Friday Financial Five – April 4th, 2014

Friday, April 04, 2014

Dan Forbes, GoLocalWorcester MINDSETTER™

High frequency trading gets more exposure

While other problems exist in the financial services industry, high frequency trading should be the priority for the SEC. The practice doesn’t pass the smell test, and the recent 60 Minutes piece with Michael Lewis does a good job of explaining the nuances. An argument exists that high frequency trading hasn’t been a focus because it doesn’t greatly harm any individual investor. Instead, it harms millions of investors in extremely small increments and violates the concept of fair trade. The SEC can put an end to this activity or at least dissuade it, possibly with a minimum time between trades or a trade tax. The goal should not be to stifle technological advancement but to create a level playing field between buyer and seller.

401(k) auto-enrollment helping retirement savings

While participation in the stock market is at a low, it appears those making 401(k) contributions is increasing. Auto-enrollment certainly has played a role, as the number of Merrill Lynch 401(k) sponsors using this practice increased by 16 percent in 2013. Merrill also saw a 25 percent increase in those opting for annual contribution increases. Many retirement plans participants adapt to the “forced” contribution and increase, then budgeting based on the remaining take home pay.

Social Security for public-sector workers

Government employees who have contributed to Social Security should really examine their benefits to ensure proper projected retirement income. WEP (Windfall Elimination Provision) rules and the Government Pension Offset can both reduce estimated benefits. The WEP reduction is maximized at one-half of the pension. The Government Offset factors into spousal and survivor benefits and can amount to two-thirds of the pension. Those in public service must be mindful of these provisions to properly forecast retirement income.

The cost of Alzheimer’s

A recent program by the Alzheimer’s Association highlighted the immediate need to address this not only as an obvious health issue, but to mitigate the overwhelming cost associated with caring for those affected. Alzheimer’s is the most expensive condition in the nation, costing $214 billion in 2014 and expected to climb to over $1 trillion by 2050. It accounts for 20% of all Medicare expense, with a total of $150 billion spent by Medicare and Medicaid combined. Out of pocket spending accounts for over $30 billion. This ailment may single-handedly threaten the sustainability of the entitlement programs, while simultaneously driving up the cost of Long Term Care coverage to prohibitive levels.

Madoff trustee looking for approval on another payout

It’s been over 5 years since Bernie Madoff’s investment firm failed. If approved by a bankruptcy judge, the most recent settlement agreement would bring total payouts to defrauded investors to almost $6 billion. Irving Picard, the trustee, most recently is looking for permission to pay out close to $350 million, the bulk of which comes as a settlement with JP Morgan Chase. Mr Picard’s legal team is not working pro-bono, as their recently submitted request for $39 million in fees would swell the total legal bill for this debacle to over $500 million.

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: 2014 Auto Insurance Rates in Central MA

Using a defined set of criteria, GoLocal utilized the Auto Insurance Premium Comparison tool from the Massachusetts Office of Consumer Affairs and Business Regulation to compile and rank the cities and towns of Central Massachusetts with the highest auto insurance premiums - lowest to highest.

The Criteria

Vehicle: 2008 Honda Civic LX

Policy: Single Vehicle, Single Operator Licensed 14 Years

Driving Record/Behaviors:

Driver Licensed in Massachusetts: Yes
Date of last accident or traffic violation: 5 years ago
Days lapse in coverage during the previous 3 years: None
Commutes to work: Yes
Annual miles vehicle driven in past year: 15,000
Years at current residence: 2
Years with current agent: 3
Years with current company: 2
Discrepancies on Application: 0
Subscriber to a Roadside Assitance Organization: No
Policy Eligible for a Group Discount: No
Premium paid in full at inception: No
Companion insurance products purchased: None

Coverage:

$20,000/$40,000 Bodily Injury Liability
$20,000/$40,000 Uninsured Motorists
$20,000/$40,000 Underinsured Motorist
$25,000 Property Damage Liability
$8,000 Personal Injury Protection ($0 deductible)

Friday Financial Five – April 4th, 2014

Related Slideshow: 2014 Auto Insurance Rates in Central MA

71. Templeton

70. Upton

69. New Braintree

68. Millville

67. Hubbardston

66. Holland

65. West Boylston

64. Ashby

63. Westminster

62. Lunenburg

61. Townsend

60. Northborough

59. Orange

58.East Brookfield

57. Barre

56. Warren

55. Ware

54. Winchendon

53. Petersham

52. Sterling

51. Brimfield

50. Ashburnham

49. North Brookfield

48. Shirley

47. Brookfield

46. Uxbridge

45. Northbridge

44. Gardner

43. Ayer

42. Athol

41. Sturbridge

40. Topsfield

39. Charlton

38. Sutton

37. Hopkinton

36. Oakham

35. Hudson

34. Douglas

33. Harvard

32. West Brookfield

31. Paxton

30. Boylston

29. Bolton

28. Dudley

27. Palmer

26. Royalston

25. Oxford

24. Westborough

23. Millbury

22. Hardwick

21. Milford

20. Marlborough

19. Leominster

18. Clinton

17. Auburn

16. Hopedale

15. Lancaster

14. Southbridge

13. Rutland

12. Fitchburg

11. Princeton

10. Holden

9. Leicester

8. Mendon

7. Southborough

6. Webster

5. Spencer

4. Blackstone

3. Grafton

2. Shrewsbury

1. Worcester

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