Friday Financial Five -September 19, 2014

Friday, September 19, 2014

Dan Forbes, GoLocalProv MINDSETTER™

 

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Number covered by health insurance increasing, as will Federal subsidies

A positive report out of the New York Times calculates the number of people without health insurance fell 8 percent in the first quarter compared with 2013. This accompanies the elimination of pre-existing conditions as a positive result of the implementation of the Affordable Care Act. On the flip side, the Congressional Budget Office (CBO) anticipates federal subsidies will increase from just under $20 billion currently to almost $140 billion in the next ten years.

The “living inherited wealth tax”

In an effort to plug budget deficits, there has been talk of implementing a “wealth tax”, citing the expanding divide between the haves and the have-nots. But what about further dividing the wealth tax between wealth that has been earned or created and that which is inherited? Inherited money may have been taxed at the estate level, but does it benefit society as a whole for multi-millions in inherited wealth to continue passing down through generations? Those with inherited wealth currently benefit by living off interest and dividends as opposed to subjecting themselves to a progressive income tax. Some may also run for office to decide how your tax dollars are spent. This would certainly be difficult to administer, but if there is ever going to be a wealth tax, the differentiation between earned and inherited wealth merits consideration.

The “Romney IRA” is also under examination

Along the same lines of the aforementioned wealth tax is a new focus on the “Romney IRA”. This is a reference to Romney’s 2012 presidential run, where he disclosed IRA holdings between $20 and $100 million. The Government Accountability Office (GAO) has identified at least 9,000 taxpayers in the country that have $5 million of more in their Individual Retirement Account. Congress is examining how aggressive investors have been able to accumulate such large amounts in their tax shelters, enabling them to avoid taxation over long periods of time. In the past, President Obama has suggested there should be a cap on what individuals can hold in tax sheltered accounts.

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ORC survey on college spending issues

ORC International conducted a survey, distributed by the Certified Planning Board of Standards, that details the problems parents are having saving for college. One-third of the parents surveyed that had student loan debt were then unable to save for their own children’s education. Younger parents are using traditional savings accounts, while older parents are utilizing 529 plans. For those that aren’t currently saving, roughly 70 percent cite the current cost of living as leaving them unable to save.

Another advisor behaving badly

In Washington State, another “financial advisor” has been sentenced to five years in jail and assessed a $1 million fine. His scam involved using proprietary information from a former employer to access former customer accounts. The criminal then liquidated the accounts for personal use. In another familiar ploy, the advisor pretended to buy annuities for clients and then sent falsified statements.

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].

 

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