up. So by wearing the sportscaster headset, wherever I turn my head, up, down, left, right, whatever, the mic is still exactly in the right position. So there may be headsets now that you can have little tiny ear things like, what are you wearing?
11:50 Speaker 04 I don't wear ear buds.
11:51 Speaker 03 At all? So there may be a mic I can wear that just attaches to my head and
11:56 Speaker 04 Yeah.
11:57 Speaker 03 Because we don't, we don't need the cans.
11:58 Speaker 04 It has to be high quality. That's the problem.
12:00 Speaker 03 Yeah. Yeah, these are the, the ones that you see football commentator use, basketball commentator, because the sound quality of the mic is the best there is. Other than the huge mic that Krista uses, that's also a broadcast quality mic and actually has even better sound. So coming up, we just talked about something so lighthearted, talking about something really dead serious. The insurance industry basically has abandoned people as they age, who in good faith bought care for older age. What are we going to do about it? What should you do if you're in the middle of that situation?
12:42 Speaker 03 And what's the best thing for you to do since overwhelmingly, we're going to need at some point in our lives, if we live a long life, we're going to need care in some form of assisted living or help with things. What should we be doing to prepare? I'm going to talk about the present and the future, straight ahead.
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13:15 Speaker 01 Price and participation may vary. Promotion pricing may be lower than meal pricing.
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14:49 Speaker 03 You got about a 70% chance that in older age, you're going to need some form of assist with living. Either within home care. Being in a facility, a long-term care facility, maybe being in a nursing home. I mean, those odds are pretty strong. Roughly three quarters of us who live to an older age are going to need help. So a lot of people in good faith for decades bought a product called long-term care insurance. It one time was sold by hundreds, if not more than a thousand insurance companies. The insurance companies blew it.
15:30 Speaker 03 The actuaries way underestimated how many people would live a long time and also need in that long time, long-term care. And the policies failed. So the insurers put people into what are known as death spirals. There's a Barron's magazine story last month talking about what people with Genworth, which was one of the big long-term care insurers, how they're suffering because Genworth has been pushing through rate increases as high as almost 150%. So someone's been paying for years and years and years and years.
16:12 Speaker 03 And they're older now and they're getting hit with 150% increase. And bam, if you can't pay it, the policy's dead or you accept a much lower benefit that won't do much. This is when the insurance industry is just like, well, you know, it didn't work out for us. So it's not going to work out for you either. And their promises weren't worth the paper they were written on. Barron's in particular takes aim at AARP. AARP was getting commissions, getting money for guiding people to go to a particular provider for long-term care policy.
16:55 Speaker 03 And AARP said, this is the quote, well, that it passively licenses its intellectual property to commercial benefit providers and receives royalty payments in return. Wow.
17:12 Speaker 03 Wow. What kind of PR or something other is that meaning? Hey, anybody who pays this, we'll take their money and they can use our name. That's not good. So as a result, I'm looking at a chart here. Nobody buys long-term care policies anymore. I mean, basically, nobody. And so that means, how are you going to pay if you do need assistance later in life? And how about people that don't have family that will be able to help them? Because what's filling in the void so often now is adult children are taking care of their older loved ones, their older parents.
17:55 Speaker 03 And there are a lot of situations that's not going to be there. So there is no perfect answer to it. On the first thing I brought up about the big premium increases. If you've been paying a long, long time and you don't like it, but you have the resources and you can afford to keep the policy in place, pay the premium increase. Pay the increase. But what does somebody do today who's hearing me or watching me? You're trying to figure out, what do you do down the road? How do you take care of down the road? What should you be doing? So you can buy a policy from the insurance industry now that will give you a set benefit.
18:34 Speaker 03 What happened with these policies is like my late mom had one that just automatically paid all the costs that she incurred over, I think it was eight years in long-term care before she died at 92. But it paid everything. That doesn't happen anymore. So you can buy an insurance policy that usually is embedded inside a whole life insurance policy that will pay you to your survivors either the death benefit you purchased or make that available to you as what's known as a living benefit for long-term care.
19:18 Speaker 03 And that is the least bad alternative I know of today for people who can afford it and have means. The truth is, most people don't have a lot of assets, don't have a lot of means, and end up having your state pay for it.
