The digital revolution in banking is one of the major investment themes of the young century, pushing big share-price and valuation gains for financial-technology upstarts like PayPal Holdings and Square, as well as network giants like Mastercard and Visa. Younger consumers have embraced cash-transfer apps like Venmo and, to an extent, cryptocurrencies. Some retailers have tried to ditch cash and take all payments in digital or card form.
But where there is revolution, there is counterrevolution. It turns out that good old-fashioned cash has a constituency—and investors may regret ignoring it.
U.S. News & World Report
How to apply for Social Security
Cash money
Some companies historically linked to physical cash have seen their share prices soar since the start of 2019.
You can apply for Social Security online at ssa.gov, by calling 1-800-772-1213 or in person at your local Social Security office. You must be at least 61 years and 9 months old to submit an application for retirement or spousal benefits, and payments can start as early as age 62. Your age when you enroll plays a big role in determining your payment amount, so take care to see how much you will receive at various claiming ages.
When can I apply for social security?
You can get a personalized estimate of your future Social Security benefit by creating a My Social Security account at ssa.gov/myaccount and viewing your Social Security statement. Your statement lists how much you are likely to receive in retirement if you continue working at your current salary until your full retirement age, age 62 and age 70.
"If you look at your Social Security statement today, your estimated benefit is based on your previous year's income," says Ross Menke, a certified financial planner and founder of Lyndale Financial in Nashville, Tennessee. "If you do stop working earlier, that will have an impact on what you would be eligible to receive as a Social Security benefit."
The statement also lists how much you will qualify for if you become disabled and what family members might receive if you pass away. Social Security statements are mailed to workers age 60 and older who don't have a My Social Security account.
How much social security will I get?
Most workers pay 6.2% of their earnings into the Social Security system, and employers match this amount. Self-employed workers contribute 12.4% of their paychecks. However, earnings that exceed $137,700 in 2020 are not taxed by Social Security or used to calculate retirement payments. Workers who earn more than $137,700 will see a bump in their paycheck when Social Security taxes stop being withheld.
Your Social Security payments might also be taxed in retirement. If the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefit exceeds $25,000 ($32,000 for couples), federal income tax could be due on part of your Social Security benefit. If these income sources exceed $34,000 ($44,000 for couples), up to 85 percent of your Social Security payments may be taxable. There are also several states that tax Social Security benefits.
What is the social security tax limit?
You can work and collect Social Security benefits at the same time. However, if you haven't reached your full retirement age, part or all of your Social Security payments could be temporarily withheld. Social Security beneficiaries who are younger than their full retirement age can earn up to $18,240 in 2020 before they will lose one benefit dollar for each $2 earned above the limit.
The earnings limit jumps to $48,600 for those who turn their full retirement age in 2020, and the penalty decreases to $1 withheld for every $3 earned above the limit. However, once you turn your full retirement age, your benefit will be recalculated to give you credit for your withheld benefit and continued earnings. You can earn any amount without being subject to Social Security withholding after you turn your full retirement age.
What is the social security wage limit?
Social Security payments to retired workers averaged $1,478 per month in November 2019. The average spousal payment is about half that amount, or $773. Widows and widowers receive survivor's payments worth an average of $1,199 monthly.
What is the average social security benefit?
The maximum possible Social Security benefit changes depending on the age you retire. A worker who retires at full retirement age in 2020 could be eligible for up to $3,011 per month. The maximum benefit declines if you start collecting payments before your full retirement age, while someone who delays retirement until age 70 can collect a higher monthly benefit.
To qualify for these large payments, you need to maintain a high income throughout a career of 35 years or more. "Those who receive the maximum benefit possible are those who've earned at or above the highest taxable wage base all of the years that are used in the benefit calculation," says William Meyer, founder and managing principal of Social Security Solutions, a company that analyzes Social Security claiming strategies. "That person would have exceeded the maximum taxable earnings in each of the highest 35 years."
What is the maximum social security benefit?
Many U.S. citizens with a driver's license or state-issued identification card can use their My Social Security account to apply for a replacement Social Security card online. You can also fill out a paper application and mail it in or take it to your local Social Security office.
How do I get a new social security card?
Most Americans contribute 6.2% of their earnings to the Social Security system, and employers pay a matching amount. Those who are self-employed pay 12.4% of their income into Social Security. Workers who have sufficiently paid into the system can collect retirement benefits beginning at age 62 or older. You may also be eligible to collect benefits if you become disabled, and your family members might qualify for survivor's payments after you pass away.
How does social security work?
If you have a medical condition that significantly limits your ability to work and perform basic activities such as walking or remembering, you might qualify for Social Security disability payments. Be prepared to provide medical records documenting your condition and why it prevents you from working. Social Security disability payments won't start until six months after your disability began. There's also a several-month wait time to process disability applications.
How do I qualify for social security disability?
Social Security beneficiaries are required to sign up for electronic payments. Social Security benefits can be directly deposited into a bank or credit union account or loaded onto a prepaid debit card. The payment dates vary based on your date of birth. If your birthday falls on or before the tenth of the month, you will receive your payment on the second Wednesday of each month. Those born between the 11th and 20th get their payments on the third Wednesday, and people born late in the month get their direct deposits on the fourth Wednesday.
