Americans on economy: This hurts

Nationwide poll locates sore spots as consumers are knocked around by inflation and gas prices. Consumers hunker down but feel optimistic about future.

NEW YORK (CNNMoney.com) -- Some economists say the United States is not in a recession, but don't tell that to the majority of American consumers.

A national CNN/Opinion Research Corp. poll released this week found that the recent economic downturn has taken its toll.

Americans are driving less and even cutting back on necessities such as food and medicine. The financial strains have led a vast majority of people to believe that the U.S. economy has entered a recession.

"This economic downturn will be relatively mild according to the numbers," said Wachovia economist Mark Vitner. "But the pain and discomfort for the consumer will be the most severe since 1991, and possibly since 1981 to 1982."

But there is some hope for the future, as a majority of those surveyed feel that the economy will rebound in 2009.

Majority think U.S. economy is in a recession. Americans think the economy is now in a recession and the number who feel that way continues to grow.

Of the more than 1,000 adult Americans conducted March 14-16 , 74% said they believe the nation is now in a recession. That figure rose from 66% in February and 61% in January.

Economists' definition of a recession is two consecutive quarters of negative GDP growth, and though growth was sluggish in the last quarter - 0.6% - the U.S. economy has not yet shown one quarter of retraction. But to the average American, times are still tough.

"What they're describing is different from a recession - they're giving a common sense definition of a recession," said Wachovia economist Mark Vitner. "They're saying that these are tough economic times, and from that perspective they're absolutely right."

Inflation is top concern. Most Americans think times are tough because they are feeling the pinch from rising prices.

The survey showed that 65% said they are "very concerned" about inflation, and 26% said they are "somewhat concerned."

Unemployment concerns also loom large, with 59% saying they are "very concerned" and 27% saying they are "somewhat concerned" about job losses.

According to the Department of Labor, the United States has already lost 85,000 jobs so far in 2008, with February's net job report showing the worst loss in nearly five years.

American's concerns framed the issue that faced the Federal Reserve, which attempted to balance the threat of recession against rising inflation in its 3/4 percentage point cut of its key interest rate Tuesday.

The central bank cuts rates in order to boost the economy and, in this round, to stave off a recession. But lower interest rates can also weaken the dollar, sending inflation higher.

Though the Fed decided to cut rates further, it noted that "uncertainty about the inflation outlook has increased," in a statement following the rate cuts Tuesday. But the central bank said it will closely monitor inflation in the future.

"The Fed is definitely concerned, because [inflation] issues impact consumers," said Wachovia economist Sam Bullard.

Cash strapped, and driving less. Escalating prices - specifically rising gas prices - have taken their toll on Americans, causing them to drive less.

Seventy-two percent of respondents said recent price increases in gasoline have caused financial hardship for them or their households.

"For some time we've been trying to determine the breaking point for when gas prices take their toll on the consumer," said John Kilduff, an energy analyst at the trading firm MF Global. "It appears we've found that point."

Rising fuel prices have caused most Americans to cut back on their driving. Of the over 1,000 American adults surveyed in the poll conducted March 14-16, 64% said they have made some changes to their driving behavior as a result of higher gas prices, with 19% saying they have cut back on driving enough to have a major effect on their daily lives. And 5% say they have stopped driving altogether.

Financial pain hits close to home. The slumping economy is not only hurting Americans at the pump, but it's causing pain where it hurts the most: daily necessities like food and drugs.

Thirty percent of respondents are trimming their spending on food and medicine and that 57% are worried they will have to cut back soon. Nearly half said they have cut back on how much heating or electricity they use in their homes, and 53% are concerned that they will have to trim spending on heating in the future.

"Consumers are definitely feeling a pinch on rising prices of staple products like food," said Wachovia economist Adam York. "There are some consumers that are having some real trouble in this environment."

Typically in an economic downturn, consumers have shifted their spending from discretionary items like electronics and leisure activities in order to continue paying for food and drugs. But continually escalating prices may have left consumers with little left to cut.

