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Friday Financial Five – April 22, 2016

Friday, April 22, 2016


Trump might shake up the Fed

Assuming she likes her job, Janet Yellen may not be hoping for a Trump presidency. The candidate stated he would likely seek a replacement for the Federal Reserve chairwoman if he wins the election. This despite his observation that he thinks the current low interest rate environment is good and that he feels no urgency for the Fed to raise rates. Trump also indicated he’d work proactively to take some of the power away from the Fed, echoing a common sentiment that it wields unintended economic influence.

UnitedHealth Group to exit Obamacare exchanges

A poorly kept secret is that UnitedHealth, the nation’s largest health insurer, could not find profitability within the framework of the Affordable Care Act’s exchanges. It was announced this week that the insurer will leave most of the 34 state exchanges where it operates by next year. Losses for last year and 2016 are expected to top $1 billion, despite improved revenue numbers for the first quarter this year. 

Retirees not looking to spend down assets

The conventional rule of thumb on retirement spending is expect withdrawals to slowly deplete assets. Many retirees experience spending levels that closely resemble their working years. A new study shows that may not be the norm, with respondents preferring to cut spending to allow them to preserve or even increase the value of their nest egg. The study, conducted by Greenwald & Associates and Cannex, indicates half of the retirees expect to grow their assets over the next decade, while thirty percent expect to keep their asset level constant. This expectation would reduce the amount of money workers need to accumulate by retirement to supplement Social Security or pension income.

Treasury Department confronts corporate inversion 

The Treasury Department has tried to score one for the little guy by implementing tax rule changes sure to ruffle the feathers of some large corporations. The practice of “inversion” applies when a domestic corporation purchases or merges with a foreign company to take advantage of favorable tax treatment. Earlier this month, the Treasury clarified the tax treatment for inversion stockholders post-merger. If the shareholders of the former U.S. company own at least 80 percent of the combined firm, the U.S. government considers the new business as taxable, regardless of where the business is headquartered. The imposition of the new rules would most likely be challenged in court for companies that invert and then are taxed under these guidelines. While Democrats in Congress want a lower ownership percentage threshold implemented, Republicans are looking to tackle inversion as part of a broader tax reform.

File and suspend decision needed soon 

The option to elect “file-and-suspend” for Social Security payments under the current system exists until April 29th.  This option is available for those that are between 66 and 70 and have not yet claimed benefits. In order to qualify, those interested will need to apply and request suspension request by the deadline. While the decision to file-and-suspend typically involves married couples, it may also apply to a single person who qualifies and simply wants to preserve the grandfathered option.   

Dan Forbes, a CFP Board Ambassador, is a regular contributor on financial issues. He leads the firm Forbes Financial Planning, Inc in East Greenwich, RI and can be reached at [email protected]


Related Slideshow: Massachusetts Business Rankings

See how Massachusetts stacked up.

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Massachusetts has 2015's 28th highest insurance premium penalties for high risk drivers, according to a WalletHub report. 

Mass is behind Colorado and New Mexico who come in at 26 and 27 spots respectively while Mass is ahead of Tennessee and the District of Columbia who rank 29 and 30 respectively. 

Massachusetts ranks 14th overall in the category of DUI conviction annual premium increase with an amount of $756.

Massachusetts ranks 20th overall in the category of speeding over 20 mph annual premium increase with a total of $261 while ranking 21 overall in the category of  two accidents annual premium increase with a total of $1,364. 

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Massachusetts has been ranked as the 5th most eco-friendly state in the country, according to a recent study by WalletHub. 

Mass ranks tenth in environmental quality and fourth in Eco-Friendly Behaviors landing them in 8th overall. 

Mass is behind Minnesota and New York who are in the fourth and third spots respectively, and in front of Washington and New Hampshire  who come in at the six and seven spots. 

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The Economist

Small Business Friendliness Grade: D+

The Economist grades states on an A+ to F grading scale for its small business climate. Massachusetts ranks near the bottom of the nation, joining New Mexico and New York in receiving D+ grades.  9 states scored worse than a D+ in the Economist rankings. 

Overbearing bureaucracy and excessive licensing is stifling small business in America. 

Read More About The Economist Grade Here

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#25 CNBC

CNBC ranks each state in cost of doing business, economy, technology and innovation.

Massachusetts' unemployment rate as of May 2014 was 5.6 percent. The state added 9,100 jobs in the month of May.

Read More About CNBC Ranking Here

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#13 Forbes

Forbes ranks each state in business costs, economic climate, and growth prospects.

The most damning in the commentary:

Massachusetts’ business costs, including labor, energy and taxes, are the highest of the 48 contiguous states—only Hawaii is higher—at 20% above the national average.

Read More About Forbes Ranking Here

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#47 ChiefExecutive.net

ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.

The most damning in the commentary:

Taxation and regulation are always the key barometers. Massachusetts and Oregon are the worst.

Read More About ChiefExecutive.net Ranking Here

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Tax Foundation

#25 Tax Foundation

Tax Foundation ranks each state in corporate tax rank, sales tax rank, and unemployment insurance tax rank.

Massachusetts ranked #49 in unemployment insurance tax.

Read More About Tax Foundation Ranking Here

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Wallet Hub

#10 Wallet Hub

Wallet Hub ranks each state in ROI rank, state tax rank, and overall government services.

Massachusetts ranked #49 in worst roads and bridges, but ranked #7 in overall government services.

Read More About Wallet Hub Ranking Here

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#41 ALEC

ALEC ranks each state in economic performance and outlook.

Although Massachusetts ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.

Read More About ALEC Ranking Here

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Kauffman Foundation

#29 Kauffman Foundation

Kauffman Foundation ranks each state in entrepreneurship.

Entrepreneurial activity generally is highest in Western and Southern states
and lowest in Midwestern and Northeastern states.

Read More About Kauffman Foundation Ranking Here

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Free Enterprise

#18 Free Enterprise

Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.

Massachusetts's reputation as a hotspot for science and technology endures in this year's rankings. The commonwealth is a center for STEM jobs and university research and development, ranking 4th and 2nd, respectively, in those two categories. It also ranks 6th as a center for high-tech establishments. Massachusetts is taking aggressive steps to bolster economic activity with high-impact university-industry R&D projects and new tools for tech-based startup companies.

Read More About Free Enterprise Ranking Here

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The Pew Charitable Trusts

#45 The Pew Charitable Trusts

The Pew Charitable Trusts ranks each state in job growth and job creation.

Massachusetts added 38,368 jobs in 2014.

Read More About The Pew Charitable Trusts Ranking Here


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