When will I receive my social security check?
Last year, flows into U.S. sustainable funds more than tripled, marking the fourth year of record flows, according to Morningstar. Talking about sustainability “is a way to build better relationships with clients. And it’s material to returns,” says Catherine Banat, managing director of responsible investing at RBC Global Asset Management. One beneficiary will be impact investing strategies—where people seek specific outcomes from their portfolios—many of which are aligned with the U.N. Sustainable Development Goals.
In 2019, according to the Global Impact Investing Network, assets in this market totaled around $500 billion, based on surveys with 1,300 impact investors. That will happen in mutual funds too: According to Morningstar, the largest impact funds include the $4.8 billion TIAA-CREF Social Choice Bond (TSBBX), the $2.4 billion Community Reinvestment Act Qualified Investment (CRAIX), the $1.2 billion Domini Impact International Equity (DOMIX), and the $1.2 billion AB Sustainable Global Thematic (ALTFX).
12. Flows will keep surging
Particularly of people who are great at building computer models and handling large data sets, and who are thick-skinned when dealing with corporate executives and officers. “There’s a global hiring war in ESG right now,” says Manulife’s Chew.
13. Expect more hiring in the sustainability industry...
Even though cash will be around for some time to come, that isn’t an invitation to ditch bets on digital payments.
Source: FactSet
Shares of companies whose fortunes are tied to physical cash in a major way, such as ATM providers like Cardtronics or Diebold Nixdorf, or companies that transfer or protect cash, like Western Union or Brink’s, soared last year. Over the past year through Thursday, those four stocks on average are up 83%. That easily tops the average 39% gain for Mastercard, PayPal, Square and Visa.
A number of voices have arisen to oppose an all-digital future. They range from people advocating on behalf of lower-income consumers, who tend to use cash more, to companies in the cash business.
There have been some notable results. In January, New York’s City Council voted to ban cashless stores and restaurants. Philadelphia and San Francisco have made similar moves. In the U.K., banks increased subsidies for some cash machines after a spike in concern about “ATM deserts.” Amazon’s first New York Amazon Go store, designed to use seamless mobile payments, started accepting cash last year.
For all that, there is little question electronic payments in the U.S., ranging from debit cards to mobile apps, are gaining ground.
In the most recent Federal Reserve survey of U.S. consumer payments, covering 2018, for the first time cash wasn’t the most common form of payment. It was surpassed by debit cards. Even a slim majority of payments in the survey under $10, long cash’s stronghold, were made by other methods.
Yet digital’s gain isn’t necessarily
coming at the expense of cash.
The overall pie still appears to
be growing.
Only two countries, Russia and
Sweden, had a net substitution
of cards for cash from 2007 to 2016,
with cash in circulation shrinking as
card payments grew, according to the
Bank for International Settlements.
In other countries tracked, including
the U.S., both cash demand and card
payments have grown. Fed governor
Lael Brainard said in December that
“physical cash in circulation for the U.S.
dollar continues to rise due to robust demand.”
The upshot is that some investors may have ditched companies tied to cash prematurely. Diebold Nixdorf has built and installed ATMs for financial institutions in more than 100 countries, and also provides other automation tools, services and software for banks and retailers. The shares struggled badly in 2018, but the company has slashed losses, helping propel the stock up 380% since the start of 2019.
Cardtronics, an owner or manager of some 300,000 ATMs globally that partners with retailers and financial institutions, is up 77% since the start of 2019. Brink’s, which moves and manages cash and other valuable goods for banks, retailers, governments and others, is up 34% since the start of 2019.
“There’s an inherent skepticism,” said Tobey Sommer, an analyst at SunTrust Robinson Humphrey who has Brink’s as one of his top picks for 2020. “Clients say, ‘I don’t have $100 in my pocket, I have cards and a phone.’ But they are well-banked investors. Not everybody gets platinum-card offers in the mail.”
Western Union, meanwhile, is up 62%. The company has improved its cost efficiency, and has also extended its business enabling people to send and receive physical cash to the digital realm and to new partners. For example, it partners with Amazon.com to let people pay for online purchases by using cash at a Western Union location.
Digital payments is where the biggest revenue growth will likely occur. But earnings at cash-linked companies have also been growing of late, and have come at a discounted price. The collective earnings of these four cash companies have seen a fivefold increase in the first nine months of 2019 over the prior year, yet they still trade at an average multiple of 15 times forward earnings. That is a far cry from the average of 44 times for the four
digital giants.
So cash’s persistence may open a window for some underappreciated stocks.
Of course, not all cash companies have outperformed. Notably, shares of U.K.-based bank note printer De La Rue sank last year. A contract for printing U.K. passports ended, and it took a charge when Venezuela’s central bank was unable to pay for its services. The company is restructuring to focus on currency and a growing anticounterfeit-technology unit, but has warned there is “significant doubt” it can continue as a going concern.
And the fact that cash will be around for some time to come isn’t an invitation to ditch digital-payment bets. That’s especially true for companies with exposure to China, where digital payments have leapfrogged cards and checks.
The main thing to remember: There is more than enough spending globally to keep a diversity of payments players swimming in dough.
Buttress a nest egg
with a cash stash
Kiplinger