19:37 Speaker 03 Through the state Medicaid program. Medicare doesn't pay, but the Medicaid program ends up paying for most assisted living in the United States, most nursing home care in the United States. But if you're in the muddy middle and you have decent assets, but you're not crazy rich, because if you're crazy rich, you may spend more paying for long-term care than you pay for your lifestyle as is today. But if you're in that muddy middle, looking at one of these whole life policies may be the best alternative available at this time. Krista?
20:15 Speaker 04 Ron.
20:16 Speaker 03 That was not a happy topic.
20:17 Speaker 04 Well, it's reality. Ron in Colorado says, I've listened to your show since the 90s and I've learned so much. Thank you for all the wonderful, helpful advice you and your team provide.
20:25 Speaker 03 Thank you.
20:26 Speaker 04 I've accumulated substantial amount of assets. I'm 69, single, healthy, never married, no kids, and my two older brothers live 1,000 miles away. I have a lot of acquaintances where I live. However, I don't have any close friends nearby. I need someone to act on my behalf if I'm incapacitated and handle my estate when I die. Who do you sugge-- what do you suggest? I'm not comfortable with my situation and have to get my estate in proper order. It'll take a great weight off of my mind.
20:53 Speaker 03 Ron, you know, as more and more of us are single in society and a lot of people don't have kids today, we don't know where we turn in this case. And what has become more and more the case is you hire a lawyer as your fiduciary, who is the one you pay to be in a position to be your advocate and ultimately handle your estate later. And I'd be surprised if it's different in Colorado than other states. That is the most common thing that happens if you take care of this in advance.
21:33 Speaker 03 You hire a lawyer and you can have them be both your durable power and durable power attorney for health care. I prefer that for the healthcare thing, that if one of your older brothers, no thousand miles away, if they are willing to be your durable power of attorney for healthcare, which means they're the one who is in your stead, helps make decisions if you're incapacitated, you can't say what your wishes are. And many states now have what are known as statutorys, which are documents that are fill in the blank, that you state your wishes on a series of questions,
22:18 Speaker 03 and then you state who your messenger is, who carries out your wishes. And that could be one of your brothers. It could also be the lawyer that you hire to handle the other things. Based on the dynamic of your family, and the situation you described on the healthcare side, it could be either. It could be either of your brothers, or you could name both one to serve. In the event one can't or chooses not to, the other would serve. Or if it feels simpler to you and better to you, the lawyer who you're having handle your estate is also the one that would be carrying out your healthcare wishes.
22:59 Speaker 04 This is from Chelsea in Minnesota. The last day I saw one of my two car keys was months ago. I have thoroughly searched my house many times, but still haven't turned up. We would like to sell or trade in the car as our teen son is getting too tall to sit in the backseat. Most places or individuals want two keys for the largest sale value. It costs several hundred dollars to get the key replaced at a dealership. I see ads for online and in-town locksmiths who may be able to program my fob for less, but I don't want to waste money on something that doesn't work or risk having someone make a copy for themselves and come steal my car from my driveway. What's the least expensive and most trustworthy option for getting a car key with a fob replaced?
23:43 Speaker 03 Okay, this is a wonderful question, and the marketplace has changed on this. There are now companies. That all they do is do this. They are mobile services. People who shop regularly at discount stores and warehouse clubs will see their road shows that set up at a Sam's Club, a Costco, a Walmart, whatever. And they make the key right in front of you. They program the fob right in front of you. And they are all priced at a fraction of what it is to get a replacement fob programmed at a dealership.
24:24 Speaker 03 You can order a blank fob if you've lost the fob like you have. You could order a blank fob online for a much lower price and pay the dealership programming fee. A lot of cars though now have the ability to program the one you order self-service instead of having to program at a dealership.
24:48 Speaker 04 I've also taken the fobs I ordered online to the locksmith and they've done it.
24:52 Speaker 03 And they've done it. So this is something that's gotten much easier. If you are a Sam's or Costco member, they will put for your local club usually online what road shows or have road show events. And when they're happening, you may well see that your local club is having a fob event is one of their events because there's so much demand for this. Because who has not lost a key to a vehicle? I'm looking, I don't see a hand anywhere. And I am so flaky, I lose everything. I mean, people who make fun of me wearing cargo, you know, pants with cargo pockets.