A recent Commerce Department report shows that consumers' food and beverage spending dropped 0.2% in February from the previous month and grocery store sales fell 0.3%.

"Instead of buying steak, they're buying chicken," said York. "People are buying generics and reducing spending by shifting to cheaper alternatives."

Confident in 2009 turnaround. Though times are tough now, Americans believe the economy will bounce back by next year.

The poll showed 60% of respondents think economic conditions in the United States will be "good" next year, as opposed to the 75% who think the economic situation is "poor" now.

"Most people realize that the economy has cycles of ups and downs," said Bullard. "Fortunately, the last two recessions were some of the shortest on record, so in 2009 we should be pulling up out of this."

Americans agree with the economists. Eighty-three percent said they are "confident" that they will be able to maintain their standards of living next year, and 85% are "confident" they will keep their jobs over the next six months.

Consumers also showed faith that they would be able to pay off their future debts, with 90% of respondents demonstrating confidence they would be able to meet their monthly mortgage payments for the duration of the mortgage. Nearly as many Americans - 83% - said they could pay off college loans, car payments, and credit cards in the future. The average amount of credit card debt of those polled was $4,000.

"The Fed's rate cuts will start to take their toll later this year, and the economy should bounce back by the end of 2008," Bullard said.

College saving: Do it now

Whether the stock market is up or down, start saving for your children's education before it's too late.

NEW YORK (CNN) -- As the stock market was tumbling early this year, 40-year-old Eric Horowitz decided he could handle only so much pain. His daughter Elizabeth attends private high school, and a year from September she'll be a freshman in college. So Horowitz chopped his exposure to stocks to about 60% of his portfolio down from 85%.

"I think the stock market is always risky," says Horowitz, a single, divorced father in Manhattan, and a self-employed "executive coach." "You always bet on yourself first. First put your money into yourself, into your children."

Parents are spending record amounts for their children's education. The average cost for tuition, fees, room and board at a four-year private college is $32,307 this year, as calculated by the College Board. That's up 6% from the prior academic year.

"How am I going to make it?" asks Horowitz, who says he is already paying $30,000-a-year for Elizabeth's private school education. "How am I going to get all four years through - and hopefully she won't go to graduate school."

A common dilemma
Horowitz is not alone in fearing that the stock market could be too volatile to provide the income he needs to pay for Elizabeth's education.

Mutual fund giant T. Rowe Price says parents have been pulling back on investing in 529 college savings plans, which accumulate tax-free as long as the account is spent on a child's college education. New accounts this year are down about 20%, according to T. Rowe Price, while existing customers are contributing 10% less to 529s.

"It certainly appears as though it is the economy that's impacting consumers," says T. Rowe Price's Tom Kazmierczak. "It's very easy for parents to think to themselves that they can cut college savings when they have to choose between saving for college and paying for a mortgage," he says. "It really can be the wrong thing to do particularly if you've got younger children at home."

Financial advisor Thomas Henske of Lenox Advisors recommends that clients who can afford it tuck away $10,000-$12,000 annually in an investment account for each child beginning at birth. If the investments can achieve an 8% return, the child's college expenses should be fully funded at about $90,000 a year, he estimates.

"What's going to make the difference is putting that money away on a regular basis, investing it the right way with a long term approach," says Henske.

It's never too early
Robin Kahn, an attorney who is mother of two students at Millburn High School in New Jersey, says she and her husband Scott ignored a close friend who had advised them to begin saving for college when their children were born.

"It wasn't until the mid-90's when we started," says Kahn. "That was definitely a mistake. We should have listened."

Both children, Max, a senior, and Gabrielle, a freshman, now have investment accounts for college. But their parents expect to dip into their own savings for college.

"It's definitely not enough. We don't have enough for four-years for each of them," Kahn says. "We'll have to see what scholarships or grants or loans are available to us."

