Friday Financial Five: November 14, 2014

Friday, November 14, 2014

Dan Forbes, GoLocalProv MINDSETTER™

Obamacare under fire on multiple fronts

The Affordable Care Act may face a multitude of challenges over the coming months. The recent election put the plan in the crosshairs of those that want to redefine full time work and remove some of the outlined taxes. Employers face mandated coverage for employees working 30 hours per week, with legislators looking for an increase to that number. There is also a Supreme Court ruling on the horizon that could eliminate health insurance subsidies for all but a handful of states. On top of these efforts, the “architect” of the health plan, Jonathan Gruber, admitted in recently highlighted video clips that the law was written to fool voters and avoid labeling increased expenses as a tax hike.

Wells Fargo unloading government backed student loans

In an effort to focus solely on private student lending, Wells Fargo will be selling over $8.5 billion in government backed loans to a servicing company, Navient. Many banks have gotten out of the educational loan business completely, but Wells Fargo continues to increase market share. They are now the largest private lender in the United States with almost $12 billion in outstanding student loans. Navient, the largest servicing company of federal and private student loans, will add to their servicing portfolio of $310 billion.

An increase in FSA contributions

Employees contributing to Flexible Spending Accounts will get a small boost for 2015, while also possibly carrying over up to $500 in unused funds. For next year, the limit for contributions will be $2,550. The increases and carry over are subject to the employer plan documents, which should reference whether or not increases imposed by the IRS are automatically adopted. In some cases, the plan may need to be reviewed and amended.

CBO reviews average income and federal tax rates

According to the latest report from the Congressional Budget Office, average market income in 2011 was $81,000, while various government entitlement programs produced another $13,000 for total income of $94,000. The federal tax, which is comprised of individual and corporate income, payroll, and excise tax, averaged $17,000 per household. The CBO report illustrates the progressive nature of the tax code, but again notes that the highest quintile of earners made and paid more than the rest of earners combined. The lowest earners paid an average of 11 percent in federal tax compared to 23 percent, or $58,000 on average, for the highest income group.

Run out of money or die early?

There’s an old Seinfeld bit about people’s number one fear being public speaking, with death coming in at number two. Seinfeld is amazed that people would rather be in the coffin than giving the eulogy. Similarly, the aforementioned Wells Fargo has a new survey saying more than 20 percent of people would rather die early than run out of money in retirement. The same survey identified 40 percent of respondents in their 50’s as not currently saving and almost half thinking they won’t have enough money to survive retirement without running out of money.

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].

Related Slideshow: SLIDES: Ranking the Highest Student Loan Default Rates in Central MA

The U.S. Department of Education announced the official FY 2011 two-year and official FY 2010 three-year federal student loan cohort default rates (CDR). The national two-year cohort default rate rose from 9.1 percent for FY 2010 to 10 percent for FY 2011. The three-year cohort default rate rose from 13.4 percent for FY 2009 to 14.7 percent for FY 2010.

Below are the FY 2010 default rates for all post-secondary schools in Worcester, ranked lowest to highest.

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