25:37 Speaker 03 I wear them because then I know exactly, okay, my wallet goes here, my phone goes there, my keys go here because I am so flaky.
25:47 Speaker 04 All right, here's a question from Thomas. He says, "I'm trying to sell my own vehicle. I know I have to be careful of scams. People are asking for the VIN number. I'm reluctant to give that out and tell them they can get it when they see the car. What do you think about handing out your VIN?"
26:01 Speaker 03 Okay, so Thomas is funny because we're on two different sides of mentality about this. I always tell somebody looking for a used vehicle to get the VIN because, and if you look at any used vehicle seller online now that's a dealer, almost always they list the VIN number there. So if you want to, before you would ever go look at the vehicle, you can run vehicle title history. We have a way for you to do that for free on Clark.com, but you could buy temporary access to one of the VIN check services. And what you're seeing there, you're seeing if a vehicle's been in a major accident that was reported
26:42 Speaker 03 in insurance industry database, or the wreck is really important, or the title history. And so there's very useful information there, Thomas, that people want to see. And it's not necessarily for some bad purpose they're asking. It's actually protecting themselves. I remember years ago when Krista was trying to buy a vehicle, a used vehicle, and she would call up people or send a message asking for the VIN. And what would you say, 90% of the people you called hung up on you?
27:22 Speaker 04 No, I would say in that point, maybe like half of the people just were like, "No, wouldn't give it to me" because it was, there were bad ads. But then when I had the cars inspected, most of them failed the inspection.
27:34 Speaker 03 I remember, how many inspections did you pay for before you found a vehicle that was okay? Was it three?
27:40 Speaker 04 It was four, I think.
27:41 Speaker 03 Four.
27:41 Speaker 04 So, because I did a total of five. Yeah. So I paid for five, but four didn't work out.
27:46 Speaker 03 And so that's what you need to know. Why is it I'm so insistent about you having a used vehicle inspected is one of the most important parts of buying a used vehicle? Because used vehicles have histories, and a lot of times they're not so good. And so having it inspected as part of purchasing one is so good because there is no lemon law, except I think in three states for buying a used vehicle. You buy it, whatever problems there are, and the courts have made it clear that no matter what somebody tells you, it does not matter. And the sticker, if you go to a dealer, says as is no warranty on almost all of them. And it even says in there, you can't rely on anything said to
28:30 Speaker 03 you. Anything you do, buying one is your problem. That's why having the mechanic inspecting the vehicle of your choice is money well spent, because you think, why did I spend the money for that? The mechanic said the car is good. Yeah, that's why you spent the money, to know that before you spend the big money buying a vehicle, it was good. Or in Krista's case, avoiding trouble four times on cars that look good, with the fifth being the lucky charm. And that did turn out to be a good reliable vehicle, as I remember. So that's, that's the thing. So Thomas, there's a legitimate reason why people want that
29:14 Speaker 03 VIN. There may be some bad things people do possessing a VIN, but I'm not sure what those would be. And I hope you have a wonderful, wonderful day. And it's been our pleasure being with you today here on the podcast and the YouTube show. And if you're not subscribing right now, and you just kind of found your way to us, wherever you like listening to podcasts, just click that subscribe button. On YouTube, click the subscribe button. And on YouTube, I want you to know that when you subscribe to us, not only do you get the, the full length of our show, but you get little vignettes from me on specific
29:55 Speaker 03 topics, shorter form information on information you can use for your wallet, scams you can avoid, and the rest.
30:06 Speaker 03 And everything we're about, whether it's with our newsletters that you can subscribe to at Clark.com/newsletter or newsletters, our websites, our social media, what I do on if a radio station or TV station where you live carries me, everything we do is devoted to you being empowered so you can save more, spend less, and avoid getting ripped off. And we'll see you tomorrow.
30:37 Speaker 00 Your sausage McMuffin with egg didn't change, your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just $5, only at McDonald's for a limited time.
30:50 Speaker 01 Pricing participation may vary. Promotion pricing may be lower than meal pricing.
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