Horowitz also says he hasn't saved nearly enough to pay for Elizabeth's college. His plan is to set aside as much of his annual earnings as possible to pay for tuition, and take out loans for the remainder.

How Sulzberger beat the hedge funds at their own game

The New York Times chairman may have neutralized his hedge fund critics by giving them board seats.
NEW YORK (Fortune) -- It seemed too easy. Two months ago, a pair of little-known hedge funds informed the New York Times that they were mounting a campaign to elect four directors to the company's board. Monday, the nation's most powerful newspaper publisher capitulated and agreed to support two of the insurgent nominees at its annual meeting next month.

How could the Times be so easily bought to its knees? The dissidents - Harbinger Capital Partners and Firebrand Partners - amassed a nearly 20% stake in the Times (NYT). The company's controlling shareholders, the Sulzberger/Ochs clan, couldn't brush off them off as they did a Morgan Stanley (MS, Fortune 500) fund manager who tried to shake things up at the company last year.

The hedge funds have declared victory. But perhaps they are being a little hasty. The truth is, Arthur Sulzberger Jr., the company's chairman, may have been the true winner for avoiding a bitter proxy war that might have raised questions about his leadership and damaged the Times.

The New York Times, after all, is no ordinary public company. Presidents quake before Times' op-ed columnists like Maureen Dowd. Wall Street isn't as easily cowed - not when the company's stock has fallen nearly 60% in the last five years. But even deep-pocketed hedge fund managers can't play too roughly with the Paper of Record.

Harbinger and Firebrand grasped this far better than Morgan Stanley. Hassan Elmasry, one of the investment bank's fund managers, tried to force the Sulzberger/Ochs family to do away with the company's sacrosanct two-tiered stock structure. It's easy to see why. The clan owns shares that have super-voting rights, making the Times impervious to hostile takeovers.

If the family lost that veto power, a Rupert Murdoch could swoop in and add the Times to his empire. That would have been great for Elmasry's fund. But it would have threatened the quality of the company's flagship paper.

Elmasry ended up looking like a stereotypical Wall Street barbarian interested in nothing but a quick buck. The Sulzbergers came across as principled guardians of journalistic independence by standing up to him.

The new dissidents didn't make the same mistake. They bought up shares like typical green-mailers. But publicly, Harbinger and Firebrand offered the Times nothing but olive branches. "I want to assure you that we are not pursing a change in the dual class shareholder structure," Firebrand Partners founder Scott Galloway wrote Times chairman Arthur Sulzberger Jr., on Jan. 27.

Sulzberger, however, demonstrated that he had also learned something from his tussle with Morgan Stanley. He beat back Elmasry, but looked as if he was turning a deaf ear to the fund manager's legitimate complaints about the company's poor financial performance. That didn't sit well with the investors. At last year's annual meeting, half of the non-family shareholders withheld their votes in protest.

Now Sulzberger is wisely casting himself as a conciliator. Instead of ignoring the hedge funds, he agreed to enlarge the company's 13-member board to make room for two of the candidates proposed by the hedge funds: Scott Galloway and James Kohlberg, co-founder of private equity firm Kohlberg & Company.

In doing so, the Times chairman may have may have effectively neutralized the dissidents - at least, for a while. The hedge funds can't complain that he is ignoring them, but they don't have enough votes to sway the board either.

Perhaps Harbinger and Firebrand might have done better if they had a chance to fight it out with the Times over board seats. That way, they might have rattled the company's controlling shareholders and forced them to sell some non-core assets like the company's stake in the Boston Red Sox to boost shareholder value. Now the hedge funds have to play nice - even with nearly 20% of the company's shares.

Oh, and about those shares. In the end, Harbinger and Firebrand want a sizable return on their investment. They are likely to discover there are no miracle cures for newspaper publishers. Isn't that what Times CEO Janet Robinson has been saying for a while? Well, nobody can say that Harbinger and Firebrand haven't been warned.

