Friday Financial Five – April 22, 2016
Friday, April 22, 2016
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].
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