7 ways your money is changing

4. Dividends: No guarantees

The association between constant dividends and financial health is broken. Companies that paid dividends continually for many years were considered the strongest. The companies that raised them the longest were regarded as really solid. But the recession and other developments showed that there are few havens nowadays. General Electric (GE, news, msgs), Pfizer (PFE, news, msgs), Alcoa (AA, news, msgs) and many other industrial companies, just about every major bank and many insurance and real estate firms cut or eliminated payouts over the past year.

The new thinking: If a company is convinced it has a better use for its cash than to distribute it to shareholders, then don't necessarily punish the stock because of a dividend cut. After all, GE's stock surged 38% from Feb. 27, when it slashed its dividend 68%, through June 30. Shares of Alcoa have skyrocketed 66% since the aluminum giant chopped its payout 82% on March 16.

This doesn't mean you can't find solid dividend payers. The key, though, is dividend growth, not a very high yield. Consider these three serial dividend boosters as an excellent foundation for a long-term portfolio of growth stocks: Abbott Laboratories (ABT, news, msgs), Coca-Cola (KO, news, msgs) and Sysco (SYY, news, msgs).

5. Credit: Tougher to come by

No more liar loans and other sketchy subprime credit, of course. Even after home prices stabilize, the 30-year fixed-rate mortgage with a substantial down payment will once again become the cornerstone of the housing industry.

Partly that's because the big banks feeling financial stress are and will remain under pressure from regulators and shareholders to tighten up. Also, local and community banks will be making a larger share of mortgages. Those institutions tend to keep loans on their books rather than buy and sell them into mortgage securities, so the smaller players are more selective about saying yes or going easy on borrowers.

Adjustable-rate loans with teaser rates will still be available. But they'll be targeted toward people who really do have the potential to earn more in the future -- for example, doctors during their medical residency -- instead of flippers, investors or borrowers with marginal income and credit.

As for credit cards, they'll come with stiffer terms. Gone are the days when you could hop from one 2.9% offer to another. New credit card legislation that curbs punitive late fees and interest penalties is popular with consumer advocates. (See "What the new credit card law means for you.") But there's a flip side. Look for banks to reinstate annual credit card fees, demand higher credit scores and offer fewer perks to customers who use their cards frequently. A study by Synovate, a market research firm, has found that U.S. households are already receiving dramatically fewer card offers in the mail. An increasing number of those offers are for fee-based cards.

6. Retirement: Getting a makeover

Traditional fixed pensions are disappearing, strapped employers are ending matching contributions to 401k plans (at least temporarily), and many plan participants have lost one-third to one-half of their savings. As a result, the retirement system will get a makeover and more oversight.

In general, the system will become more compulsory and less voluntary. The trend toward automatic enrollment in a 401k or equivalent plan sponsored by your employer (with a worker opt-out option) will accelerate. The same goes for efforts to get employees to increase contributions each year until they hit the legal limit. Also, instead of a lump sum being the most prevalent payout method (either to be rolled into an IRA or spent), expect annuities, which resemble the monthly-payments-for-life structure of traditional pension plans, to be offered in more company plans.

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Private managers, such as Fidelity, Vanguard and TIAA-CREF, will still handle the money and offer a range of investment choices, but fees will be lower and will be disclosed. And plan managers will try to make payouts more predictable. One possibility: Require target-date retirement funds to hold more cash as you approach retirement age.

7. Government: A visible hand

President Barack Obama has said he hopes a more stable financial system will "help speed the day that the government can get out of the way and let the private sector grow the economy." But the Federal Reserve's buying binge of Treasury securities extends Washington's influence over interest rates to as long as 30 years. And there's talk of establishing a "financial product safety commission" to vet the exotic creations of financial engineers.

The idea is to foster more-predictable and less-risky investment markets. For a while, the government did succeed in flattening the business cycle, and the U.S. experienced more than 20 years without a harsh recession. It remains to be seen whether this time around the hand will be smoother -- or just heavier.

This article was reported by Jeffrey R. Kosnett for Kiplinger's Personal Finance Magazine.

Published July 6, 2009

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