Stocks surge in early going

Wall Street aims higher as investors welcome Lehman and Goldman earnings, and gear up for the Fed.

NEW YORK (CNNMoney.com) -- Stocks rose at the open Tuesday as investors welcomed better-than-expected earnings from Goldman Sachs and Lehman Brothers and geared up for an expected interest rate cut from the Federal Reserve later in the day.

The Dow Jones industrial average added over 200 points or 1.7% at the open. The Nasdaq composite index gained 1.9%. The Standard & Poor's 500 index rose 2.2%.

Stocks were mostly lower Monday after Bear Stearns (BSC, Fortune 500)' fire sale to JP Morgan chase (JPM, Fortune 500). However, falling commodity prices and anticipation about the Fed helped stocks close off the lows.

In the news Tuesday:

Lehman Brothers. Shares of the brokerage surged 20% after it reported weaker quarterly sales and earnings that beat estimates, despite taking $1.8 billion in writedowns for bad mortgage bets. Lehman also sought to reassure investors that it was not in danger of seeing a fate similar to that of Bear Stearns, saying that it has maintained a strong liquidity position. Stock (LEH, Fortune 500)

Goldman Sachs. The Wall Street firm managed to report another quarter of better-than-expected sales and earnings, despite the ongoing market turmoil, although results were sharply lower versus a year ago. Shares gained 9% at the open. Stock (GS, Fortune 500)

Federal Reserve. Central bankers meeting Tuesday are expected to cut the fed funds rate, a key overnight bank lending rate, by as much as a full percentage point, with an announcement expected at 2:15 p.m. ET. The Fed has already cut the fed funds rate by 225 basis points since September as a means of shoring up the struggling economy and unfreezing the blocked up credit markets. There are 100 basis points in one percentage point.

Housing. New home construction fell in February to just over a million properties, beating forecasts for a bigger drop. Building permits, a measure of builder confidence, tumbled more than expected.

Inflation. The Producer Price Index (PPI), which measures inflation at the wholesale level, rose as expected in February. But core PPI, which excludes volatile food and energy prices, rose more than expected.

Gold glitters again - sets new record

Investors flock to the commodity amid sinking dollar and worries about rising inflation.

NEW YORK (CNNMoney.com) -- Gold futures soared to a fresh all-time trading high above $1,000 an ounce Friday as the dollar sunk to new lows.

COMEX gold for April delivery touched $1,007.30 an ounce in morning trading before slipping back a bit.

After weeks spent hovering below the key psychological mark, gold finally hit $1,000 an ounce for the first time Thursday.

Behind gold's surge has been a drop in the dollar, which dropped below 100 yen for the first time since 1995 Thursday. It also has hit a string of record lows against the euro.

The greenback has fallen to record lows amid fears of a protracted slowdown in the U.S. and concerns about rising inflation.

A key inflation reading released by the Labor Department Friday showed consumer prices were flat last month, but there are signs that price pressures are building.

Commodity prices have soared recently. Oil prices have set 12 record highs in the past 13 trading sessions. The front-month crude contract is now trading just below $111 a barrel. Gasoline has set record highs for four straight days, as U.S. drivers now need to shell out an average of $3.28 a gallon.

Targeting the right fund mix

It’s easy to select a good asset allocation for your nest egg on your own, but if you don’t have the discipline to stay balanced, a target-date retirement fund could be your best option, says Money Magazine’s Walter Updegrave.

Question: I’ve got my 401(k) invested in a target-date retirement fund. I’m wondering, though, whether I would be better off investing it in large-cap, mid-cap, small-cap and blended funds, putting 25% into each option. What do you think? –J. Duffaut

Answer: You’ve no doubt heard the expression, “First, do no harm.” (You scholarly types may be more familiar with the Latin version, “Primum non nocere.”)

It’s a bedrock principle that all good physicians adhere to. The idea is that a doctor shouldn’t dole out medicine or prescribe a treatment that has an uncertain benefit for the patient but may have a good chance of causing harm.

In other words, a doctor must consider the downside before intervening.

Well, I think that individual investors - and particularly people who are building a nest egg for retirement in a 401(k) or similar account - ought to take this principle to heart as well.

Take the case of 401(k)s and target-date retirement funds. The number of 401(k) plans offering target funds has mushroomed over the past few years and more and more participants are plowing their contributions into this option. I think the growing popularity of target funds is good for two reasons:

1. They make retirement investing easy. Just choose a target fund with a date that roughly matches the year you plan to retire, and you get a ready-made diversified portfolio of stocks and bonds that’s appropriate for someone your age. What’s more, the fund automatically shifts its mix more toward bonds as you age, so that you take less investing risk as you grow older.

2. They can save us from our own worst impulses. Here I’m talking about our tendency to chase hot funds and sectors, buy into inflated asset classes and pour too much money into company stock and other investments that may be risky but we don’t necessarily see as risky. In short, target funds make it harder for us to sabotage our own retirement planning efforts.

Are target funds perfect? Of course not. But if your 401(k) offers this option, then it seems to me that before you reject it in favor of other funds, you ought to ask yourself: Can I do better on my own?

The answer may very well be yes. You don’t have to be an investing savant to put together a decent portfolio of stock and bond funds. But you do have to take responsibility for creating and maintaining a workable investment strategy - that is, deciding on a reasonable mix of stocks and bonds, choosing appropriate funds, monitoring their performance and then rebalancing your portfolio once a year.

If you don’t know enough about investing to do this or you’re not willing to put in the fairly minimal time and effort needed to do it (or you know deep inside that you’ll probably give in to the urge to tinker often enough that you may undermine your efforts), then it seems to me that taking an active approach has the potential to do more harm than good. In which case, I’d say you’re better off with a target fund.

Now, I don’t know you well enough to judge how capable or responsible an investor you are. But based on your question, my guess is that you’re probably a good candidate for a target fund.

Why? Well, you talk about putting equal amounts of money in large-, mid- and small-cap funds. That means you’ve got twice as much money in mid-size and small stocks combined as you do in the big boys. (Let’s leave the “blended” funds aside since I’m not sure what kind of funds you mean.)

But if you take a look at the percentage of total market value that large-, mid- and small-cap stocks actually account for in the stock market, you find that large stocks represent almost 75% of market value and mid- and small-caps combine for the other 25%. (You can see this for yourself by plugging the stock market ticker for Vanguard’s Total Stock Market Index fund—VTSMX—into the Instant X-Ray tool.)

This means that investors as a whole have allocated about three times as much of their capital to large stocks than medium and small ones. You, on the other hand, are proposing to do pretty much the opposite by putting twice as much in the mid-size and small stocks.

If you’re doing this because you believe you have insights that investors overall lack - in effect, you think they’ve made the wrong decision - then fine, maybe it makes sense to go so far against the grain. But if you don’t have insights or information the rest of the investing world doesn’t have, then I don’t see how you can justify divvying up your money as you’ve suggested.

Either way, I can tell you that by piling so much into mid- and small-size stocks (and putting nothing in bonds, unless they’re in your “blended” category), you are creating a very volatile portfolio that, if nothing else, is virtually guaranteed to give you a white-knuckle ride.

So I guess I would answer your question with one of my own - namely, how did you come up with that 25%-in-each-group strategy? And unless you have a very cogent reason for it, I’d say you’re better off sticking with your target-date fund.

That’s not to say, however, that at some point in the future you can’t switch out of your target-date fund and into a portfolio of individual funds you’ve created. But for that to make sense, I think at the very least you would want to have read a few of our Money 101 lessons, starting with the basics of investing, then moving on to stocks, bonds, mutual funds, asset allocation and, of course, retirement planning.

Until you do that, however, I say your first obligation is to do no harm, which means staying put in that target-date fund.

Lawmakers take aim at CEO compensation

High-profile former Wall Street CEOs and the head of the nation's largest home lender will testify before a Congressional committee examining the link between executive pay and the mortgage crisis.

Rep. Henry Waxman, D-Calif.
Why were executives at the helm of some of the world's largest banks compensated so richly even as their industry was being pummeled by the mortgage meltdown?
Lawmakers will pursue this question Friday when the House Committee on Oversight and Government Reform hears testimony from two former Wall Street CEOs, Charles Prince and Stanley O'Neal, and the chief of the nation's largest mortgage lender, Angelo Mozilo.

At issue are the salaries, bonuses, perks and stock awards that the executives received as the companies under their leadership took enormous losses on bad bets related to mortgage backed securities. Calls for accountability have become increasingly louder as the housing market continues to deteriorate and homeowners across the country face foreclosure.

Henry Waxman, the Democratic congressman who chairs the Committee, has developed a reputation as an aggressive reformer during his thirty years representing the Los Angeles area on Capitol Hill.

As a ranking member on the Committee, Waxman has tackled issues ranging from the high cost of prescription drugs to waste, fraud, and abuse in government contracting. Most recently, Waxman's committee made headlines when it held a series of high-profile hearings on the illegal use of steroids in major league baseball.


Stanley O'Neal, Merrill Lynch & Co.
2006: $46 million.
Stanley O'Neal relinquished his title as chairman and CEO of Merrill Lynch & Co. in October, after a 21-year career there, and less than a week after the company reported an $8 billion loss on subprime related investments.

According to a profile from Harvard Business School, where he earned his MBA in 1978, O'Neal was born into poverty in Alabama. As a young boy, he labored on his family's cotton farm while his mother worked as a cleaning lady.

He rose through the ranks at Merrill, becoming president and chief operating officer in July 2001. He was tapped as CEO in December 2002 and added the title of chairman in April 2003. The posts made him one of the most powerful African-American executives on Wall Street.

O'Neal was eventually replaced by John Thain, the former chief of NYSE Euronext. In 2006, O'Neal received $46 million in total compensation, including an $18.5 million bonus and $26.8 million in stock awards, according to SEC filings.


Charles O. Prince, Citigroup Inc.
2006: $24.8 million.
Charles Prince stepped down as CEO of Citigroup Inc. in November, not long after world's largest bank reported a 57% drop in quarterly earnings and lost nearly a quarter of its market value.

"It is my judgment that given the size of the recent losses in our mortgage- backed securities business, the only honorable course for me to take as chief executive officer is to step down," Prince said in a statement at the time.

Two months after Prince walked away, Citigroup suffered a $10 billion quarterly loss -- the largest ever in the company's history -- and announced an $18.1 billion writedown due to mortgage-backed investments.

In 2006, Prince's total compensation was $24.8 million, including a $13.2 million bonus and $10.4 million in stock awards. As part of his separation agreement with Citigroup, Prince is entitled to an office, executive assistant, and a car and driver for up to five years, according to a SEC filing.


Angelo Mozilo, Countrywide Financial
2006: $42.9 million.
Angelo Mozilo has already heard from lawmakers about the level of his compensation as the CEO of Countrywide Financial Corp.

Mozilo reportedly stood to collect a windfall of $115 million dollars after his firm agreed in January to a yet-to-be completed $4 billion sale to Bank of America. But after facing heavy criticism from lawmakers, including Sen. Hillary Clinton, Mozilo said he would forfeit $37.5 million in payments tied to the deal.

In January, Sen. Charles Schumer and Rep. Barney Frank, both openly criticized Mozilo's compensation as Countrywide became a symbol of the subprime mortgage crisis.

"Mr. Mozilo could display some goodwill by donating any severance pay he stands to receive to the nonprofit housing counselors trying to prevent foreclosures," Schumer said in a statement.

In 2006, Mozilo took home $42.9 million in compensation.

NEW YORK (CNNMoney.com) -- Despite all the pain the U.S. dollar has endured in recent days, the greenback may still have further to fall before seeing

Adviser-recommended annuities aren't always a red flag, but proceed with caution. Make sure you know what you're getting into before you buy in says Money Magazine's Walter Updegrave.

NEW YORK ( Money) -- Question: My 63-year-old mother earns about $1,200 a month, has $90,000 in savings and, as a result of a recent refinancing, has a $90,000 30-year mortgage. In three years she will begin collecting an estimated $1,300 a month from Social Security. A financial adviser suggests she put $60,000 into a variable annuity that is guaranteed to double in value in 10 years. Is this a good idea? --David, Denver, Colorado

Answer: Whenever someone tells me they're considering an investment that purports to deliver lofty guaranteed returns, my antennae automatically go up. Doubling your money in 10 years amounts to an annualized 7.2% gain, a guarantee that borders on too-good-to-be-true in almost any market, especially today's.

When this investment involves an annuity, I become even more suspicious because annuities are notorious for hitches and complications that can make them far less appealing than they seem.

And when I see that this annuity is being pitched to an older person, alarm bells really begin to go off for me because regulators have long warned about sales people earning big commissions by convincing seniors, often at "free lunch" seminars, to put their money into annuities and other investments that are often inappropriate.

I don't say all this because I am "anti-annuity." On the contrary, I think in many cases it can make sense for retirees to devote a portion of their savings to a certain type of annuity - an immediate annuity, a.k.a an income or payout annuity - while leaving the rest in conventional investments like stock and bond mutual funds. The idea is that the annuity can offer a guaranteed lifetime income, while the funds can provide liquidity as well as long-term growth.
Beware of hidden fees
But variable annuities are a different breed. They're often sold more as tax-advantaged investments than income vehicles. With a variable annuity you get to invest in "subaccounts," essentially mutual fund portfolios, whose gains are sheltered from taxes as long as your money remains in the annuity.

That sounds just peachy, but there are downsides too. When you pull those gains out of an annuity, they're taxed at ordinary income rates, even if they're long-term capital gains that are normally taxed at more attractive long-term capital gains rates. And most annuities also carry high fees that can dramatically reduce their returns and, in my opinion, undercut their effectiveness.

Over the past few years, many advisers have begun selling a type of variable annuity that's designed to provide retirement income. It's called a variable annuity with a guaranteed minimum withdrawal benefit. But as I've noted before, I believe the combination of this annuity's mind-boggling complexity and generally blimpish fees make it an inferior choice to a combination of a plain-old immediate annuity and mutual funds.

Get it straight
I don't know which type of variable annuity your mom is being pitched. But I do know that she needs to understand what it costs and how it actually works.

Just getting a handle on costs can be daunting because the disclosure of fees is, how should I put it, so non-consumer friendly that you can't help but wonder if annuity sellers are purposely making it difficult for people to understand what they're paying. I've proposed an E-Z Annuity Fee Disclosure form and, who knows, maybe one day annuity companies and regulators will come up with something similar (or better) on their own to help people like your mom.

As for understanding how the annuity works, that's an even bigger challenge. Let's start with that guarantee you mentioned. What exactly is guaranteed to double in 10 years? You might assume that it's the value of your account - that your mom invests $60,000 and in 10 years is guaranteed to have $120,000 no matter what happens in the financial markets.

But there may be any number of strings attached to that sum. For example, your mom might not actually be able to withdraw $120,000. To collect on the guarantee, she might have to take that amount in payments over the rest of her life. And the annuity company could pay a subpar return during that time, in effect taking away at the back end the alluring gain the annuity appeared to deliver the first 10 years.

Your mom also needs to know what happens if she has to get to her money for unexpected expenses or an emergency. Most variable annuities come with surrender charges that can start at 10% or more and take years to disappear. Many annuities allow you to withdraw up to 10% of your account value with no withdrawal charge, but withdrawals can also affect the guarantee. (Withdrawals from an annuity before age 59 1/2 can also trigger a separate 10% IRS penalty tax. That's not a concern for your 63-yer-old mom, but other readers should keep this tax in mind.)

Question an adviser's motives
My advice is that you and your mom sit down with an adviser and figure out how much income she'll need in retirement and how she should get it given her resources. She may not need an annuity. After all, Social Security provides lifetime income that's adjusted for inflation. If an annuity does make sense, the adviser can help her decide which type is right for her.

A fee-only planner willing to work on an hourly or flat-fee basis would be most likely to provide the most independent advice. You can find such planners in your area by clicking here.

One final note: I couldn't help but wonder whether your mom's $90,000 in savings came from the proceeds of her $90,000 refinancing. That led me to wonder whether the adviser recommending the annuity also recommended the refi.

If so, I'm not saying there's anything necessarily sinister going on. But it would raise additional suspicions in my mind about the adviser's motives, especially given all I hear about seniors being steered into reverse mortgages by people looking to sell them annuities or other products. If you come to the conclusion that the annuity salesman was behind the refi and that the goal was to sell your mom an annuity she didn't really need, I'd recommend reporting the incident to the Securities and Exchange Commission, the Financial Industry Regulatory Authority (FINRA), your state securities regulator and your state insurance department.

I think it's worthwhile keeping regulators informed about what's going on given all the inappropriate investments, scams and other ploys being directed at seniors these days. Who knows? The information might prove helpful later on for someone else's mom.

Dollar: It will only get worse

Greenback likely to stay under pressure in near term but find relied by mid-year, currency experts argue.

NEW YORK (CNNMoney.com) -- Despite all the pain the U.S. dollar has endured in recent days, the greenback may still have further to fall before seeing any sort of relief, according to currency experts.

Driving much of the dollar's decline this week were tepid remarks about the U.S. economy by Federal Reserve Chairman Ben Bernanke, who hinted that the central bank would cut interest rates once again at the Fed's March meeting.

Those comments, combined with a number of troubling signs about the strength of the U.S. economy, helped send the dollar tumbling to multi-year lows against a host of currencies including the Swiss franc, the Malaysian ringgit and Japanese yen.

"It all points towards a weaker U.S. economy and currency traders don't want to be exposed to that kind of risk," said Gareth Sylvester, senior currency strategist and self-described "dollar bear" at HFIX Plc in San Francisco.

But perhaps the most notable move of the week was the dollar hitting successive all-time lows against the euro, breaking the key psychological barrier of $1.50 for the first time since the 15-nation currency was launched in 1999.

Currency experts, however, argue that the dollar will remain under pressure at least through the next month or longer.

If next Friday's February employment report is as bad as economists are anticipating, argues Joe Francomano, manager of foreign exchange with Erste Bank in New York, the greenback could possibly hit rock bottom at that point.

"You are going to see the momentum of this week carry over as far as dollar weakness goes and culminate next Friday," said Francomano.

How far could it fall?

The prevailing forecast lately is that the dollar will hit a ceiling of $1.55 against the euro in the near term and fall further against the yen, sinking as low as ¥101 or ¥102.

Even the most bearish currency experts agree that the pressure on the dollar should abate some time around the middle of 2008, after the Fed winds down its rate-cutting campaign and as the sluggish U.S. economy starts to perk up.

But where the dollar heads after that is anyone's guess.

Greg Anderson, executive director of forex strategy at ABN AMRO, expects the greenback to move towards $1.56 against the euro as 2008 comes to a close.

Ertse Bank's Francomano, however, argues that the dollar should wind up around $1.46 against the euro by year end as investors are lured back in by a discounted greenback.

"When the bad data has been processed and the Fed has cut rates to 2 percent or so, then expect the dollar to look cheap," said Francomano.